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Neoliberalism: origins, theory, definition
Since the 1990's activists use the word 'neoliberalism' for global market-liberalism
('capitalism') and for free-trade policies. In this sense, it is widely used in South
America. 'Neoliberalism' is often used interchangeably with 'globalisation'. But
free markets and global free trade are not new, and this use of the word ignores
developments in the advanced economies. The analysis here compares
neoliberalism with its historical predecessors. Neoliberalism is not just economics:
it is a social and moral philosophy, in some aspects qualitatively different from
liberalism. Last changes 02 December 2005.
Neoliberalism inadequately defined?
The definition of neoliberalism presented here is more abstract than usual - but it
also suggests that neoliberalism has been underestimated. A widely quoted
example of those 'usual definitions' is What is "Neo-Liberalism"? by Elizabeth
Martinez and Arnoldo García:
Neo-liberalism is a set of economic policies that have become widespread during
the last 25 years or so. Although the word is rarely heard in the United States, you
can clearly see the effects of neo-liberalism here as the rich grow richer and the
poor grow poorer....Around the world, neo-liberalism has been imposed by
powerful financial institutions like the International Monetary Fund (IMF), the
World Bank and the Inter- American Development Bank....the capitalist crisis over
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the last 25 years, with its shrinking profit rates, inspired the corporate elite to
revive economic liberalism. That's what makes it 'neo' or new.
This sense of the word 'neoliberalism' is widely used in Latin America. However,
neoliberalism is more a phenomenon of the rich western market democracies, than
of poor regions. That is why I emphasise the historical development of liberalism,
in those western market democracies. The IMF and the World Bank are not the
right places to look, to see the essence of neoliberalism. And the WTO ideology -
free trade and 'competitive advantage' - is 200 years old. There is nothing 'neo' in
their liberalism.
Seattle and Genoa?
The image of 'neoliberalism' has been heavily influenced by the protests against it:
people think of the violent protests at Seattle and Genoa, and the associated social
movements. If you only thought about that, then neoliberalism would be an
ideology of the riot police, and that's not accurate.
It's true that the Genoa G8 summit was intended as a show of force. The organisers
knew that violent demonstrations were probable in an Italian city, but chose to
confront them. Democratically elected leaders "should not run from
demonstrators", said Tony Blair. (However, when it was Britain's turn to organise
the G8 summit, the hypocrite choose the isolated Gleneagles hotel in Scotland). 20
000 police and soldiers were deployed at the Genoa G8 summit - NATO used 42
500 troops to occupy Kosovo. This show of force was out of all proportion to the
political strength of anti-market forces, but it emphasised the legitimacy of the
market-democratic states.
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It is possible for 'the state' to suppress 'the market', but also to promote it. In fact,
the free market emerged in Europe under the protection of the state, and the market
needs the state, more than the other way around. The market needs internal
regulation, in order to function: the state, in the form of the legal system, ensures
contracts are enforced. In the form of the police, it prevents theft and fraud. It
establishes uniform systems of weights and measures, and a uniform currency.
Without these things there would be no free market, no market forces, and no
resulting market society. Bill Gates disputes the US Government's authority over
his business - but if there was no government at all, the poor would soon steal his
wealth. The attack on the World Trade Center provided some images of this
dependency - the reopening of the New York Stock Exchange by police and
firefighters, for instance. (In turn, at least in the United States, the market is
integrated in the national identity: the NYSE reopening was seen as an act of
national defiance).
The free market is itself a form of social organisation: it is neither spontaneous nor
endemic to humans. If no-one ever promoted or enforced it, there would be no free
market on this planet. For thousands of years, there was none. The modern free
market came into existence primarily because liberalism demanded its existence.
This demand was a a political demand, and it was enforced through the state.
The general functionalist starting premise is only modified to the extent that the
"system" is comprehended as capitalist, in a specific way "form-determined". The
state and the political system function as a form of an 'ideal all-around capitalist',
who must uphold not just the society as such, but the 'capitalist element'. The
different forms of state interventionism are explained both as an expression of
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functional needs of the accumulation and reproduction process of capital. The
general requirements of capital accumulation such as basic infrastructure,
functioning law systems and legitimization mechanisms are tasks that cannot be
carried out by individual capitalists due to the competition relations, but instead
systemically require a "fictive all-around-capitalist". This "capitalist referee" must
guarantee the fulfilment of these tasks in the interest of maintaining the system of
capitalist society..
Business and the State: Mapping the Theoretical Landscape
Volker Schneider and Marc Tenbuecken, 2002.
If everyone on this planet was a liberal, an enthusiastic supporter of the free
market, then that would be the end of the matter. But of course some people
oppose the market, and its effects - especially the resulting inequality. The market
is a political and social regime, and like any other regime, it must be enforced
against opposition. That is true even of democracies: democrats overthrow
dictators, and dictators overthrow democracies. If either side wants to avoid their
own overthrow, they must use force. Democrats do use democratic force, and do
fight democratic wars, as they know in Iraq.
The relationship between supporters and opponents of the free market, is similar to
that between democrats and anti-democrats. They are enemies, inherently. On the
very existence of the market, no compromise is possible. The free market either
exists, or it does not exist. It can disappear by consent - which is absurdly unlikely
- or without consent. Any attempt to end the free market is, by definition, an
attempt to overthrow a fundamental social structure. Certainly, in the long-
established western market democracies, it would mean a collapse of the existing
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social structures. The effect would be dramatic - comparable to occupation by a
foreign power.
