Neoliberalism in crisis? Money and the state in contemporary capitalism

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Autor(es): Radice, Hugo

Radice, Hugo. Senior Lecturer en Economía Política Internacional en el Institute for Politics and International Studies de la Universidad de Leeds, Gran Bretaña. Fue co-fundador en 1970 de la Conference of Socialist Economists


At the time of writing, it is clear that what first began some eighteen months ago as a crisis in the obscure sub-prime mortgage market within the US finance industry has developed into a full-blown global economic crisis, with a slowdown or even halt to economic growth, falling sales and rising unemployment in many countries. As always in such circumstances, different social interests are now proposing responses that serve their own needs; but for all such groups, in order to frame an appropriate response it is first necessary to decide what kind of crisis this is.

Superficially, it has been first and foremost a crisis in the supply of credit, and in the liquidity of major banks and other financial institutions: in brief, a credit crisis. Until the summer of 2008, this was the most common interpretation, with the result that bankers, economists and politicians were focused on rather narrow issues of regulatory standards and procedures in financial markets. By and large, with the exception of the original victims – the low-income US homeowners to whom the sub-prime mortgages had been sold – the problem did not seem to concern ordinary workers and consumers, so long as the monetary authorities in each country were able to guarantee deposits and avoid bank insolvencies.

A second line of argument has more recently emerged as the “real economy” has ground to a halt, with many countries experiencing economic slowdown or recession, falling consumer sales and rising unemployment. This is now a crisis of overproduction, whether in the Keynesian sense of a cumulative decline in effective demand, accompanied by a slowdown in inflation or even falling prices, or in the traditional Marxian sense, where the excesses of an investment boom lead to falls in the mass and rate of profit, first from labour shortages via rising real wages, and then from the emergence of overcapacity. This is the sort of crisis that is addressed by so-called trade cycle theories, seen as an unavoidable feature of capitalism, and one that is eventually resolved by a shorter or longer period of recession. But the present downturn is widely expected to be the most severe since the 1930s, and in some respects the first truly global crisis of overproduction since then. Because typically the burden of adjustment in such cyclical crises falls most immediately and heavily on workers, it is this understanding of the crisis that most obviously focuses on class responses, first of all in the form of trade union resistance to unemployment and wage cuts, and then to wider political mobilisation.

On the other hand, many commentators identified the proliferation of financial derivative products as a key reason why the crisis broadened so rapidly in all directions. This proliferation has in turn been attributed to the deregulation of financial markets, which has been such a central feature in the neoliberal model of capitalism that has been adopted almost everywhere in the last thirty years. From this standpoint, progressive commentators have suggested that we are facing a crisis of neoliberalism, which opens up the prospect of a turn towards greater state regulation and a curbing of speculative finance in favour of directly addressing problems of the “real economy”. This understanding of the crisis has also led to calls for the rethinking of the global economic order, especially through a “new Bretton Woods” process that would address the restructuring of the world economy and the rising economic strength of China and India in particular.

Predominantly, such a view of the crisis is at present only adopted within what we can call the political class, since it focuses on the institutions and practices of state economic management. Since in most countries neoliberalism has excluded the organised working class from participation in economic management – as occurred in the old forms of corporatist inclusion from the 1930s to the 1970s – these issues still remain remote from the day-to-day lives of most people. But there is no question that in the longer term, it is this dimension of the crisis that is most important, because it raises deep structural issues of the nature of class power: the ideology and practice of neoliberalism, which attained hegemonic status in the 1990s, is now seriously called into question. At the same time, a focus on neoliberalism automatically raises the issue of globalisation also, since the two have been so closely related.

But today’s global crisis can only really be a crisis of neoliberal capitalism, in the sense of offering genuine possibilities to construct a non-capitalist social order, if the roots of such an alternative can be shown to be present in both theory and practice. This is the purpose of the present paper.

Neoliberalism after three decades1

The main features of neoliberalism have by now been exhaustively described by progressive scholars, both at the general (global, theoretical) level, and in its concrete manifestations in different regions and countries. Neoliberalism was launched in the 1970s as a response by economic and political elites to the threat posed by the growing strength of organised labour in the industrial countries and the drive for a more autonomous post-colonial development path in the less developed countries. In the former case, the widespread adoption of incomes policies, moves to regulate labour markets and the extension of the welfare state threatened to undermine the postwar revival of economic liberalism represented by tariff reductions, the rise of transnational corporations and the liberalisation of capital flows. In the latter case, the success of OPEC from 1973 in repatriating a growing proportion of oil rents exemplified the wider drive towards national control of resources, and the unification of the Third World begun at Bandung in 1955 culminated in the campaign for a New International Economic Order.

