From Socialist Voice, November 2008

Apples, ideas, and workers

Labour is not a commodity like an oversupply of apples, waiting passively in barrels for prices to drop in order to be purchased. Labour can mobilise and resist wage cuts, seek increases in living standards, or change the entire system to suit its own needs and aspirations.
     Capitalism therefore faced one of its greatest threats during the Great Depression. The rival economy of the new Soviet Union was industrialising, while millions were out of work in the western economies. Workers in those countries were increasingly looking east for an alternative to unemployment and hunger.
     At first capitalism colluded with fascism as a means of eradicating the communist alternative, until fascism failed to behave. Capitalism was eventually shored up more respectfully with the adoption of Keynesian economics. Indeed many on the left believed they could manage capitalism better than the capitalists.
     This utopian notion ignores the uncomfortable fact that capitalism can have only one manager, and that is the self-serving market. Keynesian economic theory states that the government should endeavour to regulate capitalism. This is attempted by the use of fiscal and monetary policies to smooth the cyclical nature of free-market capitalism’s booms and busts. It can also incorporate the redistributive policies of the welfare state, which help provide for health, education, and a lifetime income (Wallerstein, 2001).
     However, welfare redistribution need not be progressive and can be self-financing and spread over a worker’s lifetime for periods of non-working (Pierson, 1999), can be intra-class as opposed to inter-class (Hyman, 1975), and even redistribute upwards, away from the working class (Hills, 1994): ask any worker who carriers the tax burden in an economy for anecdotal evidence of regressive “redistribution.”
     Not surprisingly, given Keynesianism’s alleged benefits, eventually most of the right wing accepted state intervention and redistribution policies. This reached its crescendo in 1971 with Richard Nixon’s statement that “we’re all Keynesians now.” Until the mid-1970s neo-liberals were just a Menshevik faction on the right; twenty-five years later all this had changed, as demonstrated by Bill Clinton’s statement in 1996 that “the era of big government is over.”
     As Milton Friedman (1998) proclaimed, “to judge from the climate of opinion, we have won the war of ideas. Everyone left or right talks about the virtues of markets, private property, competition, and limited government.”
     George (1999) believes that one explanation for this triumph of neo-liberalism is that the neo-liberals understood—as many on the left did not—that “ideas have consequences.” George also believes that neo-liberals understood the concept of cultural hegemony, as articulated by the Italian communist Antonio Gramsci.
     Starting from a tiny nucleus in the Economics Department of the University of Chicago led by Friedrich Hayek and Milton Friedman, the cadres of neo-liberalism have created a very influential cultural hegemony. The so-called “Chicago Gang” and their financial sponsors have created a huge international vanguard of think-tanks, foundations, institutes, research centres, publications and academic circles to spread their free-market ideas.
     When the fragile class compromise of Keynesianism inevitably began to collapse because of the market forces of rising inflation and falling growth in the early 1970s, the ideas of neo-liberalism subsequently achieved their “great leap forward” with the election of Margaret Thatcher and Ronald Reagan.
     But its theories were tested before the hegemony of Thatcherism and “Reaganomics.” “Neo-liberalism in one country” was presented with almost laboratory conditions to test its thesis: in Chile in the mid-1970s.
     After the fascist coup against the democratically elected government of the Marxist Salvador Allende on 11 September 1973, led by the CIA-backed dictator Augusto Pinochet, the Chilean economy began to collapse. By 1975 inflation was rampant. Pinochet handed over the running of the economy to a group of thirty Chileans who had studied economics at the University of Chicago.
     But the links between neo-liberalism and the Chilean dictatorship do not end there. Interviewed in 1981 while connected with a right-wing think-tank in Pinochet’s Chile, Hayek was asked, “In your view, should we have dictatorships?” He replied: “Personally I prefer a liberal dictator to a democratic government lacking liberalism.”
     Hayek’s apprentice, Friedman, the author of a book curiously called Capitalism and Freedom, also had close connections with Pinochet’s Chile. In 1998 Thatcher herself had no qualms about inviting Pinochet around for tea when he visited London two weeks before his arrest.
     Some people are surprised that so-called democratic capitalists can be fellow-travellers with undemocratic regimes. In prevailing capitalist cultural hegemony, capitalism and democracy are presented as inseparable.
     However, the history of capitalism demonstrates that universal adult suffrage is only a recent prop to the capitalist structure. Historically, people have been denied the vote on grounds of class, sex, race, religion, and colour. That those excluded were eventually enfranchised was the result of political struggle and the state conceding democratic reforms in order to dampen down more radical threats.
     But if the great unwashed were to be given the vote, economics and politics would have to be separated, as Polanyi (1944) observed in relation to nineteenth-century Britain: “When the Chartist Movement demanded entrance for the disinherited into the precincts of the state, the separation of economics and politics ceased to be an academic issue and became the irrefrangible condition of the existing system of society.”
     This point was not lost on one particular member of the British Parliament, who claimed that he saved Ireland from Chartism because, among other reasons, the call for universal manhood suffrage would lead to “a violation of all property” (Boyd, 1976). Today the main street in Dublin is named after him.
     Polanyi also states that the architects of the American Constitution isolated and protected private property from the wishes of American voters.
     At the beginning of a new century, we are witnessing the even greater separation of democratically elected parliaments from the market. The free-market fundamentalists use every means at their disposal in capitalist hegemony to argue that neo-liberal reforms, structural adjustments, liberalisation, deregulation, privatisation and curbs on workers’ rights and trade union power will result in a neutral, level playing-field.
     Non-intervention in the market, they pronounce, will result in economic prosperity, and a “trickle-down” effect will raise living standards for all. But government non-intervention is not neutral when such inaction actually favours powerful property-owners against the weak, namely workers and the poor.
     In 1997 a United Nations report (UNCTAD, 1997) stated that since the early 1980s and “the deregulation of domestic markets and their opening up to international competition . . . the world economy has been characterized by rising inequality and slow growth.”
     Annual rates of growth in gross domestic profit from 1950 corroborate the UN report. Between 1950 and 1973—the Keynesian era—global growth (including the Soviet and ex-Soviet countries) was 4.9 per cent. From 1973 to 1998 it dropped to 3 per cent, a fall of 38.7 per cent (Felix, 2003). Global GDP further declined to 2.7 per cent between 1990 and 2001 (Monthly Review, 2002).
     Neo-liberal hegemony also fails the 45 per cent of the world’s population who live on less than $2 a day and who are trapped in poverty, hunger, and disease. In twenty-four African countries GDP per capita is less than in 1975, and in twelve countries it is even below its 1960s level (Milanović, 2003). Furthermore, environmental damage is written off by capitalism as an economic “externality,” as if it’s someone else’s problem.
     Regarding the Soviet Union and other former socialist countries, growth in GDP has declined in every country except Poland. In Russia, Georgia, Moldova, Ukraine and Tajikistan it has declined the most. Throughout these “transition” economies the level of poverty has risen from 14 million in 1989 to 147 million in 1998 (Macionis and Plummer, 2005; Swift, 2004).
     In a World Bank publication, Milanović asked a number of “uncomfortable questions,” one being why the  best  “pupils”  among  the  “transition” economies—such as Armenia, Georgia, Kyrgyzia, and Moldova—after emerging as new economic entities in 1991, with no debt, and following all the instructions and advice of neo-liberalism, are seeing their GDP halved and in need of debt write-off.
     Despite neo-liberalism’s falling growth and rising inequalities, we are increasingly exposed to Thatcher’s proclamation that “there is no alternative.” In 1992 Francis Fukuyama of the US Department of State went as far as to claim that because of the dismantling of the Soviet Union the world has come to the “end of history.” But “neo-liberalism is not a force like gravity but a totally artificial construct; you can also understand that what some people have created, other people can change” (George, 1999).
     To convince people that there is no alternative to neo-liberalism, those with alternative ideas on how societies should allocate limited and finite resources must be marginalised. Perhaps that is why, nineteen years after the fall of the Berlin wall, we still have a UN-condemned embargo against Cuba. Keep all the bad apples—or is it ideas?—in one barrel.


