{"id":2854,"date":"2019-12-08T16:30:30","date_gmt":"2019-12-08T16:30:30","guid":{"rendered":"https:\/\/www.worldsocialism.org\/wsm\/?page_id=2854"},"modified":"2019-12-08T16:31:17","modified_gmt":"2019-12-08T16:31:17","slug":"neo-liberalism-old-religion-repackaged","status":"publish","type":"page","link":"https:\/\/www.worldsocialism.org\/wsm\/neo-liberalism-old-religion-repackaged\/","title":{"rendered":"Neo-Liberalism: Old Religion Repackaged"},"content":{"rendered":"\n

It\u2019s not neo-liberalism that\u2019s to blame \u2013 it\u2019s capitalism<\/strong><\/p>\n\n\n\n

In\n Marx\u2019s day the doctrine that the government should not interfere in the\n operation of the capitalist economy was known as \u2018Manchesterism\u2019 after \nthe city in the north of England where capitalist industry was then most\n developed and whose capitalists wanted to be free to pursue profits as \nthey thought fit.<\/p>\n\n\n\n

Its\n advocates preached \u2018free trade\u2019 (the abolition of tariffs on imported \ngoods and bounties on exported goods) and letting market forces operate \nfreely. They even opposed laws against adulteration and to limit the \nhours of work of those they employed. Also known as \u2018economic \nliberalism\u2019, it had roots in the eighteenth century in French \nmanufacturers and merchants who told the royal bureaucracy to leave them\n alone and let them get on with their business (\u2018laissez faire\u2019) and in \nAdam Smith\u2019s curious theory that behind market forces was some \n\u2018invisible hand\u2019 ensuring that these operated for the common good.<\/p>\n\n\n\n

However,\n a practical problem soon arose over industries and services which all \ncapitalist businesses had to make use of, such as transport (roads, \ncanals, railways) and communications (post, telegraph). Capitalists did \nnot want these to be in the hands of any one group of their number who \nwould thereby be in a position to hold the rest of them to ransom and \ncharge monopoly prices. This was why in Britain, as early as 1844, a \nRailways Act contained a clause providing, if need be, for state \nownership, so-called \u2018nationalisation.\u2019 In Europe railways had been in \nthe hands of the state almost from the beginning because of their \nstrategic importance for transporting troops in times of war. In the \nevent Britain settled for price regulation by the government, which was \nalso a violation of laissez faire<\/em>.<\/p>\n\n\n\n

Economic\n liberalism never caught on in its entirety outside Britain as \u2018free \ntrade\u2019 was seen, not without justification, by rival capitalists in \nother countries as a means of giving British capitalists a competitive \nadvantage. They demanded that their governments \u2018protect\u2019 them from such\n competition through tariffs on imported British goods. Beyond that, \nhowever, they embraced the doctrine that governments should not \ninterfere with their pursuit of profits.<\/p>\n\n\n\n

Enter Keynes<\/strong><\/p>\n\n\n\n

Between\n the two world wars of the last century even Britain abandoned free \ntrade and the gold standard. An era of government-created fiat money \nopened up, in which governments had to pursue an interventionist policy \nto manage their currency. With the financial crash of 1929 and the big \nslump in production that followed, governments also came under pressure \nto intervene in the capitalist economy to try to get it expanding again.\n \u2018Public works\u2019 programmes were initiated, such as Roosevelt\u2019s New Deal \nin the USA and Hitler\u2019s rearmament in Germany. In his 1936 General Theory of Employment, Interest and Income <\/em>the\n British economist John Maynard Keynes provided a theoretical \njustification for such ad-hoc schemes. He argued that left to itself \u2013 laissez faire<\/em>\n \u2013 capitalism would not necessarily recover from a slump of its own \naccord, as economists had preached till then, but that government \nintervention, in the form of a tax policy to stimulate demand was \nrequired. In the event of a boom, this could be prevented from ending in\n a slump, as booms had previously always done, by the government pursing\n the opposite policy of using taxes to discourage consumption. Thanks to\n government intervention, steady capitalist expansion could be \nengineered.<\/p>\n\n\n\n

Naturally\n this theory, especially stimulating demand in a slump by redistributing\n purchasing power from the rich to the non-rich, was acclaimed by \nreformists as a justification for the reforms they already favoured. \nThose that had still regarded themselves as in the Marxist tradition \nabandoned Marx for Keynes. <\/p>\n\n\n\n

Keynesianism\n was not consciously pursued as a government policy till the beginning \nof the Second World War. When that war was not followed by a slump, as \nthe end of the First World War had been, but by a 25-year period of \ncapitalist expansion with only minor \u2018recessions,\u2019 many open supporters \nof capitalism hailed Keynes for having saved capitalism.<\/p>\n\n\n\n

But\n this was an illusion. Put to the test when the post-war boom came to an\n end in the 1970s, Keynesian policies resulted in what was called \n\u2018stagflation\u2019 \u2013 a rise in the general price level while the economy \nremained stagnant. The post-war boom had been caused by other factors \nsuch as reconstruction and the spontaneous expansion of internal and \nworld markets.<\/p>\n\n\n\n

