neoliberalism: origins, theory, definition · neoliberalism: origins, theory, definition since the...

Legal Club – Faculty of Law

National Economics University – Hanoi – Vietnam Email: [email protected] or [email protected]

www.legalclubneu.wordpress.com or www.sites.google.com/site/legalenglishclub

Neoliberalism: origins, theory, definition

Since the 1990's activists use the word 'neoliberalism' for global market-liberalism

('capitalism') and for free-trade policies. In this sense, it is widely used in South

America. 'Neoliberalism' is often used interchangeably with 'globalisation'. But

free markets and global free trade are not new, and this use of the word ignores

developments in the advanced economies. The analysis here compares

neoliberalism with its historical predecessors. Neoliberalism is not just economics:

it is a social and moral philosophy, in some aspects qualitatively different from

liberalism. Last changes 02 December 2005.

Neoliberalism inadequately defined?

The definition of neoliberalism presented here is more abstract than usual - but it

also suggests that neoliberalism has been underestimated. A widely quoted

example of those 'usual definitions' is What is "Neo-Liberalism"? by Elizabeth

Martinez and Arnoldo García:

Neo-liberalism is a set of economic policies that have become widespread during

the last 25 years or so. Although the word is rarely heard in the United States, you

can clearly see the effects of neo-liberalism here as the rich grow richer and the

poor grow poorer....Around the world, neo-liberalism has been imposed by

powerful financial institutions like the International Monetary Fund (IMF), the

World Bank and the Inter- American Development Bank....the capitalist crisis over

http://www.globalexchange.org/economy/econ101/neoliberalDefined.html




the last 25 years, with its shrinking profit rates, inspired the corporate elite to

revive economic liberalism. That's what makes it 'neo' or new.

This sense of the word 'neoliberalism' is widely used in Latin America. However,

neoliberalism is more a phenomenon of the rich western market democracies, than

of poor regions. That is why I emphasise the historical development of liberalism,

in those western market democracies. The IMF and the World Bank are not the

right places to look, to see the essence of neoliberalism. And the WTO ideology -

free trade and 'competitive advantage' - is 200 years old. There is nothing 'neo' in

their liberalism.

Seattle and Genoa?

The image of 'neoliberalism' has been heavily influenced by the protests against it:

people think of the violent protests at Seattle and Genoa, and the associated social

movements. If you only thought about that, then neoliberalism would be an

ideology of the riot police, and that's not accurate.

It's true that the Genoa G8 summit was intended as a show of force. The organisers

knew that violent demonstrations were probable in an Italian city, but chose to

confront them. Democratically elected leaders "should not run from

demonstrators", said Tony Blair. (However, when it was Britain's turn to organise

the G8 summit, the hypocrite choose the isolated Gleneagles hotel in Scotland). 20

000 police and soldiers were deployed at the Genoa G8 summit - NATO used 42

500 troops to occupy Kosovo. This show of force was out of all proportion to the

political strength of anti-market forces, but it emphasised the legitimacy of the

market-democratic states.




It is possible for 'the state' to suppress 'the market', but also to promote it. In fact,

the free market emerged in Europe under the protection of the state, and the market

needs the state, more than the other way around. The market needs internal

regulation, in order to function: the state, in the form of the legal system, ensures

contracts are enforced. In the form of the police, it prevents theft and fraud. It

establishes uniform systems of weights and measures, and a uniform currency.

Without these things there would be no free market, no market forces, and no

resulting market society. Bill Gates disputes the US Government's authority over

his business - but if there was no government at all, the poor would soon steal his

wealth. The attack on the World Trade Center provided some images of this

dependency - the reopening of the New York Stock Exchange by police and

firefighters, for instance. (In turn, at least in the United States, the market is

integrated in the national identity: the NYSE reopening was seen as an act of

national defiance).

The free market is itself a form of social organisation: it is neither spontaneous nor

endemic to humans. If no-one ever promoted or enforced it, there would be no free

market on this planet. For thousands of years, there was none. The modern free

market came into existence primarily because liberalism demanded its existence.

This demand was a a political demand, and it was enforced through the state.

The general functionalist starting premise is only modified to the extent that the

"system" is comprehended as capitalist, in a specific way "form-determined". The

state and the political system function as a form of an 'ideal all-around capitalist',

who must uphold not just the society as such, but the 'capitalist element'. The

different forms of state interventionism are explained both as an expression of




functional needs of the accumulation and reproduction process of capital. The

general requirements of capital accumulation such as basic infrastructure,

functioning law systems and legitimization mechanisms are tasks that cannot be

carried out by individual capitalists due to the competition relations, but instead

systemically require a "fictive all-around-capitalist". This "capitalist referee" must

guarantee the fulfilment of these tasks in the interest of maintaining the system of

capitalist society..

Business and the State: Mapping the Theoretical Landscape

Volker Schneider and Marc Tenbuecken, 2002.

If everyone on this planet was a liberal, an enthusiastic supporter of the free

market, then that would be the end of the matter. But of course some people

oppose the market, and its effects - especially the resulting inequality. The market

is a political and social regime, and like any other regime, it must be enforced

against opposition. That is true even of democracies: democrats overthrow

dictators, and dictators overthrow democracies. If either side wants to avoid their

own overthrow, they must use force. Democrats do use democratic force, and do

fight democratic wars, as they know in Iraq.

