Beyond Neoliberalism

A World to Win

James Petras, Henry Veltmeyer

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781409428473
• eBook ISBN: 9781317174639
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Globalisation
• Index: Politics & International Relations

The world is at the crossroads of social change, in the vortex of forces that are bringing about a different world, a post-neoliberal state. This groundbreaking book lays out an analysis of the dynamics and contradictions of capitalism in the twenty-first century. These dynamics of forces are traced out in developments across the world - in the Arab Spring of North Africa and the Middle East, in Cuba and elsewhere in Latin America, in the United States, and in Asia. The forces released by a system in crisis can be mobilized in different ways and directions. The focus of the book is on the strategic responses to the systemic crisis. As the authors tell it, these dynamics concern three worldviews and strategic responses. The Davos Consensus focuses on the virtues of the free market and deregulated capitalism as it represents the interests of the global ruling class. The post-Washington Consensus concerns the need to give capital a human face and establish a more inclusive form of development and global governance. In addition to these two visions of the future and projects, the authors identify an emerging radical consensus on the need to move beyond capitalism as well as neoliberalism.

PART I
Capitalism in the Twenty-First Century

Chapter 1
The Contradictions of Capitalism

Capitalism is by definition a wage-labor system of commodity production driven by the implacable search for private profit, a system that nowadays operates on a global scale and thus is constituted as a world system. As a system, capitalism is constituted by four fundamental institutions: (1) private property in the means of production, a key institution of the capitalist state; (2) the social relation of wage labor, a social institution that defines two basic classes—the owners of the means of production, or the capitalist class (the ‘bourgeoisie’), and the proletariat: workers who own nothing but their capacity to labor, which they are therefore compelled to exchange against capital for a living wage; (3) the state, a complex of institutions designed and serving to create the necessary conditions of capital accumulation, including minimally (other institutions can be and have been added as needed) the provision of an economic and social infrastructure for the capital accumulation process and for reproducing the system, i.e. legitimating its basic arrangements; a mechanism for the authoritative allocation of society’s productive resources and determining ‘who gets what’ share of national income; a legislature, or a law-making system; the government of the day, with decision-making and administrative apparatus; and a repressive apparatus, serving to reconcile any conflicts over property and to preserve order; and (4) the market, an economic institution that serves as a mechanism of economic exchange among individuals and for an non-authoritative allocation of society’s resources and income distribution (the market in theory can be ‘free’ but more often than not is state-regulated).

As for the dynamics of capitalist development they can be explained by reference to, or in terms of, various ‘laws’ of development that specify patterns or tendencies under specified objectively given conditions. There are various theories of such ‘laws’ available, but none as useful as the theory advanced by Karl Marx. This theory has four key propositions, namely:

1. The labor theory of value (LTV): labor is the source of exchange value—that the value of a commodity (reflected in its market price) is equivalent to the socially necessary labor time required to produce it.

2. The theory of surplus value (TSV): capitalist development is based on the exploitation of labor—i.e. workers do not receive the full value of their labor; and surplus value (in excess of that required to maintain the worker and his/her family) is the source of the capitalist’s profit.

3. The theory of the law for a falling rate of profit (TLFRP): the average rate of profit, system-wide, tends to fall over time (under two conditions: a tendency for the organic composition of capital, the ratio between constant and variable capital) to rise; and, under conditions of a class struggle, for the rate of surplus value to remain constant).

4. The General Theory of Capital Accumulation (GLCA), which specifies a twofold tendency, on the one hand towards the concentration (and centralization) of capital and for it to assume a corporate and monopoly form, and on the other, for the direct producers of society’s wealth to be separated from their means of production—the ‘original accumulation of capital’—leading to the ‘multiplication of the proletariat’ (the conversion of the small landholding agricultural producers into a working class) and the formation of an industrial reserve army whose labor is redundant for the purpose of capital accumulation.