So it is not surprising that force is used in the face of a threat, and it is not
surprising that it is the force of the state. That is after all, a typical task of the state
- the preservation of the regime itself, the preservation of the nature of the state.
Anarchist propaganda speaks of "the State", as if all states were interchangeable,
but they are not. A market democracy is not interchangeable with a Bolshevik
regime, simply because they both have a government, an army, and a police force.
A market democracy will use force, state force, against an attempt to overthrow
either democracy or the market. That is what the riot police did: defend the state,
and defend the market - without contradiction between them.
In historical perspective 'Genoa' was an absurd over-reaction. The western market
democracies are the most stable and successful societies in history. The principle
of the free market is accepted by well over 90% of their population, probably
closer to 99% in western Europe. The tensions can be explained by the underlying
sense of threat, but they are not specifically related to neoliberalism, and they
certainly do not explain it. For that, a long-term and ideological perspective is
necessary.
Liberalism
Liberalism as a coherent social philosophy dates from the late 18th century. At first
there was no distinction between political and economic liberalism (economics was
not considered a separate discipline until about 1850). Classic liberal political
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philosophy has continued to develop - after 1900 as a purely conservative
philosophy. The basic principles of all liberal philosophy are:
Liberals believe that the form of society should be the outcome of processes.
These processes should be interactive and involve all members of society.
The market is an example, probably the best example, of what liberals mean
by process. Liberals are generally hostile to any 'interference with process'.
Specifically, liberals claim that the distribution of wealth as a result of the
market is, in itself, just. Liberals reject the idea of redistribution of wealth as
a goal in itself.
Liberals therefore reject any design or plan for society - religious, utopian,
or ethical. Liberals feel that society and state should not have fixed goals,
but that 'process should determine outcome'. This anti-utopianism became
increasingly important in liberal philosophy, in reaction to the Communist
centrally-planned economies: it anticipated the extreme deregulation-ism of
later neoliberalism.
Liberalism is therefore inherently hostile to competing non-liberal societies -
which it sees not simply as different, but as wrong. In the last 10 years,
Islamic society has replaced the Communist state, as the perceived 'opposite'
to a liberal society.
Nevertheless liberalism has compromised with one specific form of non-
liberal ideology: nationalism, in the ethno-national form which underlies
most present nation states. A political community based on common origin,
history and language is not liberal, but liberals never tried to form the
voluntarist, contractual, non-historical state - which liberalism would
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logically imply. The nation state was simply taken for granted, as the
political and economic arena for liberal process.
Liberals define liberalism itself as 'freedom', so they rarely think consent is
required for the imposition of a liberal society. In fact, most would say it can
not be imposed, inherently. After the Cold War this belief has acquired a
geostrategic significance: many western liberal-democrats now believe, that
a war to impose a liberal-democratic society is inherently just. This belief
influences interventionist policy, but as yet no war for the sole purpose of
liberalisation has been fought.
Classic political liberals reject the idea that there are any external moral
values: they say that there are only opinions. They feel that these opinions
should be 'expressed' in public, and that in some way this 'market of
opinions' will favour the truth. (The idea that truth can be revealed by
discourse is much older than liberalism).
The liberal rejection of external moral values is formally expressed in the
liberal idea of human rights: both good and evil humans have equal rights,
which apply equally when they facilitate good or evil actions. Classic liberal
philosophy advocated 'liberty' as a value, even if they did not call it a value.
In effect it places liberty as a value above good (and evil).
Liberals believe in formal equality among participants in a liberal society,
but almost all liberals also believe in inequality of talent. Many liberals were
therefore sympathetic to biological theories of inequality. (Theories of
hereditary racial differences in intelligence are now popular among US
neoliberals).
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Liberalism is a universal ideology, and in principle liberals seek to apply it to the
entire planet, and the entire human population. Most liberals have supported the
expansion of liberal society, although in the 19th century that meant among the
'civilised nations'. For a long time the free market was considered the only cross-
cultural and 'exportable' element of liberalism. Only recently have liberals
advocated, that African and Asian societies should become 100% liberal-
democratic societies. 'Liberal missionaries', such as George Soros, were unknown
or marginal in the 19th century.
Market liberalism
The free market is not simply 'exchange' or 'trade'. Two people who exchange
products can not form a free market in the liberal sense, even if their transactions
are monetarised. The element of competition is missing in this two-person society.
A minimal liberal free market needs at least three parties, with two of them in
competition - for instance, two competing sellers and one buyer. The resultant
pressure on the two sellers to lower prices, is the simplest type of 'market force'.
Such a force comes into existence without any conscious action on the part of the
three parties. In modern markets there are millions of parties, and complex market
forces. Market-liberals value this characteristic of the market. Their belief in the
moral necessity of market forces in the economy, is probably the first defining
feature of market liberalism. The second is the belief in entrepreneurs themselves,
as a good and necessary social group. To summarise:
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For all liberals, interactive process legitimises outcome: in market
liberalism, the market is the primary process, and market transactions are the
interaction.