The relationship between supporters and opponents of the free market, is similar to

that between democrats and anti-democrats. They are enemies, inherently. On the

very existence of the market, no compromise is possible. The free market either

exists, or it does not exist. It can disappear by consent - which is absurdly unlikely

- or without consent. Any attempt to end the free market is, by definition, an

attempt to overthrow a fundamental social structure. Certainly, in the long-

established western market democracies, it would mean a collapse of the existing

http://www.ucl.ac.uk/spp/download/political_science/londonVSMT_fin.pdf

http://www.ucl.ac.uk/spp/download/political_science/londonVSMT_fin.pdf




social structures. The effect would be dramatic - comparable to occupation by a

foreign power.

So it is not surprising that force is used in the face of a threat, and it is not

surprising that it is the force of the state. That is after all, a typical task of the state

- the preservation of the regime itself, the preservation of the nature of the state.

Anarchist propaganda speaks of "the State", as if all states were interchangeable,

but they are not. A market democracy is not interchangeable with a Bolshevik

regime, simply because they both have a government, an army, and a police force.

A market democracy will use force, state force, against an attempt to overthrow

either democracy or the market. That is what the riot police did: defend the state,

and defend the market - without contradiction between them.

In historical perspective 'Genoa' was an absurd over-reaction. The western market

democracies are the most stable and successful societies in history. The principle

of the free market is accepted by well over 90% of their population, probably

closer to 99% in western Europe. The tensions can be explained by the underlying

sense of threat, but they are not specifically related to neoliberalism, and they

certainly do not explain it. For that, a long-term and ideological perspective is

necessary.

Liberalism

Liberalism as a coherent social philosophy dates from the late 18th century. At first

there was no distinction between political and economic liberalism (economics was

not considered a separate discipline until about 1850). Classic liberal political




philosophy has continued to develop - after 1900 as a purely conservative

philosophy. The basic principles of all liberal philosophy are:

Liberals believe that the form of society should be the outcome of processes.

These processes should be interactive and involve all members of society.

The market is an example, probably the best example, of what liberals mean

by process. Liberals are generally hostile to any 'interference with process'.

Specifically, liberals claim that the distribution of wealth as a result of the

market is, in itself, just. Liberals reject the idea of redistribution of wealth as

a goal in itself.

Liberals therefore reject any design or plan for society - religious, utopian,

or ethical. Liberals feel that society and state should not have fixed goals,

but that 'process should determine outcome'. This anti-utopianism became

increasingly important in liberal philosophy, in reaction to the Communist

centrally-planned economies: it anticipated the extreme deregulation-ism of

later neoliberalism.

Liberalism is therefore inherently hostile to competing non-liberal societies -

which it sees not simply as different, but as wrong. In the last 10 years,

Islamic society has replaced the Communist state, as the perceived 'opposite'

to a liberal society.

Nevertheless liberalism has compromised with one specific form of non-

liberal ideology: nationalism, in the ethno-national form which underlies

most present nation states. A political community based on common origin,

history and language is not liberal, but liberals never tried to form the

voluntarist, contractual, non-historical state - which liberalism would




logically imply. The nation state was simply taken for granted, as the

political and economic arena for liberal process.

Liberals define liberalism itself as 'freedom', so they rarely think consent is

required for the imposition of a liberal society. In fact, most would say it can

not be imposed, inherently. After the Cold War this belief has acquired a

geostrategic significance: many western liberal-democrats now believe, that

a war to impose a liberal-democratic society is inherently just. This belief

influences interventionist policy, but as yet no war for the sole purpose of

liberalisation has been fought.

Classic political liberals reject the idea that there are any external moral

values: they say that there are only opinions. They feel that these opinions

should be 'expressed' in public, and that in some way this 'market of

opinions' will favour the truth. (The idea that truth can be revealed by

discourse is much older than liberalism).

The liberal rejection of external moral values is formally expressed in the

liberal idea of human rights: both good and evil humans have equal rights,

which apply equally when they facilitate good or evil actions. Classic liberal

philosophy advocated 'liberty' as a value, even if they did not call it a value.

In effect it places liberty as a value above good (and evil).

Liberals believe in formal equality among participants in a liberal society,

but almost all liberals also believe in inequality of talent. Many liberals were

therefore sympathetic to biological theories of inequality. (Theories of

hereditary racial differences in intelligence are now popular among US

neoliberals).




Liberalism is a universal ideology, and in principle liberals seek to apply it to the

entire planet, and the entire human population. Most liberals have supported the

expansion of liberal society, although in the 19th century that meant among the

'civilised nations'. For a long time the free market was considered the only cross-

cultural and 'exportable' element of liberalism. Only recently have liberals

advocated, that African and Asian societies should become 100% liberal-

democratic societies. 'Liberal missionaries', such as George Soros, were unknown

or marginal in the 19th century.

Market liberalism

The free market is not simply 'exchange' or 'trade'. Two people who exchange

products can not form a free market in the liberal sense, even if their transactions

are monetarised. The element of competition is missing in this two-person society.

A minimal liberal free market needs at least three parties, with two of them in

competition - for instance, two competing sellers and one buyer. The resultant

pressure on the two sellers to lower prices, is the simplest type of 'market force'.

Such a force comes into existence without any conscious action on the part of the

three parties. In modern markets there are millions of parties, and complex market

forces. Market-liberals value this characteristic of the market. Their belief in the

moral necessity of market forces in the economy, is probably the first defining

feature of market liberalism. The second is the belief in entrepreneurs themselves,

as a good and necessary social group. To summarise:




For all liberals, interactive process legitimises outcome: in market

liberalism, the market is the primary process, and market transactions are the

interaction.

