Neoliberalism as the agent of capitalist self-destruction

upset broker

By Neil Davidson. Reprinted from Salvage, and abridged by Daphne Lawless for Fightback’s upcoming magazine issue on neoliberalism.

The neoliberal era can be retrospectively identified as beginning with the economic crisis of 1973, or, more precisely, with the strategic response of state managers and employers to that crisis. Previous eras in the history of capitalism have tended to close with the onset of further period of systemic crisis; 1973, for example, saw the end of the era of state capitalism which began in 1929. The neoliberal era, however, has not only survived the crisis which began in 2007, but its characteristic features are, if anything, being further extended and embedded, rather than reversed.

Yet, although neoliberalism has massively increased the wealth of the global capitalist class, has it also restored the health of the system itself? When crisis did return in 2007–8, it simply proved that neoliberalism was no more capable of permanently preventing this than any other mode of capitalist regulation.

Neoliberalism does, however, represent a paradox for capitalism. Its relative success as a ruling-class strategy, particularly in weakening the trade union movement and reducing the share of profits going to labour, has helped to disguise that some aspects of this mode of regulation are proving unintentionally detrimental to the system. Serving the interests of the rich is not the same – or at least, not always the same – as serving the interests of capital and may, in certain circumstances, be in contradiction to it. Capitalist states – or more precisely, their managers – have traditionally acted to make such an assessment; but in the developed West at least, neoliberal regimes are increasingly displaying an uncritical adherence to the short-term wishes of particular business interests. This is not the only emergent problem: the increasingly narrow parameters of neoliberal politics, where choice is restricted to ‘social’ rather than ‘economic’ issues, has encouraged the emergence of far-right parties, usually fixated on questions of migration, which have proved enormously divisive in working-class communities, but whose policies are in other respects by no means in the interests of capital.

How did capitalist states operate before neoliberalism? There are two foundational aspects of capitalism: the ‘horizontal’ competition between capitals and the ‘vertical’ conflict between labour and capital. The role of the capitalist state is to impose a dual social order determined by these two processes: over competing capitals so that market relations do not collapse into ‘the war of all against all’, and over the conflict between capital and labour so that it continues to be resolved in the interest of the former. Beyond this, states also have to establish ‘general conditions of production’, which individual competing capitals would be unwilling or unable to provide, including some basic level of technical infrastructure and welfare. These functions are mainly ‘internal’ to the territory of nation-states, but they must also represent the collective interests of the ‘internal’ capitalist class ‘externally’ in relation to other capitalist states and classes, up to and including the conduct of war.

In order to maintain links to capital in all its multiple incarnations, the state must partly mirror capital’s fragmentation. As this suggests, not every action carried out by the state need necessarily be in the direct collective interest of the ruling class – indeed, if it is to give the appearance of adjudicating between different class and other interests then it is essential that they are not, so long as these actions are ultimately subordinated to ruling class interests. Nevertheless, the capitalist state has nevertheless tended not to be run by capitalists themselves.

At the most fundamental level, the common interest between capitalists and state managers stems from their common class position: both are part of the bourgeoisie. If we visualise the bourgeoisie as a series of concentric circles, then the capitalist class as such (actual owners and controllers of capital) occupies the centre and a series of other layers radiates outwards, with those closer to the periphery being progressively less directly connected to the core economic activities of production, exploitation, and competition, and more involved with those of the ideological, administrative, or technical aspects, which are nevertheless essential to the reproduction of capitalism. The incomes that state managers are paid from state revenues ultimately derive from the total social surplus value produced by the working class, as are the profits, interest, and rent received by different types of private capitalist. And this applies not simply to the source of their income but also to its level, since the relatively high levels of remuneration, security, and prestige enjoyed by these officials depend on the continued exploitation of wage labour. At that level the interests of state managers and capitalist are the same.

These groups have a shared ideological commitment to capitalism, but their particular interests arise from distinct regions of the totality of capitalism, in its various national manifestations. A shared background in institutions like schools, universities, and clubs helps to consolidate a class consciousness that articulates these interests, but a more fundamental reason is that the activities of states are subordinated to the accumulation of capital.

There have nevertheless always been tensions, above all the fear on the part of capitalists that states will either restrict or abolish their right to private property. What gives these fears plausibility is precisely the fact that state managers have both to facilitate the process of capital accumulation and ameliorate its effects on the population and environment.