Although oft debated, these propositions more or less have withstood the test of time—over a century of capitalist development. Indeed, there is considerable evidence that these ‘laws’ of capitalist development are operating on a global scale, and so we can now conceive of capitalism as a ‘world system’. The evolution of this system and its development dynamics for the sake of analysis have been periodized by a number of scholars (e.g. Delgado-Wise and Foladori, 2011; Desai, 2000;) as follows:

• 1450–1800: a period of primitive accumulation, violent expropriation, enslavement and large-scale theft and colonialism dominated by merchant’s capital—European-based crown chartered commercial companies.

• 1800–70: a period characterized by the rise of industrial capitalism in Western Europe, including a ‘industrial revolution’, the consolidation of the nation-state, a social and political revolution that displaced the landed oligarchy from power and the formation of an economic structure based on the class relation of capital to labor.

• 1870–1914: a period of globalization—the large-scale international movement of both capital and labor—and imperialism in which large areas of what is now termed the global South were dominated and colonized, and subjected to a process of capitalist development (productive and social transformation).

• 1914–44: a 30-year inter-war period that featured a major involution in the capitalist system and a process of state-led social reform—the ‘taming of capitalism’ in the words of Surendra Patel (2007)—that led to the formation of a welfare state.1

• 1944–70: the ‘golden age of capitalism’ characterized by a system-wide rapid economic growth within the framework of a liberal capitalist world order, the undisputed economic supremacy of the Pax Americana, an East–West cold war between a US-led capitalist system and a USSR-led socialist system, a process of decolonization and nation-building and the launching of a project of international cooperation for (capitalist) development.

• 1970–82: a period of transition from state-led national development to a new world order of neoliberal globalization.

• 1983–99: a ‘brief history of neoliberalism’ (Harvey, 2003) characterized by the installation of a new world order, several cycles of structural or policy reform, increasing integration into a system-wide globalization process, the collapse of the socialist bloc, a second cycle of neoliberal reforms in Latin America, widespread resistance against neoliberalism and its decline as an effective ideology of the global ruling class, and the erosion of US influence and power and the decline of US hegemony.2

• 2000 to date: a period of uneven capitalist development characterized by a further realignment of world power and the search for a new post-neoliberal world order and the construction of a post-neoliberal state.

Dynamics of Uneven Capitalist Development

A fair conclusion that can be derived from Marx’s theory of capitalism is that its development as a system is profoundly uneven and rife with class conflict. The fundamental source of this conflict, substantiated by different generations of scholars, both Marxist and non-Marxist, is an economic structure based on the capitalist mode of production and a social structure based on the capital–labor relation, i.e. the exploitation of workers by capitalists. The dynamics of capitalist development based on this relation are both structural, or objective (economic), and strategic, or subjective (political). The structural dynamics of capitalist development are expressed in the development of conditions that are ‘independent of our will’, and thus not as one would choose, and objective in their effects—an objectivity that accords with an individual’s class position. The strategic or political dynamics of the capital–labor relation are reflected in the formation of class consciousness—in workers becoming aware of their exploitation.

The Fundamental Contradictions of Capitalist Development

Capitalist development is contradictory and fundamentally unstable. That is, the dynamic forces of capitalist development are impelled by contradictions intrinsic to capitalism. These include:

1. Economic production is based on social cooperation—the contributions of all classes and members of society, but under capitalist relations of production (private property in the means of production) capitalists have the legal right and the political capacity to appropriate the social product for private profit and personal enrichment.

2. Forces of production tend to expand but the corresponding social relations at some point will turn into fetters, inhibiting further expansion and creating thereby the objective and subjective conditions of revolutionary transformation, including class consciousness and forces of resistance to capitalist development.

3. Capitalism is driven not by the satisfaction of human needs but rather by the need to accumulate capital and the search for profit (to extract surplus value from the direct producer); however, the system suffers from a built-in tendency for the rate of profits to fall, requiring capitalists to take countervailing measures and resulting in a propensity towards crisis.