Market liberals believe that economic transactions should take place in a
framework which maximises the effect of each transaction on every other
transaction. (That is an abstract definition of the free market, but it makes
the later transition from liberalism to neoliberalism easier to understand).
Liberals see the market as good, and often as semi-sacred. They want the
market to be as large as possible, involving all of society. In modern liberal-
democratic states almost all adults participate in the market. A private club
in a Communist state, where members can hold a closed free market, would
satisfy no liberal.
Liberals are hostile to economic self-sufficiency - so strongly, that they
believed in war to 'open up markets'. The most famous example is the
Opium War, when Britain forced the Chinese Empire to allow the import of
opium. This liberal belief in market expansionism has revived after the end
of the Cold War.
Market liberals are hostile to trade barriers: "free trade" is a classic slogan of
market liberalism. That meant traditionally, the free flow of goods and
capital: neoliberalism later developed a more diffuse version, where 'flow'
and 'interaction' are treated as quasi-ethical values.
Market liberals believe that important aspects of society should be
determined by the market, certainly the distribution of income and wealth.
Neoliberalism later extended this belief, claiming thatall social life should be
determined by the market.
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All market liberals are hostile to interference in the market, by church, state
or others - although since the 19th century only the state has sufficient power
to interfere. Market liberals are clearly anti-utopian, in the sense of opposing
economic planning, especially centralised state control of the entire
economy. They believe that the market produces the best 'design for society',
and that is is wrong to substitute any other design.
However, market liberalism is itself a utopia, despite its anti-utopianism. In
the 'ideal world' of market liberalism, no goods or services exist which are
not the product of market forces, but all goods or services which are market-
responsive do exist. This is in itself a utopian project, implying a total
structuring of society. Neoliberalism goes even further - extending the
market principle beyond the production of goods and services.
The social institution of the entrepreneur is central to market liberalism. An
entrepreneur is a person whose profession is, to respond to market
forces. In the 19th century most entrepreneurs were still private individuals,
later the business firm took over this function. The enterprise/firm is a
permanent organisation, structured to respond to market forces. An
entrepreneur is not a farmer, or a manufacturer, or a consultant: in theory an
entrepreneur changes activities in accordance with the market. In reality
most entrepreneurs retained a specialisation for some specific products or
services: but neoliberalism now demands, that the theoretical flexibility
should become standard practice.
Without the entrepreneur there is no free market, therefore market liberals
demand a privileged social status for the entrepreneur. The early liberal
theorists were hostile to the urban guild economy of mediaeval Europe: they
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saw it, in effect, as a conspiracy not to compete. In their historical vision, the
entrepreneur rescued Europe from the poverty of the Middle Ages. (This
vision was shared by Karl Marx, who admired the cultural dynamism of the
free market). Not just mediaeval Europe, but all societies without an
entrepreneurial caste, were seen as failures.
A central but rarely explicit political demand of market liberals is therefore, that
entrepreneurs should have control of the economy. This has not only been
accepted, but has become so incorporated into the culture of western liberal-
democratic societies, that few people ever think about it. But it would not be any
less logical, to hand the economy to engineers, or priests - or not to privilege any
one group. The choice depends on underlying values, and liberals value the
entrepreneur. This value preference of liberals, and its widespread acceptance, has
created what in the US is called 'the business community'. That is a real and
identifiable social elite - with specific cultural preferences, specific clothing, and
often a specific form of language (sociolect). It does in fact control the economy,
in liberal-democratic states. Although this was probably not foreseen by early
liberals, market liberalism has become an ideology in support of this elite. Their
culture, attitudes, and ethics have greatly influenced neoliberalism.
Neoliberalism
If Adam Smith returned and saw the more extreme aspects of neoliberalism, he
would probably find them bizarre. Nevertheless, they derive from the ideas of early
liberalism. The belief in the market, in market forces, has separated from the
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factual production of goods and services. It has become an end in itself, and this is
one reason to speak of neoliberalism and not of liberalism.
A general characteristic of neoliberalism is the desire to intensify and expand the
market, by increasing the number, frequency, repeatability, and formalisation
of transactions. The ultimate (unreachable) goal of neoliberalism is a universe
where every action of every being is a market transaction, conducted in
competition with every other being and influencing every other transaction, with
transactions occurring in an infinitely short time, and repeated at an infinitely fast
rate. It is no surprise that extreme forms of neoliberalism, and especially
cyberliberalism, overlap with semi-religious beliefs in the interconnectedness of
the cosmos.
Some specific aspects of neoliberalism are:
A new expansion in time and space of the market: although there has been a
global-scale market economy for centuries, neoliberals find new areas of
marketisation. This illustrates how neoliberalism differs from classic market
liberalism. Adam Smith would not have believed that a free market was less
of a free market, because the shops are closed in the middle of the night:
expansion of trading hours is a typically neoliberal policy. For neoliberals a
23-hours economy is already unjustifiable: nothing less than 24-hours
economy will satisfy them. They constantly expand the market at its
margins.
The emphasis on property, in classic and market liberalism, has been
replaced by an emphasis on contract. In the time of Adam Smith, property
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conferred status in itself: he would find it strange that entrepreneurs
sometimes own no fixed assets, and lease the means of production.