In this typical view of the genesis of neoliberalism, there is an asymmetry in the respective accounts for developed and less developed countries. In the 1970s, in the former case even mainstream approaches2 took for granted that the politics of economic management centred on the conflict between capital and labour. However, in the latter case not only the mainstream, but also progressive and even Marxist approaches3, were still centred on the national struggle against colonialism and neocolonialism. Naturally, for countries and regions perceived as being at an intermediate level of development – the semiperiphery (Radice 2008b) – both analytical axes could be applied: in the Latin American case, long histories of class struggle in terms of both economic and political contestation had shown, at least since the 1930s, considerable similarities with those of more advanced capitalist countries, interwoven with patterns of agricultural exploitation and international trade that resembled more the experience of colonial and postcolonial Africa and Asia.

A common feature in the analysis of all cases was the reluctance of scholars to abandon methodological nationalism (Gore 1996) and appreciate the increasing salience of global relations of accumulation and class struggle. By the mid-1990s, a double process of unification and convergence seemed undeniable to many: the Washington Consensus, although initially formalised in relation to what was still called the Third World, could be seen to be faithfully reflected in the restoration of capitalism in the former Soviet bloc, and in the evolution of European integration towards the single currency and the “Maastricht rules” on public debt and deficits. As far as less developed countries are concerned, neoliberalism provided an ideological foundation for the “normalisation” of post-colonial capitalism, profoundly altering the forms of states, political regimes and institutionalised social interests towards liberal norms – effectively extending and/or completing the historical transition to capitalism across the globe (Harvey 2007).

Nevertheless, the continued “real” existence of the nation-state, and indeed its continued capacity to act as promoter of national development in certain circumstances, has encouraged approaches among progressive scholars to both comparative and world-historical analysis that emphasise the existence of alternative norms to those of pure neoliberalism.

Comparative analysis of advanced capitalist countries, in the “varieties of capitalism” literature, became very popular following the collapse of the Soviet alternative. US scholars in the 1980s and even the 1990s looked to the relative success of Japan in arguing that the Reaganite dismantling of welfare and the deregulation of labour and financial markets would only accelerate the US’s relative decline in economic performance, while similar arguments were made in Europe4 based on the clear evidence, at least until the mid-1990s, of UK decline in relation especially to the north European “social market” or Rhineland model. But from the late 1990s, the more neoliberal regimes in the UK and Ireland experienced rapid growth, and were contrasted by their advocates with the “Eurosclerosis” of Germany, France and Italy.

In regard to less developed countries, including the semiperiphery, the 1990s saw the heyday of the model of the developmental state, articulated from the experience of South Korea and Taiwan in adapting the Japanese model to their own circumstances from the 1960s onwards. As neoliberalism tightened its grip the developmental state model seemed to provided the only viable alternative everywhere, and one that in some respect seemed closer to progressive norms on industrialisation, employment, land reform and income distribution. Unfortunately neither labour rights nor public welfare provision were part of the developmental state model in East Asia, while there were evident difficulties in translating the model to the very different historical, social, political and ethnic contexts of regions such as Eastern Europe and Latin America.

If neoliberalism was generally triumphant by the end of the century5, there remained the history questions. Was this a substantively new form of capitalism (for example in Regulation Theory terms, a new mode of regulation), and if so, where had it come from? Would it in turn be historically superseded, and if so, by what? Especially in the field of international political economy, Polányi’s The Great Transformation (1944) has been seen as offering some hope, with his concept of the “double movement”. Polányi argued that the rise of classical economic liberalism in nineteenth-century Britain that was integral to her rise to global hegemony, but that the promise of a “market society” foundered on the impossibility of extending the commodity form to land, labour and money. Since neoliberalism harbours the same ambitions, surely it too will founder on the same rocks, and lead in due course to the reemergence of social movements that would bring markets back under state control.