Market liberals believe that economic transactions should take place in a

framework which maximises the effect of each transaction on every other

transaction. (That is an abstract definition of the free market, but it makes

the later transition from liberalism to neoliberalism easier to understand).

Liberals see the market as good, and often as semi-sacred. They want the

market to be as large as possible, involving all of society. In modern liberal-

democratic states almost all adults participate in the market. A private club

in a Communist state, where members can hold a closed free market, would

satisfy no liberal.

Liberals are hostile to economic self-sufficiency - so strongly, that they

believed in war to 'open up markets'. The most famous example is the

Opium War, when Britain forced the Chinese Empire to allow the import of

opium. This liberal belief in market expansionism has revived after the end

of the Cold War.

Market liberals are hostile to trade barriers: "free trade" is a classic slogan of

market liberalism. That meant traditionally, the free flow of goods and

capital: neoliberalism later developed a more diffuse version, where 'flow'

and 'interaction' are treated as quasi-ethical values.

Market liberals believe that important aspects of society should be

determined by the market, certainly the distribution of income and wealth.

Neoliberalism later extended this belief, claiming thatall social life should be

determined by the market.




All market liberals are hostile to interference in the market, by church, state

or others - although since the 19th century only the state has sufficient power

to interfere. Market liberals are clearly anti-utopian, in the sense of opposing

economic planning, especially centralised state control of the entire

economy. They believe that the market produces the best 'design for society',

and that is is wrong to substitute any other design.

However, market liberalism is itself a utopia, despite its anti-utopianism. In

the 'ideal world' of market liberalism, no goods or services exist which are

not the product of market forces, but all goods or services which are market-

responsive do exist. This is in itself a utopian project, implying a total

structuring of society. Neoliberalism goes even further - extending the

market principle beyond the production of goods and services.

The social institution of the entrepreneur is central to market liberalism. An

entrepreneur is a person whose profession is, to respond to market

forces. In the 19th century most entrepreneurs were still private individuals,

later the business firm took over this function. The enterprise/firm is a

permanent organisation, structured to respond to market forces. An

entrepreneur is not a farmer, or a manufacturer, or a consultant: in theory an

entrepreneur changes activities in accordance with the market. In reality

most entrepreneurs retained a specialisation for some specific products or

services: but neoliberalism now demands, that the theoretical flexibility

should become standard practice.

Without the entrepreneur there is no free market, therefore market liberals

demand a privileged social status for the entrepreneur. The early liberal

theorists were hostile to the urban guild economy of mediaeval Europe: they




saw it, in effect, as a conspiracy not to compete. In their historical vision, the

entrepreneur rescued Europe from the poverty of the Middle Ages. (This

vision was shared by Karl Marx, who admired the cultural dynamism of the

free market). Not just mediaeval Europe, but all societies without an

entrepreneurial caste, were seen as failures.

A central but rarely explicit political demand of market liberals is therefore, that

entrepreneurs should have control of the economy. This has not only been

accepted, but has become so incorporated into the culture of western liberal-

democratic societies, that few people ever think about it. But it would not be any

less logical, to hand the economy to engineers, or priests - or not to privilege any

one group. The choice depends on underlying values, and liberals value the

entrepreneur. This value preference of liberals, and its widespread acceptance, has

created what in the US is called 'the business community'. That is a real and

identifiable social elite - with specific cultural preferences, specific clothing, and

often a specific form of language (sociolect). It does in fact control the economy,

in liberal-democratic states. Although this was probably not foreseen by early

liberals, market liberalism has become an ideology in support of this elite. Their

culture, attitudes, and ethics have greatly influenced neoliberalism.

Neoliberalism

If Adam Smith returned and saw the more extreme aspects of neoliberalism, he

would probably find them bizarre. Nevertheless, they derive from the ideas of early

liberalism. The belief in the market, in market forces, has separated from the




factual production of goods and services. It has become an end in itself, and this is

one reason to speak of neoliberalism and not of liberalism.

A general characteristic of neoliberalism is the desire to intensify and expand the

market, by increasing the number, frequency, repeatability, and formalisation

of transactions. The ultimate (unreachable) goal of neoliberalism is a universe

where every action of every being is a market transaction, conducted in

competition with every other being and influencing every other transaction, with

transactions occurring in an infinitely short time, and repeated at an infinitely fast

rate. It is no surprise that extreme forms of neoliberalism, and especially

cyberliberalism, overlap with semi-religious beliefs in the interconnectedness of

the cosmos.

Some specific aspects of neoliberalism are:

A new expansion in time and space of the market: although there has been a

global-scale market economy for centuries, neoliberals find new areas of

marketisation. This illustrates how neoliberalism differs from classic market

liberalism. Adam Smith would not have believed that a free market was less

of a free market, because the shops are closed in the middle of the night:

expansion of trading hours is a typically neoliberal policy. For neoliberals a

23-hours economy is already unjustifiable: nothing less than 24-hours

economy will satisfy them. They constantly expand the market at its

margins.

The emphasis on property, in classic and market liberalism, has been

replaced by an emphasis on contract. In the time of Adam Smith, property




conferred status in itself: he would find it strange that entrepreneurs

sometimes own no fixed assets, and lease the means of production.