Contract maximalisation is typically neoliberal: the privatisation of the
British railway network, formerly run by one state-owned company, led to
30 000 new contracts. Most of these were probably generated by splitting
services, which could have been included in block contracts. (A fanatic
neoliberal would prefer not to buy a cup of coffee, but negotiate separately
for each microlitre).
The contract period is reduced, especially on the labour market, and so
the frequency of contract is increased. A service contract, for instance for
office cleaning, might be reduced from a one-year to a three-month contract,
then to a one-month contract. Contracts of employment are shorter and
shorter, in effect forcing the employee to re-apply for the job. This
flexibilisation means a qualitatively different working life: many more job
applications, spread throughout the working life. This was historically the
norm in agriculture - day labour - but long-term labour contracts became
standard after industrialisation.
Market forces are also intensified by intensifying assessment, a development
especially visible on the labour market. Even within a contract period, an
employee will be subject to continuous assessment. The use of specialised
software in call centres has provided some extreme examples: the time
employees spend at the toilet is measured in seconds: this information is
used to pressure the employee to spend less time away from the terminal.
Firms with contracts are also increasingly subject to continuous assessment
procedures, made possible by information technology. For instance, courier
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services use tracking software and GPS technology, to allow customers to
locate their packages in transit. This is a typical example of the new hyper-
provision of business information, in neoliberal economies.
New transaction-intensive markets are created on the model of the stock
exchanges - electricity exchanges, telephone-minute exchanges. Typical for
neoliberalism: there is no relationship between the growth in the number of
transactions, and the underlying production.
New forms of auction are another method of creating transaction-intensive
markets. Radio frequency auctions, such as those for UMTS frequencies, are
an example. They replaced previous methods of allocation, especially
licensing - a traditional method of allocating access to scarce goods with no
clear private owner. The complex forms of frequency spectrum auctions
have only been developed in the last few years. Neoliberals now see them as
the only valid method of making such allocations: they dismiss all other
methods as 'beauty contests'.
Artificial transactions are created, to increase the number and intensity of
transactions. Large-scale derivative trading is a typically neoliberal
phenomenon, although financial derivatives have existed for centuries. It is
possible to trade options on shares: but it is also possible to create options on
these options. This accumulation of transaction on transaction, is
characteristic of neoliberalism. New derivatives are created, to be traded on
the new exchanges - such as 'electricity futures'. There is no limit to this
expansion, except computer power, which grows rapidly anyway.
Automated trading, and the creation of virtual market-like structures, are
neoliberal in the sense that they are an intensification of "transaction for
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transaction's sake". However, a world in which allentrepreneurial activity
was automated would not be neoliberal, or liberal.
This expansion of interactivity means that neoliberal societies are network
societies, rather than the 'open societies', of classic liberals. Formal equality
and 'access' are not enough for neoliberals: they must be used to create links
to other members of the society. This attitude has been accurately labelled
'connectionist'.
Because of contract expansionism, transaction costs play an increasing role
in the neoliberal economy. All those 30 000 contracts at British Rail had to
be drafted by lawyers, all the assessments have to be done by assessors.
There is always some cost of competition, which increases as the intensity of
transactions increases. Neoliberalism has reached the point where these costs
threaten to overwhelm the existing economy, destroying any economic gains
from technological change.
The growth of the financial services sector is related to these neoliberal
characteristics, rather than to any inherent shift to service economies. The
entire sector is itself a transaction cost: it was almost non-existent in the
centrally planned economies. In turn, it has created a huge demand for office
space in the world's financial centres. The expansion of the sector and its
office employment are in direct contradiction of propaganda about 'more
efficiency and less bureaucracy' in the free market.
The speed of trading is increased. Online market data is expensive, yet it is
now available free with a 15-minute delay. The markets move so fast, that
the data is worthless after 15 minutes: the companies can then give it away,
as a form of advertising. Day-traders buy and sell shares in minutes.
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Automated trading programmes, where the computer is linked direct to the
stock exchange system, do it in seconds, or less. It is this increased speed
which has led to the huge nominal trading volumes on the international
currency markets, many times the Gross World Product on a yearly basis.
Certain functions arise which only exist inside a neoliberal free market -
'derivative professions'. A good example is the profession of psychological-
test coach. The intensity of assessment has increased, and firms now
regularly use psychological tests to select candidates, even for intermediate
level jobs. So ambitious candidates pay for training, in how to pass these
psychological tests. Competition in the neoliberal labour market itself
creates the market for this service.
The creation of sub-markets, typically within an enterprise. Sub-contracting
is itself an old market practice, but was usually outside the firm. It is now
standard practice for large companies to create competition among their
constituent units. This practice is also capable of quasi-infinite extension,
and its promotion is characteristic of neoliberalism. A few companies even
required each individual employee to register as a business, and to compete
with each other at the place of work. A large company can form literally
millions of holdings, alliances and joint ventures, using such one-person
firms as building blocks.
Supplier maximalisation: this extends the range of enterprises that compete
for each contract. The ideal would be that every enterprise competes for
every contract offered, maximising competition and market forces. In the
case of the labour market, the neoliberal ideal is the absolutely flexible and
employable employee, who can (and does apply) for every vacancy. In
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reality, an individual can not perform every kind of work - but there is a real
development towards non-specialised enterprises, especially in the producer
services sector. In neoliberalism, instead of the traditional 'steel tycoon' or
'newspaper baron' there are enterprises which "globally link people and
knowledge, and cultures" or "advise and implement solutions to
management issues". (In fact these are quotes from the accountants Price
Waterhouse, but you can not guess this from the descriptions).