This argument has been eloquently made in relation to Latin America by Munck (2003: 507-8); or as Margheritis and Pereira (2007) put it,

What we have today is Polanyi versus Hayek with a twenty-first-century twist, in which arguments about the effectiveness of state intervention in markets are intertwined with a debate about the role and prospects of nation-states in the “globalised” world economy (2007: 28-9).6

Both the resource crises of the present decade and the credit crisis of 2007-8 seem to fit Polányi”s cyclical theory, and the authors cited are at pains to ground their optimism in actual analysis of recent economic and political developments in the continent. Rather than seeing the “double movement” as automatic, they follow Polányi in identifying popular resistance to market regulation as the necessary source of change.

With regard to explaining the rise of neoliberalism, there are two distinct strands of argument among its critics7. On the one hand, the traditions of Polányians, Keynesians and the dependency school see free-market economics as both theoretically and practically flawed. Broadly speaking, most of the core goals of development may be taken as given: economic growth and stability, meeting basic physical, cultural and welfare needs, abolishing poverty and disease – even, today, environmental sustainability: and neoliberalism does not in practice deliver, because it is based on a flawed understanding of how markets function. From this standpoint, postwar Keynesianism and developmentalism were theoretically well-founded, but faltered when faced with new circumstances in the 1960s and 1970s – the slower growth, renewed imperial rivalries, peripheral revolts, etc., already summarised. On the other hand, neoliberalism can equally be understood as a political project of the ruling classes, threatened by those new circumstances with the real possibility of revolutionary challenge. In this respect, the postwar order could be seen as “proto-socialist” because it contained the potential for a much deeper assault on wealth, privelege and power, through the further extension of welfare rights and state regulation. In addition, for all their flaws, at that time the Soviet model and its Chinese variant at least offered functioning alternatives to capitalism.

Such a reading of history offers some guidance on how to challenge the present-day neoliberal hegemony, but history never really repeats itself. Any effective challenge must learn from the mistakes of the past, and also take account of how circumstances have changed; the much deeper integration of global capitalism, the rise of the service economy, and the looming resource shortages, to name but three changes. However, because of their salience in the present conjuncture, the next section concentrates on the nature of money and finance.

Money and finance, market and state

In the history of capitalism, money in general and its public and private management have always served as a crucial weapon in the dispossession of the direct producers and in the accumulation and reproduction of capital. The mainstream analysis of money treats it primarily as a means of circulation and a store of value; money makes the exchange of goods more convenient than under a barter system, under which sale and purchase must occur at the same time and place. In Marx’s first take on money (Capital vol.I ch.3), he expresses these functions somewhat differently

As measure of Value, and as standard of price, money has two entirely distinct functions to perform. It is the measure of value inasmuch as it is the socially recognised incarnation of human labour; it is the standard of price inasmuch as it is a fixed weight of metal (Marx 1954, p.100).

In the remainder of the chapter he follows the usual practice of analysing money as “means of circulation”, discussing the convenience of the metallic form, the importance of hoarding (sale without purchase), and its function as means of payment. Unusually, in the context of Capital vol I, he extends his discussion to the international sphere.

While there is much to discuss in relation to money as means of circulation, what really differentiates Marx”s approach is when he goes on to explore the transformation of money into capital, for it is here that he discovers the secret of capital as self-expanding value, and labour-power as the source of that expansion. This is what distinguishes the role of money under capitalism from its role in other modes of production, past and future. For the necessary conditions under which hoards of money can function as capital are the securing of property rights that permit ownership of commodities in the form of means of production, and the availability of doubly-free labourers: freed of their own means of production, and free to sell their labour-power for money. The development of the credit system profoundly accelerates both capital formation and the dispossession of labour, allowing the pooling of hoards in the establishment of businesses beyond the reach of individuals. But at the same time, the growth of the credit system opens up the possibility of sharp interruptions in monetary circulation when hoards are withheld, or when competitive accumulation leads to temporary gluts that destroy profits and with them the willingness to spend. From an early stage in the evolution of capitalism, specialist credit providers appear in the form of banks, who extend credit on the basis of deposits placed with them; and at once there appears also the need to regulate the expansion of credit, whether by prudent self-regulation (holding fractional reserves) or by establishing public control over monetary circulation by a monopoly of the issue of legal tender as means of settlement.

This introductory account tells us that once capitalism and its credit system are established, it is no longer possible to understand and analyse money except in terms of capital and its movements. And since capital is above all a class relation, so too is money, and so too is the capitalist state in relation to its function of regulating the property rights and markets within which money performs its roles.