Contract maximalisation is typically neoliberal: the privatisation of the

British railway network, formerly run by one state-owned company, led to

30 000 new contracts. Most of these were probably generated by splitting

services, which could have been included in block contracts. (A fanatic

neoliberal would prefer not to buy a cup of coffee, but negotiate separately

for each microlitre).

The contract period is reduced, especially on the labour market, and so

the frequency of contract is increased. A service contract, for instance for

office cleaning, might be reduced from a one-year to a three-month contract,

then to a one-month contract. Contracts of employment are shorter and

shorter, in effect forcing the employee to re-apply for the job. This

flexibilisation means a qualitatively different working life: many more job

applications, spread throughout the working life. This was historically the

norm in agriculture - day labour - but long-term labour contracts became

standard after industrialisation.

Market forces are also intensified by intensifying assessment, a development

especially visible on the labour market. Even within a contract period, an

employee will be subject to continuous assessment. The use of specialised

software in call centres has provided some extreme examples: the time

employees spend at the toilet is measured in seconds: this information is

used to pressure the employee to spend less time away from the terminal.

Firms with contracts are also increasingly subject to continuous assessment

procedures, made possible by information technology. For instance, courier




services use tracking software and GPS technology, to allow customers to

locate their packages in transit. This is a typical example of the new hyper-

provision of business information, in neoliberal economies.

New transaction-intensive markets are created on the model of the stock

exchanges - electricity exchanges, telephone-minute exchanges. Typical for

neoliberalism: there is no relationship between the growth in the number of

transactions, and the underlying production.

New forms of auction are another method of creating transaction-intensive

markets. Radio frequency auctions, such as those for UMTS frequencies, are

an example. They replaced previous methods of allocation, especially

licensing - a traditional method of allocating access to scarce goods with no

clear private owner. The complex forms of frequency spectrum auctions

have only been developed in the last few years. Neoliberals now see them as

the only valid method of making such allocations: they dismiss all other

methods as 'beauty contests'.

Artificial transactions are created, to increase the number and intensity of

transactions. Large-scale derivative trading is a typically neoliberal

phenomenon, although financial derivatives have existed for centuries. It is

possible to trade options on shares: but it is also possible to create options on

these options. This accumulation of transaction on transaction, is

characteristic of neoliberalism. New derivatives are created, to be traded on

the new exchanges - such as 'electricity futures'. There is no limit to this

expansion, except computer power, which grows rapidly anyway.

Automated trading, and the creation of virtual market-like structures, are

neoliberal in the sense that they are an intensification of "transaction for




transaction's sake". However, a world in which allentrepreneurial activity

was automated would not be neoliberal, or liberal.

This expansion of interactivity means that neoliberal societies are network

societies, rather than the 'open societies', of classic liberals. Formal equality

and 'access' are not enough for neoliberals: they must be used to create links

to other members of the society. This attitude has been accurately labelled

'connectionist'.

Because of contract expansionism, transaction costs play an increasing role

in the neoliberal economy. All those 30 000 contracts at British Rail had to

be drafted by lawyers, all the assessments have to be done by assessors.

There is always some cost of competition, which increases as the intensity of

transactions increases. Neoliberalism has reached the point where these costs

threaten to overwhelm the existing economy, destroying any economic gains

from technological change.

The growth of the financial services sector is related to these neoliberal

characteristics, rather than to any inherent shift to service economies. The

entire sector is itself a transaction cost: it was almost non-existent in the

centrally planned economies. In turn, it has created a huge demand for office

space in the world's financial centres. The expansion of the sector and its

office employment are in direct contradiction of propaganda about 'more

efficiency and less bureaucracy' in the free market.

The speed of trading is increased. Online market data is expensive, yet it is

now available free with a 15-minute delay. The markets move so fast, that

the data is worthless after 15 minutes: the companies can then give it away,

as a form of advertising. Day-traders buy and sell shares in minutes.




Automated trading programmes, where the computer is linked direct to the

stock exchange system, do it in seconds, or less. It is this increased speed

which has led to the huge nominal trading volumes on the international

currency markets, many times the Gross World Product on a yearly basis.

Certain functions arise which only exist inside a neoliberal free market -

'derivative professions'. A good example is the profession of psychological-

test coach. The intensity of assessment has increased, and firms now

regularly use psychological tests to select candidates, even for intermediate

level jobs. So ambitious candidates pay for training, in how to pass these

psychological tests. Competition in the neoliberal labour market itself

creates the market for this service.

The creation of sub-markets, typically within an enterprise. Sub-contracting

is itself an old market practice, but was usually outside the firm. It is now

standard practice for large companies to create competition among their

constituent units. This practice is also capable of quasi-infinite extension,

and its promotion is characteristic of neoliberalism. A few companies even

required each individual employee to register as a business, and to compete

with each other at the place of work. A large company can form literally

millions of holdings, alliances and joint ventures, using such one-person

firms as building blocks.

Supplier maximalisation: this extends the range of enterprises that compete

for each contract. The ideal would be that every enterprise competes for

every contract offered, maximising competition and market forces. In the

case of the labour market, the neoliberal ideal is the absolutely flexible and

employable employee, who can (and does apply) for every vacancy. In




reality, an individual can not perform every kind of work - but there is a real

development towards non-specialised enterprises, especially in the producer

services sector. In neoliberalism, instead of the traditional 'steel tycoon' or

'newspaper baron' there are enterprises which "globally link people and

knowledge, and cultures" or "advise and implement solutions to

management issues". (In fact these are quotes from the accountants Price

Waterhouse, but you can not guess this from the descriptions).

