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Neoliberalism is not dead: A Response to Martin Jacques

by Darryl S.L. Jarvis

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Martin Jacques (The Guardian, August 21) recent comments on the ‘death of neoliberalism’ are important, not least because he was one of the first analysts in the early 1980s to identify the emerging dominance of neoliberalism in the West. This reversal of fortunes for neoliberalism, due to what Jacques identifies as a wave of political developments in the two countries which were its main champions, the UK and USA, is thus significant – indeed for many a cause for celebration.

To borrow a line from Mark Twain, however, reports of the death of neoliberalism are greatly exaggerated. Jacques’ analysis is an overly optimistic reading of current political developments — developments which are still formative and which may yet challenge neoliberalism but through inherently nationalist and reactionary ways.

Jacques’s assertion, for example, that ‘A wave of populism marks the return of class as a central agency in politics, both in the UK and the US’ is questionable. The populist politics of Trump and UKIP can equally be read as race politics, or a reaction to cosmopolitism, multiculturalism, and the rise of race-nationalism. To be sure, such movements might be driven by growing material inequality and the failure of various governments to sustain redistributive measures, but the anti-neoliberal politics Jacques identifies is not manifesting as a class consciousness but often something altogether more dangerous.

At the same time, the rise of populist political movements seems far from challenging the pillars of neoliberalism. The pending failure to secure both the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), for example, will have little impact on the neoliberal trade order.

Trade liberalisation has already been secured. The spate of bilateral trade and investment agreements (BITS) over the last few decades off the back of various multilateral trade agreements and symbolised in the instruments of the World Trade Organisation (WTO), are not impacted by the failure to secure TTIP or TPP. In practical terms, there are now few barriers to trade, tariffs have fallen to insignificant levels, and non-tariff protectionist measures have largely fallen away. Yes, the TTIP and TPP would add another layer of ‘protectionism’ to sections of capital in terms of intellectual property protection, the extension of the life of patents to bolster profits, and flatten the world further in terms of standardizing regulatory regimes and realising compliance with neoliberal norms, but the failure to realise the TTIP or TPP will have little impact on the already entrenched pillars of the neoliberal trade order.

The same observations can be made of finance, banking, and the global financial order. Despite the severity of the global financial crisis, the impact on the financial order has been negligible. Populist politics manifested in demands for moderation / regulation of Banker’s pay. The European Union announced restrictions on bonuses that can be paid to Bankers rather than pay caps, with the EU fearful that any real restrictions on pay and bonuses would cede ground to competitors and see an exodus of banking talent to other counties. The ‘restrictions’ on Bankers pay were thus a chimera; bonuses could be paid but had to be split into a cash component (20-30% of the bonus), part of the bonus deferred between 2-3 years to reflect year-on-your financial outcomes of the bank (40-60%), and 50% of the bonus had to be paid as shares rather than cash.

By far the bigger impact on Bankers pay was not EU regulations, but the financial performance of the sector. With the implosion of the sub-prime lending market (essentially turning ‘turds into investment grade gold’ as one Banker put it), the banking sector has withdrawn out of that market, shedding tens of thousands of jobs as the investment side of the business went south. But all of this was driven by the market, not by anything governments wrought upon the banks as a result of populist sentiment.

To be sure there has been some pain for the Banks, with the UK, Germany, and France jointly introducing a banking levy (in the UK a tax measure that was made permanent in 2012 and levelled at the rate of 0.088% on bank balance sheets – excluding ordinary deposits). But the Banks have responded by managing balance sheets and using offshore booking facilities to shelter any real impact. Indeed, apart from populist measures like a Bank levy and nominal ‘restrictions’ on Bankers pay, the structural integrity of the financial system and global financial order has been sheltered from any impact. For example, there has been no attempt to limit the growth of financialisation or impede the flow of speculative or tax-sheltering capital.

No ‘Tobin tax’ eventuated on FX transactions, transaction taxes never emerged as a means of correcting speculation or cross border currency movements, and no changes to transparency and accountability practices in terms of tax sheltering emerged. As the Panama Papers revealed (and continue to do so), the world of global finance continues as per normal, largely operating beyond the purview of governments.

Martin Jacques tells a nice story, one which I empathise with. But if this is the beginning of the end of neoliberalism, my suspicion is that neoliberals continue to sleep very well at night.

Darryl S.L. Jarvis is Professor of Global Studies, The Education University of Hong Kong.

5 Comments

  1. rtj1211 says

    I think the truth is that in the hearts and minds of ordinary people, the delusion that neoliberalism was good for them is permanently gone. In many people’s minds, that seed was never planted. In many, they didn’t really believe in it but voted for it for narrow selfish reasons. It’s only ever been a small minority who truly believed in it, either due to deficits in critical thinking or simply being in the 1% whose interests have been strongly served by it.

    What people see is that tens of thousands of jobs are shed due to the neoliberal considering machines to be more valuable than humans.