Neoliberalism is not simply an economic structure, it is a philosophy. This is most
visible in attitudes to society, the individual and employment. Neo-liberals tend to
see the world in term of market metaphors. Referring to nations as companies is
typically neoliberal, rather than liberal. In such a view Deutschland GmbH
competes with Great Britain Ltd, BV Nederland, and USA Inc. However, when
this is a view of nation states, it is as much a form of neo-nationalism as
neoliberalism. It also looks back to the pre-liberal economic theory -
mercantilism - which saw the countries of Europe as competing units. The
mercantilists treated those kingdoms as large-scale versions of a private household,
rather than as firms. Nevertheless, their view of world trade as a competition
between nation-sized units, would be acceptable to modern neoliberals.
Competition for inward investment, on the other hand, was generally unknown
until the late 19th century. This competition is often seen by activists as the core
doctrine of neoliberalism, especially since the neo-mercantilist policies are easy to
understand and very unpopular: wage cuts, less money for public services, less tax
on the rich. The neo-mercantilist nation, in other words, behaves like a
caricaturally mean and nasty capitalist. It is not relevant either for these policies, or
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for opposition to them, whether they have any effect at all. Perhaps investment
decisions are not made on this basis, perhaps there is no real mobility of capital,
perhaps no investor is interested in Argentina, for instance. But so long as the
Argentine government believes that it should pursue certain polices to attract
investors, then it will do so. So long as it believes that the 'SA Argentina' is a
business firm, then it will run Argentina accordingly.
The market metaphor is not only applied among nations, but among cities and
regions as well. In neoliberal regional policy, cities are selling themselves in a
national and global marketplace of cities. They are considered equivalent to an
entrepreneur selling a product, but the product is the city (or region) as a location
for entrepreneurs. The successful 'sale' of the product is the decision of an
entrepreneur to locate there, not simply the sale of land or factories. This view of
cities as sub-firms within the fictive 'national firm' parallels the creation of sub-
markets within real firms. The difference is, that those sub-markets really exist -
neoliberal city governments, on the other hand, act primarily on a belief in a
metaphor. Again, there is no hard evidence that the global marketplace of cities
exists: for most economic sectors complete mobility of plant and labour is an
illusion. Most firms can not simply move from city to city, across continents and
ignoring language and cultural barriers, in pursuit of locational advantage. Here
too, the neoliberalism is a philosophy, an attitude - rather than an economic reality.
It has influenced European politics - the fear of this neoliberalism dominated the
French campaign against the European Constitution. There is certainly a neoliberal
lobby within the EU, represented by the Lisbon Council, although it sees the world
in terms of competing trade blocks rather than competing cities or regions.
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However, it is not clear how a continent could be run as a business firm - even its
inhabitants wanted that. (More on neoliberal economic geography below).
A good example of the underlying attitudes is the basic policy document of the city
of Düsseldorf - the Leitbild, equivalent to a 'mission statement' in English. It was
adopted in 1997, and is no longer online at the city website, but parts are quoted
at St@ttbuch Düsseldorf...
Düsseldorf bekennt sich zum Prinzip des Wettbewerbs. Der Erfolg von Städten
entscheidet sich im Wettbewerb nach innen und aussen. Düsseldorf will besser
sein.
Wettbewerb ist treibende Kraft unseres gesellschaftlichen Systems. Im
zusammenwachsenden Europa gilt dies in hohem Masse auch für die Beziehungen
zwischen den Regionen, die als Wirtschaftsstandort, als Lebensraum für die
Bürgerinnen und Bürger und als Kulturstandort miteinander konkurrieren. Sich
hierzu bekennen heisst, den Wettbewerb aufnehmen und aktiv gestalten zu wollen.
Im Wettbewerb besteht nur, wer gut ist. Düsseldorf will Wettbewerb. Im Interesse
der vielen Millionen Menschen des Lebens- und Wirtschaftsraums: Düsseldorf will
besser sein.
...
Düsseldorf is committed to the principle of competition. The success of cities is
decided by competition, internal and external. Düsseldorf wants to be better.
Competition is the driving force of our social system. In a Europe which is
becoming more integrated, this applies increasingly to the relations between
regions. They compete with each other as investment location, as residential choice
for the citizens, and in cultural activity. Our commitment means that we will
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actively and structurally enter into this competition. In a competitive world, only
the good can survive. Düsseldorf wants to compete! In the name of the millions of
people in our economic and residential region: Düsseldorf wants to be the best!
The neoliberal urban vision was adopted, without debate, by many city
governments in the 1990's. At some point, a belief in 'competition by population
structure' was incorporated - the idea that a successful city is inhabited only by
successful people. This belief, nonsensical or not, has had an effect in a negative
sense: some cities now pursue active policies aimed at relocating low-income
households outside the city. In the Netherlands, a new law allows large cities to
legally ban poor people, from certain areas, or from the entire city..