The foregoing, summarising Marx’s analysis first published in 1867, may seem to be a long way removed from the question of whether the present crisis is a crisis of neoliberalism. But the following decade saw the rise of neoclassical economics. This reworking of classical political economy sought to provide an ideology of capitalism, with solid ontological and epistemological foundations, which sharply demarcated economic relations from political relations and expunged the concept of class still so apparent in the classical school. Leaving aside the formal and ahistorical mathematical modelling that so effectively protects the neoclassical core from social criticism, the new school in the hands of Marshall, Pigou and their contemporaries developed also a class-free approach to the analysis of how markets functioned in practice, and the role of the state in relation to them. The concept of market failure admitted the problems of monopoly and externalities that arose in the “real world”, while the unequal distribution of income and wealth was accepted as a legitimate concern in an era of much-needed social reforms. In this way, the intended self-regulation of markets was complemented by the recognition of the state as an economic actor.

With the Great Depression and the new thinking of Keynes8, it became much harder to reconcile theory with practice, for Keynes” diagnosis of a systematic inadequacy of aggregate demand implied a much more fundamental type of market failure. Furthermore, by the time of the General Theory (Keynes 1936) he had pinpointed the immediate source of this failure as the pervasive condition of uncertainty that necessarily accompanies investments in assets other than money – in other words, assets whose value depends on the future determination of returns, and the present expectations regarding them. This is how Keynes describes the core problem of liquidity preference:

So long as it is open to the individual to employ his wealth in hoarding or lending money, the alternative of purchasing actual capital assets cannot be rendered sufficiently attractive (especially to the man who does not manage the capital assets and knows very little about them), except by organising markets wherein these assets can be easily realised for money (Keynes 1936, pp. 160-1; his emphasis).9

In such circumstances, it is incumbent on the state, through the central bank, to take a general responsibility for credit provision. It becomes simultaneously both lender and borrower of last resort. But given how central money and credit are to the functioning of a modern capitalist economy, it is now no longer possible to see the state as standing outside that economy, correcting what are conceptualised as failures on the fringes of the system. Bear in mind, too, that Keynes himself was a deeply-committed liberal. After the abysmal failure of the world”s most powerful states to cooperate in rescuing free-trade, free-market capitalism from itself, in 1933 he began to advocate a strategy of practical protectionism (Radice 1988) with which he persisted until Bretton Woods: policies of greater national self-sufficiency (Keynes 1933) and strict control on international capital flows which would permit each government to engage in active monetary (and to a lesser extent fiscal) intervention. At Bretton Woods, and later in negotiating an emergency loan for Britain, Keynes had to capitulate to US insistence on enshrining in the new order a more-or-less speedy return to free capital flows: in this victory of dogmatic liberalism, reflecting the interests of money capitalists in the new global hegemon, lay the seeds of the eventual restoration of unfettered private international capital movements. There is no question that dogmatic liberals were equally concerned at the implications of Keynes’ analysis for the domestic role of the state and its right to override the interests of capital; by imposing freedom of capital movements, they ensured that governments with international debts would have to tailor their economic policies strictly to those interests.

Today, we are witnessing the same deep resistance of the moguls of money, both to decisive state intervention to restore liquidity and the supply of credit within each currency area, and to any serious effort to build a more effective and above all equitable regime of international currency adjustment and balance of payments management.10 Domestically, in both the UK and the USA bankers are working hard to socialise losses, while retaining the right to their bonuses and fat pensions: this is one main source of the growing public anger, the other being the widespread view that it was the bankers’ collective malfeasance that led to the looming global recession. But what is more important to them is to retain the subordination of lending practices to the self-regulation of private capital, and resist the roll-back of deregulation which is being seriously discussed: for they fear that government ownership stakes, and the restoration of firewalls between traditional retail banking and the modern activities of the creation and trading of securities, would presage a broader assault on the neoliberal model. This in turn would once again open up the prospect of a socialist alternative coming on to the agenda of political debate.

