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After Neoliberalism: Empire, Social Democracy, or Socialism?

William K. Tabb teaches economics at Queens College. He is the author of The Amoral Elephant: Globalization and the Struggle for Social Justice in the Twenty-First Century(Monthly Review, 2001), and Unequal Partners: A Primer on Globalization (The New Press, 2002).


What comes after neoliberalism? To answer that question we must ask a more fundamental question: What do neoliberalism and neoconservatism have in common with the antiglobalization and antiwar movements? The answer is that all ostensibly share a focus on redefining democracy in the contemporary world system. “Spreading democracy” is the rallying cry of both the Washington Consensus and the Bush Doctrine. The “Washington Consensus” is the claim that global neoliberalism and core finance capital’s economic control of the periphery and the entire world by means of the International Monetary Fund (IMF) and the World Trade Organization (WTO) is the only realistic alternative to misery and disaster. The “Bush Doctrine” is the bald neoconservative justification of U.S. global military domination and preemptive war—as part of a renewed attempt to make the world safe for democracy. For the antiglobalization and antiwar movements these establishment doctrines, insofar as they profess to be “spreading democracy,” are nothing but window dressing for the global dictatorship of the U.S. and core corporate governing elites. While focusing their attack on the institutions that enforce this dictatorship, these movements also strive to create an alternative, a genuine participatory democracy.

The first thing to recognize is that neoliberalism is widely understood, even by many mainstream economists and policy wonks, to have failed in terms of its announced goals. It has not brought more rapid economic growth, reduced poverty, or made economies more stable. In fact, over the years of neoliberal hegemony, growth has slowed, poverty has increased, and economic and financial crises have been epidemic. The data on all of this are overwhelming. Neoliberalism has, however, succeeded as the class project of capital. In this, its unannounced goal, it has increased the dominance of transnational corporations, international financiers, and sectors of local elites.

The admission that neoliberalism has failed in terms of its announced goals has forced its proponents to a tactical retreat—defending the broad thrust of the neoliberal policy agenda under cover of “reform.” The result is an augmented Washington Consensus that blames client states and not international institutions or transnational capital for the failures of neoliberalism. It is the poor who are expected to make still further adjustments along neoliberal lines. From this point of view, what comes after neoliberalism must be more neoliberalism.

September 11, 2001 offered the Bush Administration an opportunity to pursue an even more ambitious program of control, which may be called Global Bonapartism. The Bush Doctrine of preemptive wars and regime change reflects a new level of imperial ambition by the most ideologically-driven fraction of the governing elite. The liberal institutionalists of Clinton White House, and the realists of the first Bush administration, however aggressive they were, remained aware of the downside of policies which alienated the rest of the world. In contrast, the second Bush’s agenda is neoconservative—it celebrates a unique American moral right to remake the world. It is, as the president has said, a crusade against evil, spreading truth, justice, and the American way whether the rest of the world likes it or not. Despite the weakness of the economy at home, the Bush agenda has changed the subject from meeting human needs to the fear of terrorists. It is a distraction, as well, from the consequences of neoliberal policies at home, diverting attention away from the sea of corporate scandals and the class-biased impact of tax cuts and slashed social spending. The administration has put us on a permanent war footing complete with domestic repression and duct tape. It is a plan which scares voters into not asking questions and into acquiescing to a war and domestic policies that are not in their interests.

Neoliberalism

Let us look further at the failure of IMF and WTO policies. The United Nations Development Program’s Human Development Report, 2000 tells us that at the end of the 1990s, eighty countries had lower per capita incomes than at the end of the 1980s. The record is even worse when we consider that the average per capita measure obscures the grotesque and growing inequality and poverty evident in almost all of these countries. Poverty in most countries is rising because: debt payments to foreign financiers continue to eat up a major part of the income the country earns through exports each year; foreign investment is not creating the needed jobs; and, tax forgiveness and incentives to transnational corporations deplete local social spending budgets, just as they do increasingly in the richer countries.

Additionally, global economic growth rates have slowed even as neoliberal policies have squeezed living standards. Instead of increasing economic stability, financial liberalization has caused financial crisis in most of the world’s economies. An IMF study found that 133 of the fund’s 181 member countries suffered at least one crisis involving significant banking sector difficulties between 1980 and 1995. The World Bank identifies more than one hundred major episodes of banking sector insolvency in ninety developing countries and former communist nations from the late 1970s to 1994. The fact that two-thirds of the fund’s members experienced such crises cannot be altogether coincidental but rather is connected to the fact that these were the years the IMF imposed financial liberalization.