Neoliberalism is not simply an economic structure, it is a philosophy. This is most

visible in attitudes to society, the individual and employment. Neo-liberals tend to

see the world in term of market metaphors. Referring to nations as companies is

typically neoliberal, rather than liberal. In such a view Deutschland GmbH

competes with Great Britain Ltd, BV Nederland, and USA Inc. However, when

this is a view of nation states, it is as much a form of neo-nationalism as

neoliberalism. It also looks back to the pre-liberal economic theory -

mercantilism - which saw the countries of Europe as competing units. The

mercantilists treated those kingdoms as large-scale versions of a private household,

rather than as firms. Nevertheless, their view of world trade as a competition

between nation-sized units, would be acceptable to modern neoliberals.

Competition for inward investment, on the other hand, was generally unknown

until the late 19th century. This competition is often seen by activists as the core

doctrine of neoliberalism, especially since the neo-mercantilist policies are easy to

understand and very unpopular: wage cuts, less money for public services, less tax

on the rich. The neo-mercantilist nation, in other words, behaves like a

caricaturally mean and nasty capitalist. It is not relevant either for these policies, or




for opposition to them, whether they have any effect at all. Perhaps investment

decisions are not made on this basis, perhaps there is no real mobility of capital,

perhaps no investor is interested in Argentina, for instance. But so long as the

Argentine government believes that it should pursue certain polices to attract

investors, then it will do so. So long as it believes that the 'SA Argentina' is a

business firm, then it will run Argentina accordingly.

The market metaphor is not only applied among nations, but among cities and

regions as well. In neoliberal regional policy, cities are selling themselves in a

national and global marketplace of cities. They are considered equivalent to an

entrepreneur selling a product, but the product is the city (or region) as a location

for entrepreneurs. The successful 'sale' of the product is the decision of an

entrepreneur to locate there, not simply the sale of land or factories. This view of

cities as sub-firms within the fictive 'national firm' parallels the creation of sub-

markets within real firms. The difference is, that those sub-markets really exist -

neoliberal city governments, on the other hand, act primarily on a belief in a

metaphor. Again, there is no hard evidence that the global marketplace of cities

exists: for most economic sectors complete mobility of plant and labour is an

illusion. Most firms can not simply move from city to city, across continents and

ignoring language and cultural barriers, in pursuit of locational advantage. Here

too, the neoliberalism is a philosophy, an attitude - rather than an economic reality.

It has influenced European politics - the fear of this neoliberalism dominated the

French campaign against the European Constitution. There is certainly a neoliberal

lobby within the EU, represented by the Lisbon Council, although it sees the world

in terms of competing trade blocks rather than competing cities or regions.

http://www.lisboncouncil.net/




However, it is not clear how a continent could be run as a business firm - even its

inhabitants wanted that. (More on neoliberal economic geography below).

A good example of the underlying attitudes is the basic policy document of the city

of Düsseldorf - the Leitbild, equivalent to a 'mission statement' in English. It was

adopted in 1997, and is no longer online at the city website, but parts are quoted

at St@ttbuch Düsseldorf...

Düsseldorf bekennt sich zum Prinzip des Wettbewerbs. Der Erfolg von Städten

entscheidet sich im Wettbewerb nach innen und aussen. Düsseldorf will besser

sein.

Wettbewerb ist treibende Kraft unseres gesellschaftlichen Systems. Im

zusammenwachsenden Europa gilt dies in hohem Masse auch für die Beziehungen

zwischen den Regionen, die als Wirtschaftsstandort, als Lebensraum für die

Bürgerinnen und Bürger und als Kulturstandort miteinander konkurrieren. Sich

hierzu bekennen heisst, den Wettbewerb aufnehmen und aktiv gestalten zu wollen.

Im Wettbewerb besteht nur, wer gut ist. Düsseldorf will Wettbewerb. Im Interesse

der vielen Millionen Menschen des Lebens- und Wirtschaftsraums: Düsseldorf will

besser sein.

...

Düsseldorf is committed to the principle of competition. The success of cities is

decided by competition, internal and external. Düsseldorf wants to be better.

Competition is the driving force of our social system. In a Europe which is

becoming more integrated, this applies increasingly to the relations between

regions. They compete with each other as investment location, as residential choice

for the citizens, and in cultural activity. Our commitment means that we will

http://stattbuch.de/_themen/leitbild/




actively and structurally enter into this competition. In a competitive world, only

the good can survive. Düsseldorf wants to compete! In the name of the millions of

people in our economic and residential region: Düsseldorf wants to be the best!

The neoliberal urban vision was adopted, without debate, by many city

governments in the 1990's. At some point, a belief in 'competition by population

structure' was incorporated - the idea that a successful city is inhabited only by

successful people. This belief, nonsensical or not, has had an effect in a negative

sense: some cities now pursue active policies aimed at relocating low-income

households outside the city. In the Netherlands, a new law allows large cities to

legally ban poor people, from certain areas, or from the entire city..