Internationally, there is similar resistance to reform. It is obvious that the Basel II regulatory structure for banks, as well as the application of modern international accounting standards11, have been important contributory factors in the contagion spreading out from the sub-prime mortgage crisis. But equally, the cosy world of G7 summits, buttressed by the annual Davos shindigs as well as more shadowy networks of the global power elite, is seen as threatened by the growing demand to bring permanently on board the rising economic powers of Asia, Africa and Latin America. The paralysis of the WTO and the visible impotence of the UN system, both inter-state fora in which relatively powerless states are unavoidably present (however weak and uncertain their voices), are used as examples of what will happen if the G7 lose their grip on international coordination. Yet without some extension of the framework of global governance, and at least some measures to tighten the international norms of banking and financial regulation, it will be hard to ensure that in the interim, payments surpluses are recycled and the global economy sustained without great damage not only to the global poor but also to the much-discussed middle classes.

Reform, but future reversion?

At the time of writing, much hangs in the balance. For the moment, reform is in the ascendancy, and with it has come a revival of Keynesian pragmatism, and a certain revulsion against the more egregious excesses of neoliberalism. But the consequences of casting the crisis as a crisis of neoliberalism depend, clearly, on one’s understanding of neoliberalism. In present public debates the focus on finance reflects an acceptance of the underlying liberal philosophy in which economics and politics, markets and states, are seen as fundamentally distinct domains of ideas and power. This is reflected in the widespread view among Marxists that the crisis has resulted because of a “financialisation” of capitalism (Epstein 2005, Lapavitsas 2008). A critical evaluation of this view will help us to answer the broader question of neoliberalism”s future.

The idea of financialisation has its roots historically in Hilferding’s important study Finance Capital, first published in 1910 (Hilferding 1981). Hilferding identified finance capital as a new form in which industrial and banking capital, previously separately organised, were becoming fused through the growth of long-term holdings by banks in industrial companies, a phenomenon prevalent especially in Germany at the time, but also found in other advanced industrial countries (with the exception of Britain). But he analysed also in great detail the mechanisms of the stock market and the issuance of securities, by which what he termed “fictitious capital”12 was mobilised; and he linked the rise of finance capital to the broader transition from competition to monopoly, to the accentuation of crisis tendencies, and to growing imperial rivalries. His work was a seminal influence on later writers, and especially on Lenin’s Imperialism.

In recent work financialisation is less associated with Hilferding’s specific form of finance capital, and more with the evolution of new forms of financial asset, their creation and their marketing. The relevance of this for the present credit crisis lies broadly in the explosive recent development of markets in futures and derivatives, and more narrowly in the process of securitisation, under which lenders can quickly recoup their loans by bundling them up into tradable securities and selling them on. However, financialisation can be understood in two distinctive senses. The first is as a phenomenon of cyclical crisis, in which the top of a cycle is characterised first by feverish speculation, and then by a rush to money and a collapse in productive investment; this is consonant with the cycle theory sketched in various ways in the later parts of Capital vol.1, and also with Keynesian trade cycle theory. The rush to money extends to a preference for holding relatively liquid financial assets, and postponing fixed investment under conditions of uncertainty over future returns.

However, the second sense of financialisation, as a secular or long-term phenomenon that endures through one or more cycles, is more problematic. Across an entire period of decades (or for long wave theorists in a prolonged downward phase) capitalists face the prospect of slower growth in output and productivity, and therefore prefer to try to secure a larger share of the relatively smaller mass of total profits through transactions in financial assets. This preference, it is argued, has been greatly encouraged by the financial liberalisation and privatisation that have been such a major feature of the rise of neoliberalism. Privatisation of state enterprises has increased the supply of financial assets, while the growth of private pension funds places a significant and in principle stable proportion of workers” earnings at the disposal of investment institutions. Meanwhile, the proliferation of financial derivatives allows the perception of risk – an obvious problem given the common need within financial intermediation to match up short-term deposits with long-term liabilities – to be assuaged by promises that such risks can be managed, or even completely annulled. The overall result is a significant growth in the relative size of the financial sector, whether measured by share of global business turnover, employment or profits, especially in the “Anglo-Saxon” countries where greed is now said to be good.

As a description of developments in the financial sector over the last twenty years, at least in the “Anglo-Saxon” heartlands, this is fair enough. What is questionable is whether proponents of the secular financialisation thesis are right in seeing this as a new form of capitalism, not at the level of patterns of state regulation, or the balance of national versus global circuits of capital, but in a more fundamental sense. Space and time preclude a detailed discussion of this, but an alternative approach would see the new financial instruments not as vectors of a new form of exploitation (as in e.g. Lapavitsas 2008), but simply as commodities that provide new opportunities for capital accumulation through their production and sale; like any new commodities appearing in capitalism, there are opportunities for “first movers” to obtain super-profits in various ways13 but eventually competition will whittle them away. A further qualification is that the hypertrophy of the new finance is heavily concentrated, with London and New York providing the new products all over the world: taking into account also the ludicrous pyramid character of these products, in which the gross value of securities issued is a vast multiple of the underlying original asset, the true global scale of the new finance is far less than the UK/US headline figures suggest.