None of this is really surprising. The neoliberal agenda (or “Washington Consensus”) calls for trade and financial liberalization, privatization, deregulation, openness to foreign direct investment, a competitive exchange rate, fiscal discipline, lower taxes, and smaller government, none of which could plausibly lead to mass prosperity. Now, remarkably, neoliberalism’s failure to stimulate growth, produce a decline in poverty, or generate greater economic stability has led to the “augmented” Washington Consensus, brought to you by many of the same folks who produced the original version. They blame the failure of the neoliberal agenda on the countries which have been asked to follow their dictates. In this blame-the-victim scenario, what is now said to be needed is more efficient enforcement of the original goals and strategies. It is to be up to the local governments to do a better job of carrying out the program. Some small concessions are offered but these prove hollow: Recognizing the failures that financial market liberalization produced on such a large scale in the past, policy makers now recommend “prudent” capital account opening. Central banks are told they must put in place a “proper” regulatory framework, financial standards, and enforcement capabilities—but banks continue to arrange crony loans, currency speculation, and capital flight. There is recognition that corporate governance matters, that there need to be anticorruption rules, perhaps even social safety nets, and that targeted poverty reduction strategies may be appropriate as part of the conditionalities imposed by the overseers. These obvious steps were absent for the last decades, during which lower income countries were forced to dismantle the protections they had so imperfectly built against foreign control and the instability caused by the fluctuations of the global economy. Of course corruption cannot be blamed on the poorer countries alone as the scandals at Enron and WorldCom show.

The Critique

Next stage neoliberalism begins by conceding the failure of the Washington Consensus, but in a brilliant sleight of hand, proposes as the solution reforms that continue to favor foreign capital. The good governance measures now advocated by the World Bank and the IMF are not to be confused with genuine democratic empowerment. Their strict enforcement would redistribute power from incumbent elites to foreign capital—facilitating multinational capital’s economic penetration of the poorer countries. The political strategy has shifted from allying with rent-seeking local elites, once necessary to defeat the left in the era of the Cold War, to a new emphasis on diminishing the share going to these costly local liabilities. That these elites oppress their people is now admitted and even condemned by a West which has suddenly discovered human rights abuses. Blaming local elites for the failures, which are integral to a world system structured for the benefit of the capitalists of the core, undermines their power relative to foreign capital. The free market answer to the problem is for foreign capital to take over the dominant role in these economies, not to foster real democracy. Next stage neoliberalism stresses the importance of transparency, the rule of law, and a level playing field in the marketplace—but not in the society as a whole. Unequal access to government would continue for the vast majority of citizens.

Claims that next stage neoliberalism or the revised Washington Consensus will engender poverty reduction and increased accountability of the local state to its own citizens raise two sorts of criticisms. The first, emanating from within the economics profession and policy-making community, suggests that it is an impossibly broad, undifferentiated agenda of institutional reform. It is far too insensitive to local context and needs and it does not correspond to the empirical reality of how development really takes place. The problem from this perspective is that the global economic governance institutions are still trying to fit all countries into a single development model. This is inappropriate because there have been many routes to success, most quite unexpected and combining unpredictable elements of sectoral specialization and governmental support arrangements.

The neoclassical model assumes universally available knowledge, capacities to apply existing technologies, and transparent access to all market information. These assumptions are surely unrealistic. For most participants in low income countries, adoption and adaptation are problematic undertakings. Uncertainty is pervasive, access to resource markets limited and often on unattractive terms. Success depends on contingent factors about which it is not easy to generalize beyond saying that a proper balance between state regulation and the role of the market are crucial. Critics of the neoclassical approach would reform international regimes to make them fairer to the less developed countries by protecting local producers and the autonomy of local governments so that international exchange is truly based on mutual consent and fairness. The issue is how is this to be done? Is reform of existing structures and institutions possible? Or, is more fundamental change based on transforming class relations essential?

These questions bring us to a second level of criticism which comes not from within the Washington Consensus but from NGOs and civil society groups that offer a more basic critique of corporate globalization and capitalism. To the social justice movements, class power and imperialism are at the core the problem. These movements oppose the domination of social needs by market criteria, and the power of transnational capital and the most powerful governments (above all, the United States) to establish rules for their own benefit at the expense of the weaker subordinate nations and classes. From this critical perspective, it is obvious that the reforms being suggested are reinforcing the system of class rule and imperial domination which must be replaced. The growing strength of what is called the antiglobalization movement, or better, the alternative globalization movement, is testament to this critique, which is becoming a material force in the international political economy.

