WORLD-ECONOMY: Not The End of Neoliberalism Yet

By IPS Correspondents Reprint | | Print |

Christi van der Westhuizen

CAPE TOWN, Mar 2 2009 (IPS) - The economist and author Prof Patrick Bond warns that the optimism about the dawn of a post-neoliberal era is premature and that ‘‘a more dangerous and painful’’ period may be ahead before any real change to the current global economic regime will be possible.

The understanding of the global economic crisis needs to move beyond concern with the financial form of the crisis to a richer sense of why capitalist dynamics are to blame, argues Bond, who is director of the Centre for Civil Society (CCS) at the University of KwaZulu Natal, in a recent paper. The CCS is based in Durban, South Africa.

In his paper he refers to comments by, among others, German chancellor Angela Merkel telling Time magazine that if the global elite ‘‘are not in a position to show that we can create a social order for the world in which such crises do not take place, then we'll face stronger questions as to whether this is really the right economic system’’.

Even conservative media such as Time magazine has featured Karl Marx, the author of Capital, on its cover with the question ‘‘What would Marx think (about the global crisis)?’’

Despite these apparent shifts in mainstream discourses, Bond points to three warning signs that show that the end of neoliberalism may still be some time off. The first is that public policy will suffer from austerity measures, associated with economic volatility, and from ‘‘a renewed lobby for micro-neoliberal measures’’.

Second, there is still ‘‘unjustified faith’’ in the multilateral system, including ‘‘a Bretton-Woods revivalism’’, which draws attention away from the national-scale solutions. Bretton-Woods refers to the meeting place where global powers formed the International Monetary Fund (IMF) and the World Bank after the Second World War, hence the moniker ‘‘Bretton Woods institutions’’.

Third, a new threat has emerged in the form of a re-legitimised neoliberalism and imperialism, ‘‘via the election of Barack Obama as U.S. president’’, according to Bond. His criticism of Obama centres on the latter’s choice of economic policy managers, which include several figures from the Clinton administration.

Among these is Lawrence Summer who was the main driving force in Washington behind the financial deregulation of the 1990s, which led to the global crisis. He also instigated the Asian economic crisis of 1997-1998.

Bond shows that the shift in rhetoric is not backed up in practice. At a press conference after the Group of 20 (G20) summit on the financial crisis in November 2008, IMF managing director Dominique Strauss-Kahn urged all nations with the wherewithal to implement fiscal stimulus packages.

Bond reads this statement as aimed at satisfying the political imperative of the Bretton-Woods institutions to be seen as acting forcefully because of the global crisis.

But This is starkly contradicted by the IMF’s policy ‘‘advice’’ for South Africa, released in October 2008.

In its reports on South Africa, the IMF applies pressure on the South African government to maintain a budget surplus; and to implement privatisation for infrastructure and social needs, including electricity and transport. It pressurises the South African Reserve Bank to maintain current inflation-targeting and raise interest rates.

Furthermore, the IMF wants the South African treasury and trade ministries to remove protections against international economic volatility, especially financial and trade rules; and it wants the labour ministry to revoke workers’ rights in labour markets. This is despite the protection that South Africa’s residual capital controls have provided against the global crisis.

Bond adds that ‘‘the global crisis may conjure up triumphant centre-left rhetorics of post-neoliberalism in a European neo-Keynesian (and appropriately anti-American) context’’. Looking at the real power relations, however, it makes more sense to prepare a defence against austerity, he argues.

Keynesianism refers to policies inspired by influential British economist John Maynard Keynes whose proposals for a state interventionist approach in capitalist economies after the Second World War were widely embraced until the 1970s.

Regarding looming austerity measures, South Africa’s finance minister, Trevor Manuel, has warned of a further ‘‘tightening of belts’’ for some time.

In suggesting solutions, Bond calls for crucial strategic orientations to move from ‘‘an illusory post-neoliberal hubris, claimed by progressives in many sites around the world, to a more durable terrain upon which firm foundations are laid for human and environmental rights as political determinants, instead of markets and profits’’.

Bond further urges a refocus on sites of real power, which requires cutting through the ‘‘misleading hype’’ about a new Bretton-Woods conference under G20 or United Nations Financing for Development mandates, or a 2009 Copenhagen solution to the ‘‘Kyoto Protocol’s malaise’’.

The view from South Africa, he states, is to counteract the austerity, volatility and micro-neoliberal through reorganising the campaigning in ‘‘defence of financial degradation’’.

To explain the latter phrase, Bond gives as an example community members defaulting on un-repayable mortgage debt and forcing re-payment concessions from banks and creditors through community resistance, as was done in Mexico, Argentina and South Africa.

This should also be done at the national level. Bond quotes UN economic adviser Jeffrey Sachs telling African heads of state that they should refuse to pay back crippling national debt and rather spend that money on health and education.

Moreover, fruitless calls for UN action on environmental and other problems should be transcended with a reconsideration of applying national state powers, such as exchange controls, environmental re-regulation and financial nationalisation.

Bond also proposes that the ‘‘re-delegitimisation of U.S. power’’ be assisted by an insistence ‘‘on a world not addicted to the U.S. dollar and all that it represents economically, and also to provide critical (not dogmatic) support to rising anti-imperialist potentials’’.