As you would expect from a complete philosophy, neoliberalism has answers to

stereotypical philosophical questions such as "Why are we here" and "What should

I do?". We are here for the market, and you should compete. Neo-liberals tend to

believe that humans exist for the market, and not the other way around: certainly in

the sense that it is good to participate in the market, and that those who do not

participate have failed in some way. In personal ethics, the general neoliberal

vision is that every human being is an entrepreneur managing their own life,

and should act as such.Moral philosophers call this is a virtue ethic, where human

beings compare their actions to the way an ideal type would act - in this case the

ideal entrepreneur. Individuals who choose their friends, hobbies, sports, and

partners, to maximise their status with future employers, are ethically neoliberal.

This attitude - not unusual among ambitious students - is unknown in any pre-

existing moral philosophy, and is absent from early liberalism. Such social actions




are not necessarily monetarised, but they represent an extension of the market

principle into non-economic area of life - again typical for neoliberalism.

The idea of employability is characteristically neoliberal. It means that neoliberals

see it as a moral duty of human beings, to arrange their lives to maximise their

advantage on the labour market. Paying for plastic surgery to improve

employability (almost entirely by women) is a typical neoliberal phenomenon - one

of those which would surprise Adam Smith.

Eileen Bradbury, a psychologist who advises surgeons at the Alexandra Hospital in

Cheadle, Cheshire, said she was particularly worried that Jenna wanted the

operation so that she could be successful. "That is a very disturbing belief for a 15-

year-old girl to have, and also a false one," she said. "I have seen women coming

for surgery who work in television and they say they have to have it done or they

won't get the work. I usually go along with that because it is probably true".

Guardian: Parents defend breast implants for girl, 15.

In practice many 'workfare neoliberals' also believe that there is a separate category

of people, who can not participate fully in the market. Workfare ideologies

condemn this underclass to a service function for those who are fully market-

compatible. Note however, that by recognising a non-market underclass,

neoliberals undermine their own claims about the universal applicability of market

principles.

The general ethical precept of neoliberalism can be summarised approximately as:

"act in conformity with market forces"

http://www.guardianunlimited.co.uk/uk_news/story/0,3604,417988,00.html




"within this limit, act also to maximise the opportunity for others to conform

to the market forces generated by your action"

"hold no other goals"

If everyone lives by such entrepreneurial precepts, then a world will come into

existence in which not just goods and services, but all human and social life, is the

product of conformity to market forces. More than traditional market liberals,

neoliberals therefore have a quasi-heroic attitude to the entrepreneur, and to

engagement in the market. A 1998 speech by German entrepreneur Jost Stollmann

is typical: his neoliberal ideas played a prominent role in the national elections in

Germany in that year. Stollmann includes his personal moral philosophy, such as it

is...

Ich möchte die Lust und Bewunderung unternehmerischen Erfolgs in den Augen

der jungen Menschen sehen. Ich möchte den Stolz und den Zuspruch der Eltern

spüren, wenn sich Sohn oder Tochter tatenvoll in das Abenteuer Selbständigkeit

stürzen.

....so gut sein, wie wir nur können - getreu der bewährten Formel, die ich während

meiner Zeit in Amerika verstehen gelernt habe: 'BE THE BEST YOU CAN BE'

Jost Stollmann

The idea that everyone should be an entrepreneur is distinctly neoliberal. Early

liberals never expected the majority of the population to own property, let alone

run a business. (The participation of the poor in the market was limited to

accepting any work they were offered). The practices on the flexibilised labour

market would seem strange to the early liberals. For instance, individuals set up a

http://jost-stollmann.de/




one-person employment agency with one person on the books, themselves - partly

for tax reasons, but also to meet the ideal of the entrepreneur. Policy to increase the

number of entrepreneurs is typically neoliberal, although ironically it must be

implemented by the State. A classic market-liberal would not say that a free market

is less of a free market, because only 10% of the population are entrepreneurs. For

neoliberals it is not sufficient that there is a market: there must be nothing which

is not market.

the neoliberalism joke

Marxist: "The workers have nothing to sell but their labour power"

Neoliberal: "I offer courses on How to Sell Your Labour Power Like A Shark"

There is therefore no distinction between a market economy and a market society

in neoliberalism. With the attitudes and ethics set out above, there is only market:

market society, market culture, market values, market persons marketing

themselves to other market persons. In a sense neoliberalism has returned to the

position of early liberalism - which also combined culture, values and ethics with

economics. But neoliberalism brings a far more intensive 'market' - replacing not

only traditional social forms, but also the concept of private life. At the same time

this 'market' is increasingly remote from the necessity of production, which was so

real for the early liberals - when there were still regular famines in Europe. In fact

it is so remote from the existing cultural perception of a 'market', that it would

perhaps be better to use some other word.

Finally, neoliberalism has become associated with specific cultures (especially US

culture) and a specific language (English). This is not surprising: Anglo-American




liberalism had the most influence on neoliberalism. Neoliberalism as ideology is

not tied to any culture or language. It is true that a single global language would

facilitate free trade - but that could be Esperanto, as well as English. In practice,

the promotion of the English language, neoliberal policies, and pro-American

foreign policy, usually go together: this was especially true in Central and Eastern

Europe.

Globalisation and neoliberalism

Often the terms 'globalisation' and 'neoliberalism' are used as if they were

interchangeable. That is only correct in a limited sense, for the neo-mercantilist

aspects of the neoliberal ideology. I will try to clarify the perceived and actual

relationship between the two - especially for the South American use of the term

'neoliberalism'.