As you would expect from a complete philosophy, neoliberalism has answers to
stereotypical philosophical questions such as "Why are we here" and "What should
I do?". We are here for the market, and you should compete. Neo-liberals tend to
believe that humans exist for the market, and not the other way around: certainly in
the sense that it is good to participate in the market, and that those who do not
participate have failed in some way. In personal ethics, the general neoliberal
vision is that every human being is an entrepreneur managing their own life,
and should act as such.Moral philosophers call this is a virtue ethic, where human
beings compare their actions to the way an ideal type would act - in this case the
ideal entrepreneur. Individuals who choose their friends, hobbies, sports, and
partners, to maximise their status with future employers, are ethically neoliberal.
This attitude - not unusual among ambitious students - is unknown in any pre-
existing moral philosophy, and is absent from early liberalism. Such social actions
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are not necessarily monetarised, but they represent an extension of the market
principle into non-economic area of life - again typical for neoliberalism.
The idea of employability is characteristically neoliberal. It means that neoliberals
see it as a moral duty of human beings, to arrange their lives to maximise their
advantage on the labour market. Paying for plastic surgery to improve
employability (almost entirely by women) is a typical neoliberal phenomenon - one
of those which would surprise Adam Smith.
Eileen Bradbury, a psychologist who advises surgeons at the Alexandra Hospital in
Cheadle, Cheshire, said she was particularly worried that Jenna wanted the
operation so that she could be successful. "That is a very disturbing belief for a 15-
year-old girl to have, and also a false one," she said. "I have seen women coming
for surgery who work in television and they say they have to have it done or they
won't get the work. I usually go along with that because it is probably true".
Guardian: Parents defend breast implants for girl, 15.
In practice many 'workfare neoliberals' also believe that there is a separate category
of people, who can not participate fully in the market. Workfare ideologies
condemn this underclass to a service function for those who are fully market-
compatible. Note however, that by recognising a non-market underclass,
neoliberals undermine their own claims about the universal applicability of market
principles.
The general ethical precept of neoliberalism can be summarised approximately as:
"act in conformity with market forces"
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"within this limit, act also to maximise the opportunity for others to conform
to the market forces generated by your action"
"hold no other goals"
If everyone lives by such entrepreneurial precepts, then a world will come into
existence in which not just goods and services, but all human and social life, is the
product of conformity to market forces. More than traditional market liberals,
neoliberals therefore have a quasi-heroic attitude to the entrepreneur, and to
engagement in the market. A 1998 speech by German entrepreneur Jost Stollmann
is typical: his neoliberal ideas played a prominent role in the national elections in
Germany in that year. Stollmann includes his personal moral philosophy, such as it
is...
Ich möchte die Lust und Bewunderung unternehmerischen Erfolgs in den Augen
der jungen Menschen sehen. Ich möchte den Stolz und den Zuspruch der Eltern
spüren, wenn sich Sohn oder Tochter tatenvoll in das Abenteuer Selbständigkeit
stürzen.
....so gut sein, wie wir nur können - getreu der bewährten Formel, die ich während
meiner Zeit in Amerika verstehen gelernt habe: 'BE THE BEST YOU CAN BE'
Jost Stollmann
The idea that everyone should be an entrepreneur is distinctly neoliberal. Early
liberals never expected the majority of the population to own property, let alone
run a business. (The participation of the poor in the market was limited to
accepting any work they were offered). The practices on the flexibilised labour
market would seem strange to the early liberals. For instance, individuals set up a
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one-person employment agency with one person on the books, themselves - partly
for tax reasons, but also to meet the ideal of the entrepreneur. Policy to increase the
number of entrepreneurs is typically neoliberal, although ironically it must be
implemented by the State. A classic market-liberal would not say that a free market
is less of a free market, because only 10% of the population are entrepreneurs. For
neoliberals it is not sufficient that there is a market: there must be nothing which
is not market.
the neoliberalism joke
Marxist: "The workers have nothing to sell but their labour power"
Neoliberal: "I offer courses on How to Sell Your Labour Power Like A Shark"
There is therefore no distinction between a market economy and a market society
in neoliberalism. With the attitudes and ethics set out above, there is only market:
market society, market culture, market values, market persons marketing
themselves to other market persons. In a sense neoliberalism has returned to the
position of early liberalism - which also combined culture, values and ethics with
economics. But neoliberalism brings a far more intensive 'market' - replacing not
only traditional social forms, but also the concept of private life. At the same time
this 'market' is increasingly remote from the necessity of production, which was so
real for the early liberals - when there were still regular famines in Europe. In fact
it is so remote from the existing cultural perception of a 'market', that it would
perhaps be better to use some other word.
Finally, neoliberalism has become associated with specific cultures (especially US
culture) and a specific language (English). This is not surprising: Anglo-American
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liberalism had the most influence on neoliberalism. Neoliberalism as ideology is
not tied to any culture or language. It is true that a single global language would
facilitate free trade - but that could be Esperanto, as well as English. In practice,
the promotion of the English language, neoliberal policies, and pro-American
foreign policy, usually go together: this was especially true in Central and Eastern
Europe.
Globalisation and neoliberalism
Often the terms 'globalisation' and 'neoliberalism' are used as if they were
interchangeable. That is only correct in a limited sense, for the neo-mercantilist
aspects of the neoliberal ideology. I will try to clarify the perceived and actual
relationship between the two - especially for the South American use of the term
'neoliberalism'.