4. Surplus value can only be realized if capitalist firms can clear the social product on the market, but there is a built-in tendency towards overproduction for the market, pushing the system into crisis.

5. Capitalist development of the forces of production is intrinsically uneven in its dynamics and effects, generating conditions that undermine imperial power—the drive for world domination.

6. The basic institutions of capitalist development, including the market and the state, are designed and serve to maintain economic, social and political order, but in their normal functioning they produce conditions of class conflict, social disorganization (and criminal violence) and political disorder.

7. Capitalist development is predicated on the workings of the market and the freedom of capitalists to advance their interests and accumulate, but capitalism can only advance with the active support and agency of the state.

8. Capitalists have a vested interest in masking the workings of the system and securing its legitimacy, but they cannot help but act in ways that will undermine this legitimacy, creating conditions that allow and lead people to see through the ideology designed to induce false consciousness of reality. With this subjective requirement of revolutionary transformation workers are converted from a ‘class in itself’ (defined by its social relation to production or location within the system) into a ‘class for itself’, conscious of the need to overthrow capitalism and bearers of a socialist ideology as a force for change.

Marxist theorists over the years have traced out the developments associated with these dynamics. These dynamics have unfolded in different contexts, but have tended to take four fundamental forms, namely:

1. Social inequalities in the share of the wealth generated in the capitalist development process. These inequalities tend to widen and deepen over time, leading to a social polarization between the rich and the poor in the distribution of national income. The sharp increase in disparities of wealth and income, and in the share of the fruits of economic growth, over the last three decades of capitalist development provides an eloquent testimony to the working of these dynamics of social inequality. Conditions of social inequality are endemic to capitalism, a feature of all capitalist societies, but they can be attenuated with government action as in the case of the welfare states constructed in the post-World War II period of capitalist development. In the context of these states the level of social inequalities in a number of capitalist states were reduced with progressive taxation on wealth and income, and a welfare cushion to protect those vulnerable to poverty. However, with the installation in the 1980s of a ‘new world order’—a system in which the ‘forces of economic freedom’ (profit-seeking capitalists and their enterprises) were liberated from the regulatory constraints of the state—the fundamental dynamic of social inequality once again took hold. The workings and impact of these dynamics will be discussed below.

2. Class conflict, which arises from the contradictions of capitalist development and takes different forms with diverse dynamics, including class war. The political dynamics of class conflict have been studied and analyzed in diverse national contexts under changing conditions. It is possible to see World Wars I and II as to some extent the outcome of a class war between labor and capital in the advanced capitalist countries of Europe and North America. In this context for example, it is possible to interpret the class accord between capital and labor reached in the post-war period—an agreement to share the productivity gains of capitalist development—as a way of resolving this conflict. Similarly it is possible to see the role played by the state in this context as an intervention in the class war—to contain the conflict between capital and labor within acceptable limits. As for the project of putative ‘international development’, or foreign aid, constructed as a means of ensuring that the economically backward countries pursue national development along a capitalist path, it can also be seen as a useful weapon in this class war. The first major outbreak of this war in the post-war capitalist world order was in the early 1970s. In conditions of a systemic production crisis that threatened the accumulation process the capitalist class in Europe and North America launched a major offensive against labor. Subsequent developments in this class war as it unfolded in different theaters on the world stage can be traced out in diverse and changing contexts over the next three decades (Faux, 2005).

2. Uneven development. The competitive struggle among different capitals leads to a competitive struggle to advance the forces of production and development at the national level, leading to the dynamics of inter-capitalist competition and a battle for position and competitive advantage in the world marketplace. The dynamics of this struggle are reflected, inter alia, in the gradual and growing realignment of world economic power that has occurred over the past two decades, and in the associated political dynamics. These dynamics will be explored in Chapters 5–8 in the context of imperialism, which can be seen as a geopolitical project to dominate other countries in the world system and to establish hegemony over the system

3. A propensity towards crisis. Every crisis, as will be elaborated in Chapter 4, releases various forces of change, but these forces can be mobilized in different directions, to the right as well as the left, leading to a struggle of the system to alternatively manage or control the process, or to derail it. The resulting dynamics will be explored further in Chapters 4 and 5.