The relation between these two critiques should be familiar. It is the “realo-fundi” split we saw in the Greens in Germany and elsewhere: the division between the less willing to compromise activists of the landless peasant and other groups in Brazil versus the head-of-state faction surrounding Lula in office as president of Brazil; the social democratic/left socialist split evident at the Socialist Scholars Conference; and the division increasingly visible at the World Social Forum as to what direction it will take and who will speak for the movement. It is the dichotomy historically ever present on the left in many variations. For some, these differences suggest a difficult balance between long-range goals and transformational demands versus the need to respond to reform proposals which may be progressive—a difficult matter about which principled people can have honest disagreement. To others, they are occasion for personal denunciations and reason for division of the larger movement based on what are understood as irreconcilable differences. So far, the global justice movement has been able to maintain an impressive unity and keep its collective eye focused on the need for fundamental change.

Enter George W. Bush Post-September 11

September 11, 2001, was the defining moment for a president with little knowledge of the world but with faith in a messianic fundamentalism, a faith which fit neatly with the neoconservative foreign policy agenda that had been struggling for ideological hegemony for a decade or more. When George W. Bush campaigned for the presidency, he warned against nation building and humanitarian interventions where the United States had no strategic interests. Bush stood ready to intervene to ensure U.S. security, but like others with a conservative outlook, he thought we should not go about interfering everywhere. Pragmatically, he said in his second debate with Al Gore, “If we are an arrogant nation, they will resent us.” After September 11, however, he embraced the ambitious neoconservative stance of regime change and preemptive wars to promote truth, justice, and the American way around the world. The current administration holds to a neoconservative philosophy at odds with both the traditional realism of the first president Bush and the liberal institutionalism of Clinton. The conservative nationalist agenda of keeping the United States safe within its borders, and U.S. interests respected abroad, has been replaced by a unilateralist drive for active global rule to spread what are called American values everywhere.

It is important to understand that the themes which became central to the Bush approach after September 11 were well worked out a decade earlier, including the use of preemptive military force. They were authored by the men who now are implementing them. As David Armstrong writes, “the Plan,” the name given to this more than a decade-long effort to change U.S. foreign policy, “is a warmed-over version of the strategy Cheney and his co-authors rolled out in 1992 as the answer to the end of the Cold War. Then the goal was global dominance, and it met with bad reviews. Now it is the answer to terrorism. The emphasis is on preemption, and the reviews are generally enthusiastic.” The Plan, as newly presented under the name of the Bush Doctrine, has as its essential elements the idea that the whole world is the battlefield and the United States will go anywhere, alone if necessary, and act preemptively to bring about regime change and “no nation is exempt,” as the president puts it, to the “non-negotiable demands” of what he calls liberty, law, and justice (Harper’s Magazine,October 2002).

The multilateralist approach—to pressure but consult with allies, coerce but offer a compromise to achieve the appearance of consent—was and remains, to many in the U.S. elite, the far superior approach to achieving effective dominance. This has generally been the accepted way, from Woodrow Wilson at the start of the twentieth century to the first president Bush and Clinton at its end. But September 11 was forced into the service of a new world view. As Gary Schmitt and Tom Donnelly of the neoconservative Project for the New American Century wrote in January 2002, the Bush Doctrine is notable for what it is not. “It is not the Clintonian multilateralism; the president does not appeal to the United Nations, profess faith in arms control, or raise hopes for any ‘peace process.’ Nor is it the balance-of-power realism favored by his father. It is, rather, a reassertion that lasting peace and security is to be won by asserting both U.S. military strength and American political principles” (www.newamericancentury.org). When these neoconservative views were proposed as the cornerstone of U.S. foreign policy by the Richard Perle–Paul Wolfowitz crew under Secretary of Defense Dick Cheney, in 1992 military planning documents, they were considered controversial, indeed reckless and dangerous, by most conservatives. Where once the rhetoric of U.S. policy appealed to combating a presumed Soviet plan to rule the world, now the quest for global domination is the announced goal of the neoconservative strategy. It sought to prevent the emergence of any rival, any possible challenger, to U.S. hegemony. In this strategy, a unilateralist America should maintain overwhelming military superiority and dominate friends and enemies alike. It may be argued that this was always the American goal, and merely that it can be openly stated as public doctrine in the wake of the collapse of the only other superpower in 1989. But in 1992, this bold vision was considered too extremist. Of course, most of the world still thinks it is and that it must be rejected. What the neoconservatives needed, as they wrote before September 11, was a Pearl Harbor. This is what they made of September 11, and they have, with some success, at least within the United States changed the bounds of the acceptable.