The neoliberal ideology sees the nation primarily as a business firm, as explained
above. The nation-firm is selling itself as an investment location, rather than
simply selling export goods. If no-one in government believes in this ideology, it
will have no consequences. If however, a neoliberal government is in power, it will
pursue policies designed to make the nation more attractive as an investment
location. These policies are generally pro-business, and are perceived as such by
the opponents of the policies.
But remember that the ideology is neo-mercantilist: the policies are national
policies, directed ultimately at the welfare of the nation and not of the market.
Paradoxically, they are a form of protectionism: if there is a global market of
investment locations, then it is 'unfair competition' for governments to artificially
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increase the attractiveness of their own country. Such governments are, strictly
speaking, not good market liberals. Hard-line classic market liberals would shrug
their shoulders at the election of an anti-business government. "Business will go
elsewhere, the country will become poor, that's the way the global market works,
leave the market alone", they would say. They would not waste their time trying to
get a pro-business government elected there. In reality few liberals are so
consistent, neoliberals certainly are not. But their rhetoric of 'national
competitiveness' is a form of economic nationalism: it is a modern version of the
old nationalist insistence, that the whole nation should work together. It revitalises
jingoism, chauvinism, flag-waving and foreigner-bashing: Tony Blair is probably
the best example.
Don't tell me that a country with our history and heritage, that today boasts six of
the top ten businesses in the whole of Europe, with London the top business city in
Europe, that is a world leader in technology and communication and the businesses
of the future, that under us has overtaken France and Italy to become the fourth
largest economy in the world, that has the language of the new economy, more
brilliant artists, actors and directors than any comparable country in the world,
some of the best scientists and inventors in the world, the best armed forces in the
world, the best teachers and doctors and nurses, the best people any nation could
wish for. Don't tell me with all that going for us that we do not have the spirit to
meet all the challenges before us.
Blair conference speech, 26 September 2000
Now, a neoliberal government will almost certainly appeal to 'globalisation' as a
justification and legitimisation of its policies - Tony Blair certainly does. By
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globalisation they mean, more or less, that the global market of investment
locations now exists, and that it is an inevitable historical development. The
opponents of the neoliberal government will, in turn, oppose this 'globalisation'.
However, that does not mean that the global market of nations actually exists. The
existence of neoliberal governments, pursuing neoliberal policies justified by an
appeal to globalisation, does not mean that a new global order has superseded the
order of nation states. The very fact, that it is still primarily the nation state which
is being 'marketed' in this way, shows that the nation has not disappeared.
Before considering the reality of the global order, it is also necessary to consider
the beliefs of the opponents of such a neoliberal government. Again paradoxically,
many of them accept without question the neoliberal claim that there is a long-term
historical process of 'globalisation', transforming the nation into a business firm on
a global market of nation-firms. Worse, if the nation is a business then it is often
clearly weak - everyone can see that Argentina is economically worse off than the
United States. A neoliberal government will therefore try to convert a nation such
as Argentina into a 'strong player', which means worsening the living conditions of
much of the population. Now here is the next paradox: the response of the
opponents is also an economic nationalism, this time with the emphasis on
protectionism. The opposition perception of globalisation differs in one respect: for
them it is a historical but not spontaneous development. For them it is a policy
imposed by a non-national global elite, directed against the individual nations.
In their view, the international financial institutions are equivalent to an imperial
power, which has de facto colonised countries such as Argentina. In caricatural
form: they believe that a new and powerful empire has come into existence, the
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Empire of IMF-ia, at an indeterminate location. The neoliberal government, in this
view, is a traitorous elite acting as a colonial Viceroy for the IMF-ian Empire. The
opposition wants to replace it with a government which will 'liberate' the nation
from the global market, from its colonial status. That 'liberation' is generally
understood as: withdrawal of the nation-firm from the global market of nation-
firms, protectionism, economic nationalism, and self-sufficiency instead of trade.
Here too there is a paradox: the oppositional movements are not anti-business: they
generally see national business as a victim of global business. (Local business in
South America is in the comfortable position, that both neoliberals and anti-
neoliberals want to help it, for different reasons).
The 'IMF-ia model' is partly correct: the global financial institutions are indeed a
bastion of neoliberal ideology, and they can bully some poor countries into
adopting neoliberal policies. But they can't do that to the rich western powers, in
fact they would not exist without the support of these powers. They are not a force
outside nations, they are not an imperial power. The global financial institutions
are, in the simplest terms, an instrument of US policy - and if there is a quasi-
imperial power, it is the United States.
The point is, once again, that the truth of beliefs about globalisation is itself
irrelevant. If the government and people all believe that a country is being attacked
by fire-breathing dragons, then the government might distribute asbestos suits to
the population, and the opposition might complain that there were not enough of
them. Ideologies and politics can operate on a completely fictive basis. Millions of
Europeans died to 'resolve' theological issues such as the Virgin Birth of Mary,
Mother of God.