Capitalist Development of the Forces of Production

Capitalist development implies the transformation of a traditional agrarian society based on precapitalist relations of production into a system based on the capitalist mode of production—‘changing production patterns’, in the words of José Ocampo (2011), until recently Executive Secretary of ECLAC, and a major architect of the post-Washington Consensus on the need for a more inclusive form of development.3 In broad terms this means a change in the structure of economic production—the transformation of an agriculture-based economy into one based on modern industry.4 Marxist scholars, on the other hand, stress the centrality of social rather than productive transformation: the conversion of a society and economy of direct producers on the land into a proletariat (either on their own land or in conjunction with urban migration); that is, the formation of a class of individuals that is excluded from any proprietary claim on the means of production and are thus forced into selling the only asset they have, their labor, as a commodity whose price is determined by the workings of the market.

This process leads to the concomitant formation of a class of capitalist entrepreneurs who have seized or have been granted a proprietary claim on the means of production, and whose economic success is fundamentally linked to the formation and continued reproduction of an available proletariat. Both the original claims on ownership of the means of production and the derived claims on the ownership of the profits generated there from are all socially protected from any possible counterclaims of dispossession—or exploitation—by the proletariat by the general acceptance of a socially dominant ideology which not only ‘normalizes’ this state of affairs, but which in many instances sees capitalist development as an ‘engine of growth’.

The capitalist development process has been theorized in the mainstream of development thought and by the economists at the World Bank as the working of forces of progressive change promoted by the ‘pro-growth’ policies of structural adjustment and neoliberal globalization. The theory is that these policies help and serve to advance a process of structural transformation (transformation of a backward agriculture-based system into an advanced modern system based on advanced modern productive technologies). In the process a society and economy of small-landholding agricultural producers, who function with an outdated technology and a traditional culture and mindset that inhibits initiative, are compelled by forces beyond their control to abandon agriculture and to migrate to the cities in the search for better opportunities in the modern capitalist labor market and more sustainable livelihoods. These forces of change released by the process of structural transformation also open up various pathways out of rural poverty, namely labor and migration, and, for a few, under some conditions, modernized agriculture (World Bank, 2008). The mission and aim of international cooperation is to pave these pathways, and, in partnership with the governments and civil society, to facilitate the adjustment process—to assist the rural poor in making the economic adjustment needed for them to become more productive and to escape their poverty.

The 1980s saw the advent of a new world order. The proponents of a Washington Consensus on the virtues of free market capitalism argued that the policies of structural adjustment—privatization, deregulation, liberalization and decentralization—would best serve this purpose, generating optimal conditions for economic growth. By 1990, however, it was evident that these policies were economically dysfunctional (did not generate growth) and that the resulting discontent was destabilizing. For one thing, the anticipated industrialization did not materialize. What did materialize was a process of urbanization without industrialization, which meant that the urban labor market could not absorb the masses of the migrating rural poor. For another, the policies of structural adjustment as per the Washington Consensus led to politically dysfunctional social discontent that was mobilized by the emerging forces of resistance, threatening thereby the stability of the democratic governments in the region.

To solve these problems the architects of international development, including the economists at the World Bank, engaged in a strategic rethink to come up with a new policy consensus on the need to ‘bring the state back in’ (they had gone too far in the direction of the market) and for a more socially inclusive form of development—in short, a new paradigm—and a new economic model.

1 The most succinct statement of the principles on the foundation of which the welfare state was constructed is give...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• List of Tables
• Introduction
• PART I: CAPITALISM IN THE TWENTY-FIRST CENTURY
• PART II: IMPERIALISM IN THE TWENTY-FIRST CENTURY
• PART III: TWENTY-FIRST CENTURY SOCIALISM
• Conclusion: Capitalism in the Twenty-First Century
• Bibliography
• Index