Boyd, Andrew, The Rise of the Irish Trade Unions, 1729–1960, Tralee: Anvil Books, 1976.
Felix, David, “The Past as Future?: The Contribution of Financial Globalization to the Current Crisis of Neo-Liberalism as a Development Strategy” (PERI Working Paper Series, no. 69, 2003.
Friedman, Milton, and Friedman, Rose, Two Lucky People: Memoirs, Chicago: University of Chicago Press, 1998.
Fukuyama, Francis, The End of History and the Last Man, New York: Free Press, 1992.
George, Susan, ‘A Short History of Neo-liberalism: Twenty Years of Elite Economics,” paper presented at the Conference of Economic Sovereignty in the Global World, Bangkok, 24–26 March 1999.
Hills, John, The Future of Welfare: A Guide to the Debate, York: Rowntree, 1994.
Hyman, Richard, Industrial Relations: A Marxist Introduction, London: Macmillan, 1975.
Macionis, John J., and Plummer, Ken, Sociology: A Global Introduction, Harlow (Essex): Pearson Education, 2005.
Milanović, Branko, “Forum for discussion: Revisiting ‘good’ and ‘bad’ globalizers,” Transition, vol. 14, no. 1–3 (January–March 2003).
Monthly Review, “The new face of capitalism,” Monthly Review, April 2002, p. 1–14.
Pierson, Chris, “Marxism and the welfare state,” in Andrew Gamble, David Marsh and Tony Tant (eds.), Marxism and Social Science, Chicago: University of Illinois Press, 1999.
Polanyi, Karl, The Great Transformation: The Political and Economic Origins of Our Time (second edition), Boston: Beacon, 2002.
Swift, Richard, “Life after communism: The facts,” New Internationalist, 336 (April 2004).
United Nations Conference on Trade and Development, Trade and Development Report, 1997, New York and Geneva: UNCTAD, 1997.
Wallerstein, Immanuel, “Democracy, capitalism, and transformation,” lecture at “Documenta 11,” Vienna, 16 March 2001.

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