The neoliberal ideology sees the nation primarily as a business firm, as explained

above. The nation-firm is selling itself as an investment location, rather than

simply selling export goods. If no-one in government believes in this ideology, it

will have no consequences. If however, a neoliberal government is in power, it will

pursue policies designed to make the nation more attractive as an investment

location. These policies are generally pro-business, and are perceived as such by

the opponents of the policies.

But remember that the ideology is neo-mercantilist: the policies are national

policies, directed ultimately at the welfare of the nation and not of the market.

Paradoxically, they are a form of protectionism: if there is a global market of

investment locations, then it is 'unfair competition' for governments to artificially




increase the attractiveness of their own country. Such governments are, strictly

speaking, not good market liberals. Hard-line classic market liberals would shrug

their shoulders at the election of an anti-business government. "Business will go

elsewhere, the country will become poor, that's the way the global market works,

leave the market alone", they would say. They would not waste their time trying to

get a pro-business government elected there. In reality few liberals are so

consistent, neoliberals certainly are not. But their rhetoric of 'national

competitiveness' is a form of economic nationalism: it is a modern version of the

old nationalist insistence, that the whole nation should work together. It revitalises

jingoism, chauvinism, flag-waving and foreigner-bashing: Tony Blair is probably

the best example.

Don't tell me that a country with our history and heritage, that today boasts six of

the top ten businesses in the whole of Europe, with London the top business city in

Europe, that is a world leader in technology and communication and the businesses

of the future, that under us has overtaken France and Italy to become the fourth

largest economy in the world, that has the language of the new economy, more

brilliant artists, actors and directors than any comparable country in the world,

some of the best scientists and inventors in the world, the best armed forces in the

world, the best teachers and doctors and nurses, the best people any nation could

wish for. Don't tell me with all that going for us that we do not have the spirit to

meet all the challenges before us.

Blair conference speech, 26 September 2000

Now, a neoliberal government will almost certainly appeal to 'globalisation' as a

justification and legitimisation of its policies - Tony Blair certainly does. By

http://www.guardianunlimited.co.uk/labour2000/story/0,7369,373640,00.html




globalisation they mean, more or less, that the global market of investment

locations now exists, and that it is an inevitable historical development. The

opponents of the neoliberal government will, in turn, oppose this 'globalisation'.

However, that does not mean that the global market of nations actually exists. The

existence of neoliberal governments, pursuing neoliberal policies justified by an

appeal to globalisation, does not mean that a new global order has superseded the

order of nation states. The very fact, that it is still primarily the nation state which

is being 'marketed' in this way, shows that the nation has not disappeared.

Before considering the reality of the global order, it is also necessary to consider

the beliefs of the opponents of such a neoliberal government. Again paradoxically,

many of them accept without question the neoliberal claim that there is a long-term

historical process of 'globalisation', transforming the nation into a business firm on

a global market of nation-firms. Worse, if the nation is a business then it is often

clearly weak - everyone can see that Argentina is economically worse off than the

United States. A neoliberal government will therefore try to convert a nation such

as Argentina into a 'strong player', which means worsening the living conditions of

much of the population. Now here is the next paradox: the response of the

opponents is also an economic nationalism, this time with the emphasis on

protectionism. The opposition perception of globalisation differs in one respect: for

them it is a historical but not spontaneous development. For them it is a policy

imposed by a non-national global elite, directed against the individual nations.

In their view, the international financial institutions are equivalent to an imperial

power, which has de facto colonised countries such as Argentina. In caricatural

form: they believe that a new and powerful empire has come into existence, the




Empire of IMF-ia, at an indeterminate location. The neoliberal government, in this

view, is a traitorous elite acting as a colonial Viceroy for the IMF-ian Empire. The

opposition wants to replace it with a government which will 'liberate' the nation

from the global market, from its colonial status. That 'liberation' is generally

understood as: withdrawal of the nation-firm from the global market of nation-

firms, protectionism, economic nationalism, and self-sufficiency instead of trade.

Here too there is a paradox: the oppositional movements are not anti-business: they

generally see national business as a victim of global business. (Local business in

South America is in the comfortable position, that both neoliberals and anti-

neoliberals want to help it, for different reasons).

The 'IMF-ia model' is partly correct: the global financial institutions are indeed a

bastion of neoliberal ideology, and they can bully some poor countries into

adopting neoliberal policies. But they can't do that to the rich western powers, in

fact they would not exist without the support of these powers. They are not a force

outside nations, they are not an imperial power. The global financial institutions

are, in the simplest terms, an instrument of US policy - and if there is a quasi-

imperial power, it is the United States.

The point is, once again, that the truth of beliefs about globalisation is itself

irrelevant. If the government and people all believe that a country is being attacked

by fire-breathing dragons, then the government might distribute asbestos suits to

the population, and the opposition might complain that there were not enough of

them. Ideologies and politics can operate on a completely fictive basis. Millions of

Europeans died to 'resolve' theological issues such as the Virgin Birth of Mary,

Mother of God.