Be that as it may, a more important feature of the financialisation literature is that by focusing on this aspect of capitalism, there is a consequent neglect both of production and of politics. There is a continuing and deep-rooted tendency implicitly to equate production with material goods (the terms “primary” and “secondary” as against “tertiary” indicate this all too clearly). The decline in the employment share of natural resource and industrial sectors and the rise of “service” sectors14, coupled with the necessarily one-dimensional character of statistical data broken down into sectors, encourages their neglect, but it also masks the common characteristic of the products of all sectors as extracting surplus value from productive labour. When analysing specifically capitalist production, the hegemony of capital ensures that “productive” means “productive for capital”, and this is the case regardless of the use-value characteristics of commodities. Financial services may be unusual and seemingly esoteric commodities, but they are commodities nonetheless, and the workers who produce them – yes, even the traders with their multi-million-dollar bonuses – are therefore productive wage-labourers from the standpoint of capital and its accumulation. In the end, what passes for a progressive critique of the world of finance all too readily reflects a moral critique of money, rather than one rooted in a historical materialist critique of capitalism.15

But there is also a neglect of the politics of money (and indeed the politics of production, as we shall see). Because the state appears to stand apart from the world of neoliberal finance – because, indeed, the former appeared to be obliged to retreat as the latter advanced – the implication is that the state can reassert a lost power. If the seventeenth-century English philosopher Sir Francis Bacon was right in saying that “money makes a good servant, but a bad master”, then it would appear that the state both can and should exercise mastery on our behalf over money. But, as indicated in the previous section, the very idea that the state is constituted separately from the world of markets, money and capital (the “economy” tout court, never mind the “real economy”), is central to the constitution of capitalism as such, not just a contingent phenomenon of phases of liberal hegemony. It is fundamentally for this reason that the critique of neoliberalism advanced both by the financialisation school, and more broadly the Keynesian/Polányian critics, does not get to the heart of the matter. Whatever reforms of “re-regulation”, whether national or global, ensue in the coming period are likely not only to leave untouched the grotesque inequalities of wealth and power that capitalism continues to reproduce on a larger and larger scale, but also to leave open the likelihood of liberalism returning to the ascendancy in a further regulatory cycle.

Towards a socialist critique

A socialist critique starts from the perspective of a future society in which social relations are constituted consciously by the “free association of producers”. This is not a recipe for utopian fantasies, but rather a necessary prophylactic against the ideological hegemony that aims always to naturalise capitalist social relations as eternal and unchangeable. No putative association of producers can possibly be free unless it is free to constitute not merely technical modes of production, but the social relations with which they regulate their society. Hence it is important to establish a terrain of debate which encompasses all the central traditional objectives of socialism – subject as they most certainly are to vigorous debate and disagreement - rather than being trapped in the ideological exclusions of conventional liberal thinking. To be quite clear: my purpose is not to aim for some sort of ideological purity, nor to dissolve all theoretical contradictions through a priori reasoning, and certainly not to apprehend in all their details the historically-contingent manifestations of capitalism in different regions and countries. Rather, it is to open up the given framework of thinking in order to widen the possible range of alternatives to neoliberalism. In particular, this final section focuses on two weaknesses in the current critique of neoliberalism: the concept of civil society as a source of alternatives, and the predominantly technocratic and indeed capitalist understanding of the sphere of production.

Partly because of the apparent “rolling-back” of the state under neoliberalism, many of its critics have argued that the locus of effective opposition can no longer lie in the struggle to assert class interests in a politics centred on the state, but rather should shift to the realm of civil society. The reasons for this are partly negative, in that the state apparatus itself has lost its freedom of manoeuvre under the constraint of budgetary discipline, imposed not only internally along with changes in the mind-sets of both politicians and bureaucrats, but also externally through dependence on global capital markets. The so-called “competition state” may still be capable of effective initiatives in certain fields, notably skill formation and targeted welfare measures, but, at least until the very recent renunciation of monetarist rules on public debt and deficits16, it has had to abandon important forms of state intervention that were available in principle during the Keynesian era. In parallel with this, the tradition of democratic contestation has been weakened, with all political traditions making their peace in different ways with the new orthodoxy. These twin processes have been as evident in Latin America as in other regions; most obvious has been the weakening of political parties based on organised labour, undermined not only by the reduced possibilities of state-led redistribution, but also by the deregulation and informalisation of labour markets.