Has the neoliberal era seen the capitalist class finally succeeding in ‘binding Leviathan’, to quote the title of an early British neoliberal text by William Waldegrave? We need to be clear that it is not the nature of capitalist states themselves that has changed: they still need to perform the core functions described at the beginning of this section. There is no ‘neoliberal state’, but there are ‘neoliberal regimes’.

What has changed is that the relationship between neoliberal regimes and capital since the 1970s has prevented states from acting effectively in the collective, long-term interest of capitalism. Neoliberal regimes have increasingly abandoned any attempt to arrive at an overarching understanding of what the conditions for growth might be, other than the supposed need for lowering taxation and regulation and raising labour flexibility. Apart from these, the interests of the total national capital is seen as an arithmetical aggregate of the interests of individual businesses, some of which, to be sure, have rather more influence with governments than others. In so far as there is a ‘strategic view’ it involves avoiding any policies which might incur corporate displeasure, however minor the inconveniences they might involve for the corporations, which of course includes regulation.

But corporations have always done this: why are state managers now so predisposed to respond positively to their efforts? The answer is in the way in which neoliberalism has reconfigured politics.

Three factors are important in producing this tendency. The first is the depoliticization of the political wing of the state managers through the delegation of functions away from the government in office to ostensibly ‘non-political’ bodies, the introduction ostensibly ‘objective’ assessments of the effectiveness of policy and imposition of binding ‘rules’ which restrict the range of actions which politicians can take. In relation to the latter in particular, each successive phase of the neoliberal experiment saw the incremental abandonment of the repertoire of measures through which governments had traditionally influenced economic activity.

As a consequence of their heightened ‘managerial’ function, politicians have increasingly become a professional caste whose life-world is increasingly remote from any other form of activity, economic or otherwise, and therefore more autonomous, while simultaneously becoming more committed to capitalist conceptions of the national interest, with business as an exemplar. Consequently, most discussion of politics – in the developed world at least – is devoted to expending more or less informed commentary and speculation on essentially meaningless exchanges within Parliaments and other supposedly representative institutions. Debates therefore have the quality of a shadow play, an empty ritual in which trivial or superficial differences are emphasised in order to give an impression of real alternatives and justify the continuation of party competition.

To understand why, we have to focus on the weakening of the labor movement, since one of the inadvertent roles which it historically played was to save capitalism from itself, not least by achieving reforms in relation to education, health and welfare. These benefitted workers, of course, but also ensured that the reproduction of the workforce and the conditions for capital accumulation more generally took place.

But with the weakening of trade union power and the capitulation of social democracy to neoliberalism, there is currently no social force capable of either playing this reformist role directly or by pressurizing non-social democratic state managers into playing it.

The second factor, opposed to the depoliticization of politicians, is the politicization of the non-political wing of the state managers: the civil servants. As the political parties became less distinct from each other, the officials required to implement their increasingly similar policies are required to turn themselves more completely into extensions of the parties themselves.

The third and final factor in producing chronic short-termism in neoliberal regimes is the de-politicization of the electorate. Except it is not so much de-politicization as abstention by sections of the electorate who no longer have any parties for whom to vote. Many of those electors still involved in casting their vote do so – appropriately enough – on a consumer model of political choice, where participation is informed by media-driven perceptions of which result will be to their immediate personal benefit. Unsurprisingly, the numbers prepared to carry out even this minimal level of activity are declining.

The entire neoliberal project was premised on the irreversibility of the process: the abolition of regulatory mechanisms, dismantling of welfare programs, ratification of international treaties for which there are no formal mechanisms allowing them to be either amended or annulled, and so on – all these could be reversed, but it would require new legal and administrative structures which would in turn require planning and a political will to do so which has not existed since the beginning of the neoliberal era. For all practical purposes then, members of the ruling class in the West are now united in accepting neoliberalism as the only viable way of organising capitalism as an economic system, but they are divided in relation to how capitalism should be organised as a social system. They may all be neoliberals now, but they are not all neoconservatives. In the US both Democrats and Republicans are openly committed to capitalism, but there are also real divisions of opinion between them concerning, for example, gay rights or environmental protection.