    Thinking robots is the greatest challenge all leaders of people have the next 25 years. What they will be able to do, what the humans they replace are supposed to do, whether they will lead to war and whether the controllers of capital really do want 90% of human beings to die so those remaining can live in a new Garden of Eden or not……

    Whether thinking robots are a tool of neoliberalism or whether they have simply arrived because it is their time in history is a debate for undergraduates, simply because the answer doesn’t matter. What matters is that they are here and their impact on the majority of human being’s entire life will be profound and potentially extremely damaging or fatal.

    We have a subset of humans who have written off the rest of their species in favour of silicon-based machines.

    That is the reality and that is the issue at the heart of the next great debate for world leaders: ‘is economic purity more important than the lives of 90% of the human race?’

    For the 90% excluded from the debate, a piece of advice: don’t let yourselves be excluded from the debate. Do whatever it takes to be included. The elite will happily kill you, not you individually, but lots of your kind. Don’t be afraid to kill them if they won’t let you into the debate, centre stage. You are merely treating them the way they treat you. And there are more of you. Much more of you. But be prudent in how you do things, because the minority control the weapons, including the nuclear ones, the biological ones and the chemical ones. And believe you me, they have no qualms about using those on you either…….

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  2. ”In practical terms, there are now few barriers to trade, tariffs have fallen to insignificant levels, and non-tariff protectionist measures have largely fallen away. Yes, the TTIP and TPP would add another layer of ‘protectionism’ to sections of capital in terms of intellectual property protection, the extension of the life of patents to bolster profits, and flatten the world further in terms of standardizing regulatory regimes and realising compliance with neoliberal norms, but the failure to realise the TTIP or TPP will have little impact on the already entrenched pillars of the neoliberal trade order.”

    Errm no! The state remains the most significant force in shaping the world economy, hyper-globalist rhetoric notwithstanding. Since the inception of capitalism states have always played a crucial role in the economic growth and development of their nations. This was particularly true of the overt mercantilist policies of Germany and the United States in the 19th centuries and of East Asia in the 20th. Moreover, the process of globalization has not altered the fact of national economic self-aggrandisement by states and it could be said the globalization has been used itself to further this process. More powerful states have in fact used globalization a a means of increasing their power. The US use of trade policy as a geopolitical instrument (for its hegemonic ambitions) being a template in this respect.

    ”States actively construct globalization … and use it to acquire power over their national economies and societies respectively. The US and the G7s other dominant members design and establish the international trade agreements, organizations, legislation that support and govern the trans-border investments, production networks, and market penetration, constitutive of contemporary economic globalization. Advanced capitalist states, in particular, use these political instruments to shape international economic decision making and policy IN THEIR OWN INTERESTS.” (Gritsch 2005 – The National State and Globalization – my emphasis)

    In terms of the level of global integration the process is grinding to a halt and even going into reverse. Tariffs may have been lowered, but non-tariff barriers including subsidies, quotas, procurement policies that favour national suppliers, buy local campaigns, preferential financing, preferential industrial assistance policy, bailouts (GM Motors and Citibank by Obama) differential tax regimes, currency manipulation, safety and environmental standards are all used to stop import penetration.

    Trade has been contracting and the world is becoming increasingly protectionist. After a partial recovery following the crash of 2008, trade in goods and services subsequently slowed down to around 2 or 3% per annum, something not recorded in decades. Financial flows remain at 60% below their pre-crash record. Falling from 21% of global GDP to 5% in 2012.

    You see during boom times everyone is a free -trader, come the bust, however, and its every man for himself, global integration be damned. It was Lord Palmerston who once uttered these wise words: ‘Nations do not have permanent friends of allies, they only have permanent interests. The global downturn of the early 21st century is reversing global integration, regional protectionist blocs are forming. A reconfiguration favouring closed economies with narrowly based strategic links between nations. States protecting their vital interests is still the name of the game even if it is played out at a regional or global level.

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  3. Jim Porter says

    I was under the impression that TPP had been signed by all relevant parties by Feb 2016 and only needs to be ratified and everyone keeps saying TTIP is dead but it keeps coming back and has a baby brother called CETA which could easily take its place. The only way to progress is to stop having the negotiations in secret!

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  4. bevin says

    “…Jacques’ analysis is an overly optimistic reading of current political developments — developments which are still formative and which may yet challenge neoliberalism but through inherently nationalist and reactionary ways…”

    There is no reason to believe that ‘nationalism’ as opposed to globalism is inherently reactionary. As a matter of fact neither is there any reason to believe that ‘reaction’ against globalisation is a bad thing.

    Professor Jarvis is shuffling stereotypes, not thinking.
    One way of looking at the prospects of neo-liberalism is to recollect what happened to the liberalism which it echoes. And whose horrors it repeats- the liberalism of the C19th and the British Empire, which died, a century ago on the battlefields which it had brought into being . By then liberalism was morally exhausted and the way was open for socialist reform.
    Liberalism’s final acts were to throw all the resources at its command into defeating socialism. Its last throw was to pass the torch onto its successor-fascism- which made no bones about preserving the naked rule of the wealthy, maintaining their privileges and employing every means to keep the 99% down.

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  5. Nerevar says

    I am afraid there was no man-made evil we can consider forgotten, dead or away for ever. Watching the unleashed nationalism hell in Yugoslavia, I was not able to believe i it was just not a bad dream.

    Why neoliberalism should make an exception, then?

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