Democracy as the Contested Construct

Let us return to the question of what comes after neoliberalism by reiterating the connection between neoliberalism and neoconservativism, on the one hand, and the antiglobalization and antiwar movements, on the other —the contested meaning of democracy in the contemporary world system. Everyone speaking for public attribution in the post-Cold War era seems to favor democracy. For the global institutions, the preferred term is, however, “good governance,” and for the Bush Administration, it is “liberty.” The problematic relationship between these terms and what movement activists have in mind by democracy gets to the heart of the conflict over what type of world is possible.

To the International Monetary Fund and the leadership of the World Trade Organization, following the rules, treating all participants fairly, and maintaining a level playing field in an open world economy are the keys to prosperity and achieving the aspirations of people everywhere. Accountability and transparency are the tropes of good governance. The presumption is that such procedural justice in defense of individual equality in formal dealings, and respect for the liberty of free choice, foster the general well being. Searching for convincing reasons to invade Iraq, in the face of overwhelming international resistance to the U.S. plan, President Bush identified the democratization of that country as a prime war aim. This focused attention on Saddam Hussein’s abysmal human rights record and the need for regime change in order to create a functioning democracy worthy of American ideals in that country.

Both of these formulations endorsing democracy prove problematic. In the case of the global economic governance institutions, the stumbling block is the disparate power among participants. The United States calls the tune at the IMF and the WTO, and the only real impediments to its designs come from the handful of other significant players. Most of the countries of the world play little role in the decisions which are life and death matters for their people. In many cases, the governments themselves are so undemocratic that the people of the nations have little or no say as to what their own governments say and do. The United States and the European powers have been responsible for installing and perpetuating the rule of most of the local elites.

Any real discussion of democracy needs to be extended beyond the undemocratic nature of the global economic institutions to a larger discussion of democracy, one that goes beyond whether votes are counted fairly, opposition candidates allowed to participate on an equal basis, and the voices of ordinary people heard by their elected leaders. Democracy needs finally to be discussed in relation to class rule in capitalist societies.

In the case of the Bush Doctrine, the pretense of democracy as defined by the White House is very tenuous. When the parliament of Turkey votes to deny the United States what it wants, it is told to vote again or its wishes will simply be ignored. When the UN Security Council appears to reject what the United States wants, it is told it can retain its credibility by doing America’s bidding or become irrelevant. Along with judicious bribes and threats, votes go more along lines suggested by Washington, but the limits of such unilateralism are looming large. Despite the costs of standing up to the dictatorship of the United States, more and more people and governments are increasingly willing to do so. This is partly because of Mr. Bush’s evangelical and cowboy style, but it is more fundamentally because of the consequences for the world of the U.S. turn to unilateralism with its obvious destabilizing and dictatorial aspects.

It is increasingly clear that much of the talk about democracy is really about the imposition of the will of a most dangerous set of policy makers who have usurped power in the United States. Their position has shaken other conservatives and neoliberal institutionalists. They have also strengthened, deepened, and broadened the array of anti-systemic forces active in movements of global civil society.

Democracy, we must understand, has less to do with elections than with the broader social relations which structure what is politically possible. Democracy can be measured in other terms: the extent of the people’s active participation in decision making; the degree to which they are adequately informed; who controls the media; how are campaigns financed; and who is able realistically to run for office. This requires an analysis at the level of class structures of contemporary capitalism, including the limits these structures impose on democracy.

The global justice movement has been right to focus on the pain inflicted around the world by the IMF and the World Bank, the collectors of debt incurred by despots and corrupt elites but paid in the life blood of ordinary people. The suffering inflicted by military violence in the name of promoting freedom and democracy, and the pain resulting from the allocation of scarce resources to war instead of meeting human need, are not choices made by the people. Nor did U.S. citizens vote to withdraw from the arms limitation treaty, to oppose the International Criminal Court or the Kyoto Protocol to slow down global warming. The social democratic compromise of the postwar years has been replaced by a virulent, grasping form of rule which is moving to outlaw the possibility of protest and democratic expression. The consequences of neoliberalism have forced a frightened awareness of what is at stake, and in many places have inspired the development of a counter-hegemonic consciousness and a renewed mobilization of people. It is in their understanding of the central importance of a broader definition of democracy that the antiglobalization and antiwar movements represent a dramatic challenge to class rule and Bush Bonapartism.

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