So the perceptions have themselves generated a political reality: on the basis of a

belief in 'globalisation' some governments pursue neoliberal policies, which are

neo-mercantilist in their logic and aims. In such circumstances opposition to

globalisation and neoliberalism coincides, rather than neoliberalism being identical

or synonymous with globalisation. Both sides share a common fallacy: that trade

and sovereignty are opposites, a zero-sum pair. The neoliberals believe that

national success - "in today's global market" - requires the abandonment of

national economic autonomy and sovereignty. Their opponents believe that

national welfare requires minimisation of trade and external links: they believe that

trade and invasion are equivalent, although no-one will say that outright. Once

again, the equivalences and perceptions on both sides are false. Most of the Gross

Global Product is tied to individual nation states for technical, climatic, logistical,

and cultural reasons. For most investment decisions, there is no global market of

locations. And sovereignty is not necessarily inverse to trade volume and trade

regime. A powerful country such as the United States can have a high trade volume

relative to GNP. Many colonies - by definition not sovereign - had a low trade

volume relative to GNP, because the bulk of 'GNP' consisted of peasant

agriculture. But even a fallacious belief can apparently support not just one, but

two competing forms of economic nationalism.

So what is the reality behind the perceived globalisation? One reality is that nation

states still dominate global social and economic structures. However these nation

states themselves form a specific arrangement of a specific type of state.

Globalisation claims appear logical if you see nation states as isolated islands, but

that is not the historical reality. The very existence of a world of nation states,




indicates some form of global order of nation states. What these nation states do -

trade or no trade, capital flows or no capital flows - is irrelevant to that

issue. What is already global can not logically be globalised: therefore there is

no globalisation, in the widely used sense. There is no transition underway, or

recently completed, to a fundamentally different global structure. Because the

existing order of nation states is already global, intensification of global flows, or

global trade, or global communication does not undermine it, or fundamentally

alter it. If some part of the world were to break with this global order - for instance

a future autarkic caliphate - that would be a radical change. When nations trade

with each other, that simply indicates that the global order of nations is functioning

as expected.

The false premise in the globalisation thesis is in fact the standard nationalist

claim, that each nation is a separate and particular entity. In reality nations

collectively are a global and universalist structure: the functional equivalent of a

nationalist world state. The world functions as if a nationalist world government

had seized power in the 19th century, led by Mazzini and Garibaldi and friends.

Most existing states were indeed established by nationalist groups. Nationalists co-

operate to maintain one (nationalist) world order and exclude others. The nation

state is not a particularity, existing by itself in isolation, but part of a global design.

Supporters of the globalisation thesis claim, that a world of isolated nation states

existed in the recent past - before 1989, or more approximately before 1950. They

claim that these isolated nation states are now being eroded in a global process: it

includes the formation of the neoliberals claimed 'market of nations'.




Economic globalization represents a major transformation in the territorial

organization of economic activity and politico-economic power....The sovereignty

of the modern state was concentrated in mutually exclusive territories and the

concentration of sovereignty in nations...economic globalization has contributed to

a denationalizing of national territory...

Saskia Sassen. Losing Control: Sovereignty in an Age of globalization (1996).

But is the global order of nation states disappearing, anywhere? In reality, there is

no collapse of the nation state to be seen. Nation states have not suffered

anything comparable to the dissolution of the Austro-Hungarian or Ottoman

empires. All that remains of those empires are oversized palaces in Vienna and

Istanbul. The rest of their institutions have completely disappeared: there is not a

square metre of Habsburg or Ottoman territory left in Europe. There is no longer

an Austro-Hungarian imperial army, or police, or courts, or parliament. The nation

states succeeded the multi-ethnic empires, seized all their territory, and remodelled

all society on that territory. The replacement was total. Where is the equivalent

'collapse' of the nation state? There are few places on earth without the institutions

of a nation state - perhaps Somalia, but that is not the result of globalisation. If the

world was truly 'globalised' then it would be full of disused national parliament

buildings - and not a national army in sight. The world is not like that, and will not

be like that in the immediate future.

In other words, 'globalisation' remains a belief rather than a reality. It is an

instrumental belief with great political influence and effect. It is appealed to by

both neo-mercantilist neoliberals and their economic-nationalist opponents.

Nationalists have a tradition of appealing to external threats to enforce national




unity. The nation must unite and work together, they said - to defeat the Hun, or

the Bolshevik threat, or the Yellow Peril, or the enemy within the gates, or Osama

bin Ladin. The instrumental use of 'globalisation' is in the same dishonourable

category.

Summarising neoliberalism

To conclude, here are summaries of neoliberalism in two forms. First a list of key

points in neoliberalism:

transaction maximalisation

maximalisation of volume of transactions ('global flows')

contract maximalisation

supplier/contractor maximalisation

conversion of most social acts into market transactions

artificial maximalisation of competition and stress

creation of quasi-markets

reduction of inter-transaction interval

maximalisation of parties to each transaction

maximalisation of reach and effect of each transaction

maximalisation of hire/fire transactions in the labour market (nominal

turnover)

maximalisation of assessment factors, by which compliance with a contract

is measured

reduction of the inter-assessment interval

creation of exaggerated or artificial assessment norms ('audit society')




A final summary definition of neoliberalism as a philosophy is this:

Neoliberalism is a philosophy in which the existence and operation of a market are

valued in themselves, separately from any previous relationship with the

production of goods and services, and without any attempt to justify them in terms

of their effect on the production of goods and services; and where the operation of

a market or market-like structure is seen as an ethic in itself, capable of acting as a

guide for all human action, and substituting for all previously existing ethical

beliefs.

Source: http://web.inter.nl.net/users/Paul.Treanor/neoliberalism.html

http://web.inter.nl.net/users/Paul.Treanor/neoliberalism.html

neoliberalism: origins, theory, definition · neoliberalism: origins, theory, definition since the...

Documents