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So the perceptions have themselves generated a political reality: on the basis of a
belief in 'globalisation' some governments pursue neoliberal policies, which are
neo-mercantilist in their logic and aims. In such circumstances opposition to
globalisation and neoliberalism coincides, rather than neoliberalism being identical
or synonymous with globalisation. Both sides share a common fallacy: that trade
and sovereignty are opposites, a zero-sum pair. The neoliberals believe that
national success - "in today's global market" - requires the abandonment of
national economic autonomy and sovereignty. Their opponents believe that
national welfare requires minimisation of trade and external links: they believe that
trade and invasion are equivalent, although no-one will say that outright. Once
again, the equivalences and perceptions on both sides are false. Most of the Gross
Global Product is tied to individual nation states for technical, climatic, logistical,
and cultural reasons. For most investment decisions, there is no global market of
locations. And sovereignty is not necessarily inverse to trade volume and trade
regime. A powerful country such as the United States can have a high trade volume
relative to GNP. Many colonies - by definition not sovereign - had a low trade
volume relative to GNP, because the bulk of 'GNP' consisted of peasant
agriculture. But even a fallacious belief can apparently support not just one, but
two competing forms of economic nationalism.
So what is the reality behind the perceived globalisation? One reality is that nation
states still dominate global social and economic structures. However these nation
states themselves form a specific arrangement of a specific type of state.
Globalisation claims appear logical if you see nation states as isolated islands, but
that is not the historical reality. The very existence of a world of nation states,
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indicates some form of global order of nation states. What these nation states do -
trade or no trade, capital flows or no capital flows - is irrelevant to that
issue. What is already global can not logically be globalised: therefore there is
no globalisation, in the widely used sense. There is no transition underway, or
recently completed, to a fundamentally different global structure. Because the
existing order of nation states is already global, intensification of global flows, or
global trade, or global communication does not undermine it, or fundamentally
alter it. If some part of the world were to break with this global order - for instance
a future autarkic caliphate - that would be a radical change. When nations trade
with each other, that simply indicates that the global order of nations is functioning
as expected.
The false premise in the globalisation thesis is in fact the standard nationalist
claim, that each nation is a separate and particular entity. In reality nations
collectively are a global and universalist structure: the functional equivalent of a
nationalist world state. The world functions as if a nationalist world government
had seized power in the 19th century, led by Mazzini and Garibaldi and friends.
Most existing states were indeed established by nationalist groups. Nationalists co-
operate to maintain one (nationalist) world order and exclude others. The nation
state is not a particularity, existing by itself in isolation, but part of a global design.
Supporters of the globalisation thesis claim, that a world of isolated nation states
existed in the recent past - before 1989, or more approximately before 1950. They
claim that these isolated nation states are now being eroded in a global process: it
includes the formation of the neoliberals claimed 'market of nations'.
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Economic globalization represents a major transformation in the territorial
organization of economic activity and politico-economic power....The sovereignty
of the modern state was concentrated in mutually exclusive territories and the
concentration of sovereignty in nations...economic globalization has contributed to
a denationalizing of national territory...
Saskia Sassen. Losing Control: Sovereignty in an Age of globalization (1996).
But is the global order of nation states disappearing, anywhere? In reality, there is
no collapse of the nation state to be seen. Nation states have not suffered
anything comparable to the dissolution of the Austro-Hungarian or Ottoman
empires. All that remains of those empires are oversized palaces in Vienna and
Istanbul. The rest of their institutions have completely disappeared: there is not a
square metre of Habsburg or Ottoman territory left in Europe. There is no longer
an Austro-Hungarian imperial army, or police, or courts, or parliament. The nation
states succeeded the multi-ethnic empires, seized all their territory, and remodelled
all society on that territory. The replacement was total. Where is the equivalent
'collapse' of the nation state? There are few places on earth without the institutions
of a nation state - perhaps Somalia, but that is not the result of globalisation. If the
world was truly 'globalised' then it would be full of disused national parliament
buildings - and not a national army in sight. The world is not like that, and will not
be like that in the immediate future.
In other words, 'globalisation' remains a belief rather than a reality. It is an
instrumental belief with great political influence and effect. It is appealed to by
both neo-mercantilist neoliberals and their economic-nationalist opponents.
Nationalists have a tradition of appealing to external threats to enforce national
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unity. The nation must unite and work together, they said - to defeat the Hun, or
the Bolshevik threat, or the Yellow Peril, or the enemy within the gates, or Osama
bin Ladin. The instrumental use of 'globalisation' is in the same dishonourable
category.
Summarising neoliberalism
To conclude, here are summaries of neoliberalism in two forms. First a list of key
points in neoliberalism:
transaction maximalisation
maximalisation of volume of transactions ('global flows')
contract maximalisation
supplier/contractor maximalisation
conversion of most social acts into market transactions
artificial maximalisation of competition and stress
creation of quasi-markets
reduction of inter-transaction interval
maximalisation of parties to each transaction
maximalisation of reach and effect of each transaction
maximalisation of hire/fire transactions in the labour market (nominal
turnover)
maximalisation of assessment factors, by which compliance with a contract
is measured
reduction of the inter-assessment interval
creation of exaggerated or artificial assessment norms ('audit society')
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A final summary definition of neoliberalism as a philosophy is this:
Neoliberalism is a philosophy in which the existence and operation of a market are
valued in themselves, separately from any previous relationship with the
production of goods and services, and without any attempt to justify them in terms
of their effect on the production of goods and services; and where the operation of
a market or market-like structure is seen as an ethic in itself, capable of acting as a
guide for all human action, and substituting for all previously existing ethical
beliefs.
Source: http://web.inter.nl.net/users/Paul.Treanor/neoliberalism.html