In response, many oppositionists have turned their attention to civil society and to the social movements that are seen as its most active components. This shift is advocated not only at national level, but also under the rubric of “global civil society” in initiatives ranging from the World Social Forum, through the greatly expanded range of global NGOs dealing with specific issues, to individual participation in the possibilities of cultural exchange – potentially enriching and diversifying, though in some respects destructive of difference – created by global communications and migration17. The more ambitious commentators propose the Kantian ideal of global citizenship, as a means of transcending the new limitations on the scope and effectiveness of “political society” and the state.

The problem lies in how the concept of civil society is deployed in this process. All too often, it is not appreciated that the apparently private and independent activities through which individuals participate in civil society are deeply shaped by cultures (or indeed cults) of consumerism and (“post”-)modernity that in turn reflect capitalist interests and practices.18 Independence from stifling cultural traditions, and geographical and cultural hypermobility, often promote the pursuit of crass materialism that directly contradicts the supposed concern of civil society with mutual respect and social intercourse, as well as with environmental sustainability and human rights. In short, the really effective structures of civil society might more properly be called bourgeois society, today as much as in earlier periods of capitalist development. And indeed, by far the most powerful organisations in civil society are the giant “public” (meaning private) transnational corporations, which now dominate the production and distribution of goods and services through which most human needs are met. After conceding the terrain of state-oriented politics, progressive forces are not automatically able to regroup effectively in civil society, not even to carve out “zones of autonomy”, let alone to contest on that basis once more for state power.19

So far, so depressing perhaps. But if civil society as presently constituted is fundamentally a realm of market forces and powerful private interests, there still remains an alternative terrain which, while apparently under the direct control of those private interests, can paradoxically be a genuine source of alternative visions and practical contestation. This is what Marx (1954 p.172) memorably called “the hidden abode of production, on whose threshold there stares us in the face, “No admittance except on business””. Let us look inside, for in the subsequent 300 or so pages of his account, we may find this alternative.

Put briefly, the alternative lies not in the “business” of producing value and surplus value, but the exchange between humans and nature that yields use-values, which also and necessarily constitutes the labour process in capitalist production. Marx (1954 chs 13-15) charts a historical evolution from simple cooperation, in which the new capitalist proprietors take over the inherited processes of peasant and artisanal production, through the increasingly detailed division of labour under manufacture, to the systematic application of science and technology to the collective labourer of machinofacture. This sequence has typically been understood as one of ever more complete capitalist authority and control, accompanied by the deskilling and direction of labour – to a condition illustrated by the production line in Chaplin”s Modern Times, the enslavement of the operator to the directing mechanism of the factory in Fritz Lang”s Metropolis, or Diego Rivera”s Detroit murals. But in his account Marx makes perfectly clear that the implementation of this capitalist project is subject to constant contestation and contradiction: it is a realm of class struggle that in practice underpins and generates the struggles over wages, employment and (eventually) the state provision of health, education and welfare, which take place in the “visible abodes” of the marketplace and public politics. Despite the steep hierarchies of responsibilities, training and of course pay that are found as much in the public sector as in private enterprise, workplaces are necessary a realm of the association of producers bound to a common purpose, and constantly requiring the exercise of creativity and mutual respect.20

What is missing, of course, is freedom: not freedom from all mutual constraint, but freedom to shape the context and content of associated labour. The most vivid examples of the potential contained in this have come at times and in places where for whatever reason the compulsive authority of private property, or its mimicking by the state, ceases to function: typically, periods of economic and social collapse where necessity impels the producers to turn their collective power towards the direct meeting of social needs. Latin America has given us many recent examples of this, adding to the layers of experience built up from the Russian soviets of 1905 and 1917, Barcelona 1936, the liberated zones of Europe in 1944-5, Budapest 1956. In the history of socialist thought, the cooperative movement, syndicalism, guild socialism and council communism all place production at the centre of struggle.