Electoral support for the far-right in these circumstances is based on the apparent solutions it offers to what are now two successive waves of crisis, beginning respectively in 1973–4 and 2007–8, which have left the working class in the West increasingly fragmented and disorganised, and susceptible to appeals to blood and nation as the only viable form of collectivism still available, particularly in a context where any systemic alternative to capitalism – however false it may have been – had apparently collapsed in 1989–91. The political implications are ominous. The increasing interchangeability of political parties, discussed above gives the far-right an opening to appeal to voters by positioning themselves as outside the consensus in ways which speak to popular appetites for destruction fostered by capitalism itself.

The potential problem for the stability of the capitalist system is however less the possibility of far-right parties themselves coming to power with a programme destructive to capitalist needs, than their influence over the mainstream parties of the right, when the beliefs of their supporters may inadvertently cause difficulty for the accumulation process. Take an important area of Republican Party support in the US. Since the late sixties Republicans have been increasingly reliant on communities of fundamentalist Christian believers, whose activism allows them to be mobilised for voting purposes. But this religious core vote, or at any rate their leadership, naturally also demand the implementation of policies in return for their support.

But it is not only religious belief which can cause difficulties for US capital; so to can overt anti-migrant racism. One concrete example of this is the Tea Party-inspired Beason-Hammon Alabama Taxpayer and Citizen Protection Act – HB56 as it is usually known – which was passed by the State legislature in June 2011, making it illegal not to carry immigration papers and preventing anyone without documents from receiving any provisions from the state, including water supply. The law was intended to prevent and reverse illegal immigration by Hispanics, but the effect was to cause a mass departure from the many of the agricultural businesses which relied on these workers to form the bulk of their labour force.

In an earlier era, social democratic reforms were usually intended to enable the system as a whole to function more effectively for capitalists and more equitably for the majority, however irreconcilable these aims may be in reality. But far-right reforms of the type just discussed are not even intended to work in the interests of capitalists, nor do they: they really embody irrational racist beliefs which take precedence over all else.

If I am right that certain aspects of far-right politics are counter-productive in relation to the needs of capital, it does not follow that the increased chaos consequent on the implementation of these policies would necessarily be of benefit, even indirectly, to the left. Defence of the system is always the principle objective of the bourgeoisie, even at the expense of temporary system malfunction. In a situation where economic desperation was leading to mounting disorder, far-right parties would be brought into play to direct attention from the real source of social anguish onto already-identified scapegoats, no matter what price they exacted in terms of policy.

What we see emerging is a symbiotic relationship between one increasingly inadequate regime response to the problems of capital accumulation and another increasingly extreme response to the most irrational desires and prejudices produced by capital accumulation.

Let me clear what I am not saying. I am not suggesting that it should be the work of socialists to propose solutions to the crisis of capitalism. It is always necessary to argue for reforms, of course, but the idea that the application of Keynesian solutions would restore the Golden Age of the post-war welfare state is simply illusionary and underestimates the extent to which those years were the result of a unique set of circumstances. Booms will continue to occur, as they did between 1982 and 2007, but the beneficiaries will become fewer and fewer. Consequently, I am not predicting that developments discussed here mean that capitalism will simply collapse under the weight of its own internal contradictions either. Scenarios of this type, from those of Rosa Luxemburg onwards, have been proved false in the past and there is no reason to suppose that they will be any more accurate in the future.

Indeed, a collapse not brought about by the conscious intervention of the oppressed and exploited would not be to their advantage in any case, but simply a step towards the barbarism to which Marxists from Engels onwards have seen as the consequence of failing to achieve a socialist society. And this is no mere slogan: the condition of central Africa and parts of the Middle East today indicates the presence of actually existing barbarism as the daily reality for millions. Events in the developed world are unlikely to take this form, at least until environmental catastrophe becomes irreversible, but rather involve a gradual and, for all but the very poorest, almost imperceptible worsening and coarsening on their conditions of life.

What I am suggesting is that neoliberalism as a strategy has almost been too successful as a method of capitalist regulation. It has finally brought about the situation that Schumpeter feared, where creative destruction has no limits or boundaries. Both Engels and Benjamin envisaged capitalism as a runaway train heading for destruction. It appeared, within less than a decade of the latter’s suicide in 1940, that forces within capitalism itself were capable of ‘pulling the hand break’; it now appears that his initial intuition was right and that revolution is all stands in the way of the disaster that otherwise awaits.

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