Exit Keynes<\/strong><\/p>\n\n\n\n

\"\"
Keynes v Friedman<\/figcaption><\/figure>\n\n\n\n

The\n end of the post-war boom led to what was called a \u2018fiscal crisis of the\n capitalist state\u2019. Governments depend for what they spend on levying \ntaxes, which ultimately fall on capitalist profits, and on borrowing \nmoney from those who have it. With less profit being made, there was \nless to tax and less to borrow. Government had no alternative but to cut\n their spending rather than increasing it as Keynes had advocated they \nshould do to get out of a slump. Another economic theory was required to\n replace Keynesianism and justify this.<\/p>\n\n\n\n

The\n new theory, popularised by the American economist Milton Friedman, \ncalled itself \u2018monetarism\u2019 as it advocated a tight monetary policy, i.e.\n cutting government spending, and letting market forces revive the \ncapitalist economy by restoring profitability of its own accord as asset\n prices and real wages fell. This was not really a new theory but a \nrevival of pre-Keynesian economic liberalism. <\/p>\n\n\n\n

There\n is some justification, then, for calling this replacement policy \n\u2018neo-liberalism.\u2019 What is not justified is seeing its application as a \nfree choice on the part the part of governments. It was something \nimposed on them by the workings of the capitalist economy, given the \nsituation it was in. Governments had no choice but to apply it. In other\n words, capitalism was the cause, with neo-liberalism merely the \npolitical and ideological justification.<\/p>\n\n\n\n

What\n the capitalist conditions imposed was that governments should cut their\n spending or, rather, cut taxing profits with the result that they had \nless to spend. With less to spend, \u2018austerity\u2019 was the order of the day \nin all countries irrespective of the political colour of their \ngovernment. It was not just Reagan and Thatcher in the USA and Britain \nbut also Mitterrand in France. Public services were cut back. \u2018Welfare\u2019 \nand \u2018benefits\u2019 were slashed, especially for those who for one reason or \nanother were not able to find a job. Since the economists preached that \nthere was a so-called \u2018natural rate of unemployment,\u2019 which could be as \nhigh as 6 percent, millions of already poor people had their standard of\n living reduced even further. Other reforms enacted during the post-war \nboom were whittled away or rolled back. <\/p>\n\n\n\n

To\n reduce their borrowing, governments sold off state assets to private \ncapitalist firms, who were granted the right to make profits from them \nin return for themselves raising the capital to finance them. <\/p>\n\n\n\n

As\n a policy of trying to ensure steady sustained capitalist development, \nneo-liberalism has been just as much a failure as Keynesianism was, as \nspectacularly shown by the Crash of 2008 and the Great Recession that \nfollowed. What this showed is that, no matter what policy governments \nadopt, capitalism goes relentlessly on its way, repeatedly going through\n the boom\/slump cycle that it has done since the 1820s. The fact is that\n governments do not \u2013 cannot \u2013 control the way the capitalist economy \nworks. It is the other way round. It is the operation of capitalism that\n constrains what governments do; all they can do is little more than \nreact to what capitalism throws at them. There is a sense in which they \ndo have a choice. They could choose to try to defy what capitalism\u2019s \neconomic forces dictate but, if they do, they will make matters worse. \nAs Marx pointed out with regard to banking legislation, while \ngovernments cannot make things better, they can make things worse:<\/p>\n\n\n\n

\u2018Ignorant\n and confused banking laws, such as those of 1844-5, may intensify the \nmonetary crisis. But no bank legislation can abolish crises themselves\u2019 (Capital,<\/em> Volume 3, Chapter 30, Penguin Books edition, p. 621).<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

This warning is apt because left-wing populists are calling for neo-liberalism to be replaced by\n government intervention to spend money to end austerity and get \ncapitalism expanding again \u2013 a revival of Keynes\u2019s discredited idea that\n could be called \u2018neo-Keynesianism.\u2019 As Marxists know, both from the \npast experience of such attempts and from a knowledge of how capitalism \nworks, this is doomed to fail and would make things worse.<\/p>\n\n\n\n

It\n is not neo-liberalism that is the problem, but capitalism. It is not a \nchange of policy that is required, but a change of socio-economic \nsystem. <\/p>\n\n\n\n

ADAM BUICK<\/strong><\/p>\n\n\n\n

From Socialist Standard<\/a><\/em> December 2019 article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s not neo-liberalism that\u2019s to blame \u2013 it\u2019s capitalism In Marx\u2019s day the doctrine that the government should not interfere in the operation of the capitalist economy was known as \u2018Manchesterism\u2019 after the city in the north of England where capitalist industry was then most developed and whose capitalists wanted to be free to pursue…<\/p>\n","protected":false},"author":1,"featured_media":2853,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"magazine_newspaper_sidebar_layout":"","footnotes":""},"class_list":["post-2854","page","type-page","status-publish","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/pages\/2854","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/comments?post=2854"}],"version-history":[{"count":2,"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/pages\/2854\/revisions"}],"predecessor-version":[{"id":2856,"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/pages\/2854\/revisions\/2856"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/media\/2853"}],"wp:attachment":[{"href":"https:\/\/www.worldsocialism.org\/wsm\/wp-json\/wp\/v2\/media?parent=2854"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}