It is of course a long way from such experiments, often undertaken in conditions of acute social difficulty, to a sustained mass movement of opposition to neoliberal capitalism. Once people seek to extend such initiatives beyond the “hidden abode”, they necessarily confront not only the active opposition of property, but the inertia of social convention. This has been apparent, for example, in the marginalisation of factory seizures and other grassroots initiatives in Argentina, which flourished in 2002, but lost momentum during the fragile but rapid economic recovery under the Kirchners’ conflation of Peronism and neoliberalism.21 But the alternative to building on such initiatives is to repeat capitalism’s regulatory cycle without challenging its real foundations: what we will then experience in the coming period is a crisis within neoliberalism, not a crisis ofneoliberalism.


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Prepared for the conference on ‘Neoliberalism, Crisis and Latin America’, METU, Ankara, 14 November 2008. Enviado al Foro por el autor.

1 This section draws on Radice (2005) and (2008a). An excellent recent account is Harvey (2007). The country case literature is now vast; for a good recent account, focused on Brazil but with wider Latin American implications, see Rocha’s (2007) essay on Celso Furtado and the choices that faced the first Lula administration.

2 Notably pluralism and (neo)corporatism.

3 Dependency and world-systems theories; see Radice (2008b).

4 The British experience was echoed in Australia and New Zealand; in the latter country, the conversion to neoliberalism was especially abrupt and extreme.

5 At least in relation to alternative forms of the political economy of capitalism: I leave aside the ‘clash of civilisations’ debate (e.g. Huntington 1993).

6 However, Munck (2003) very largely ignores the globalisation issue.

7 Bukharin (1972) identified three problems with bourgeois economics: logical flaws, class interest and ahistoricism.

8 Remember that this is a heroically abbreviated account; Keynes had his precursors, notably in the Swedish School.

9 This sentence more or less precisely describes what happened in global credit markets from the summer of 2007 (and as always the crisis of liquidity eventually became for many banks one of solvency also).

10 For more detail on recent and current developments see Radice (2008c) (available from author).

11 Perhaps especially the practice of ‘marking to market’ in stating the value of financial assets – something that is disastrous in present conditions where no buyers exist for complex derivative, and the ‘market’ value is therefore zero.

12 By this Hilferding meant that the value of this form of capital was given, not directly as the value of the labour-time expended in producing physical capital goods, but indirectly as the expected monetary return on the securities issued.

13 Not least by flagrant mis-selling – much like patent medicines in the 19th century, their use-value turns out to be non-existent.

14 There is a small but interesting literature on ‘servicialisation’ reflecting this view [refs to follow].

15 I do not in any way deny the cultural importance of the moral critique (as the following paragraphs make clear), merely to object to its excessive colouring of the critique of political economy.

16 It is vital to note that this relaxation has thus far been restricted to the advanced capitalist countries and to those with the largest amounts of currency reserves. The IMF is still imposing the same neoliberal package to supplicants such as the Ukraine and Hungary.

17 For a valuable discussion of the complex mix of convergence/difference and domination/resistance that arises from cultural globalisation, see Gurnah (1997).

18 Williams (2002, ch.3) provides a thoroughgoing critique of the relation between popular-national culture and the neoliberal concept of civil society. At bottom, “The ‘culture-ideology of consumerism’ serves to naturalize global capitalism everywhere” (Yúdice 1995, as quoted in Williams 2002, p.109), and this transformation deeply affects also the relation of state to society.

19 Bejar (2006) examines the fragmentation of populism as a political force in Mexico, highlighting the difficulty the left faces in defining an effective strategy; as in the case of Argentina, populism has been successfully harnessed to neoliberalism by the ruling élite. However, many have painted a more optimistic picture in the case of Venezuela under Chávez. This is perhaps because neoliberalism was previously so politically successful, making it harder to construct an alternative on the populist tradition alone: see Parker (2005).

20 Iñigo Carrera (2006: 209-15) provides, I think, a solid anaytical foundation for the foregoing claim, tracing the complex ways in which the ideal (for capital) ‘real subsumption’ of labour remains open to contestation, and necessarily provides the only real ground upon which revolutionary consciousness can develop.

21 Iñigo Carrera (2006: 205-9) incisively criticises the romantic interpretation of ‘autonomous’ responses to the Argentine crisis of 2001-2.