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The Contradictions of Capitalism and NeoLiberalism
on August 2, 2003
An extremist, disruptive version of capitalism, called neoliberalisim, now dominates the worldwide economic order. Practiced by huge transnational corporations and financial institutions with vast support from central governments, neoliberalism essentially transforms entire societies, destroying traditional ways of life and forcing individuals, sometimes with violence, to conform to its dictates. Not surprisingly, capitalistic institutions unleash immense propagandistic efforts to tout capitalism's unmatched outputs while obscuring the demands and burdens that it places on societies and individuals. "Naming the System" penetrates these purposeful obfuscations and describes the actual workings and impact of capitalism.
The field of neoclassical economics provides a theoretical basis for the workings of capitalism. Though now dominant in universities and economic institutions, the author repeatedly takes issue with its essential premises. Especially irritating is the unwillingness of neoclassical economists to acknowledge the "contradictions" of capitalism, that is, its failure to deliver as predicted. It is difficult to not come to the conclusion that the entire discipline of neoclassical economics is subservient to the business class.
Neoclassical economic theory posits "individuals," all seeking to maximize their self-interests by freely operating in various marketplace settings, as the core actors in capitalism. According to the theory, this "free-market" activity operates within the context of fundamental laws of supply and demand, and will result in socially optimal outcomes. However, to regard all market actors as essentially equal "individuals" is highly misrepresentative. Multi-billion dollar corporations often can monopolize markets, manipulate consumers through advertising, and otherwise leverage their tremendous advantages in resources. But neoclassical economists are loath to admit that the dynamics of power, inequality, and coercion can tilt markets.
A huge gap in the theory of the general benevolence of markets is that a society of self-interested maximizers will often fail to generate even basic, needed social outcomes. Conveniently, neoclassical economists leave it to governments to fill in where markets fail by doing such things as building roads and bridges, providing for national defense and public schools, and providing a legal structure and the enforcement necessary to conduct business. Neoclassicists are far less sanguine about the need to regulate or otherwise deal with the side effects of marketplace actions. According to the theory, self-interested businesses do not have to deal with the social effects of causing environmental degradation in production, laying-off workers, or paying poverty-level wages, because the marketplace will. However, it is simply not likely that the random acts of relatively uninformed and powerless individuals will be aggregated sufficiently to affect social outcomes through the marketplace. Neoclassicists insist that market actors always exercise "free choice." Of course, they have to ignore the fact that such factors as the lack of actual equal opportunity to be well educated and to associate with employment enhancing individuals and the subtle coercion of a large pool of unemployed workers are not freely chosen conditions and do undermine free-market activity.
The author insists that capitalism, or its latest incarnation as neoliberalism, be judged on its worldwide economic performance. Many Third World nations, in exchange for economic assistance, under directives by international, neoliberal economic bodies, such as the World Bank, the IMF, and the WTO, have accordingly opened their economies to global corporations and liberalizing economic forces. But results have hardly been encouraging. Since 1980 there has been no growth in per capita GDP in these countries and they have fallen further behind rich nations, not drawing nearer as predicted. Structural adjustment policies have forced millions of peasants from their lands into sprawling urban ghettos with only sporadic contingent and informal sector work available. It is hard to resist the conclusion that neoliberalism is a mechanism to disadvantage working people and to permit global corporations to exploit them.
The author acknowledges that capitalism can produce a vast array of goods, but that productivity comes at a cost to societies and individuals. Though neoclassicists declared capitalism to be recession proof in the 1990s, capitalism has always lurched from crisis to crisis with a lot of discomfort being delivered to the working class with each recession. Loss of a job can be devastating, but capitalism also relentlessly redefines the nature of work. Capitalism is unconcerned about the inherent worthiness and importance of having and doing meaningful work. It persistently deskills jobs by breaking them into sub-tasks and subjecting them to automation and mechanization. Fewer and fewer workers are permitted to conceptualize, plan, and execute their work in a complete process.
Neoliberal spokesmen often hold that capitalism and democracy are essentially one and the same. But the author points out that it is a fundamental contradiction of capitalism that the freedom that both employers and workers supposedly enjoy when meeting in the labor market disguises a regime of total control within workplaces. It is that unchallengeable control that permits owners to squeeze excessive profits from workplaces. The author digresses with an explanation of Marx's labor theory of value, but the issue is really one of relative power.
Capitalism subtly redefines freedom and democracy. Democracy is no longer located in the political realm involving decision making; it has become the freedom to participate in the marketplace, to act in one's best interest. Social or collective concerns need not trouble an individual self-maximizer - the market will do that automatically. But it has been the collective actions of labor unions and worker-centered political parties that have attempted to tame the worst excesses of capitalism. But the effectiveness of labor unions has often been reduced through both repression and cooptation.
Some radicals contend that the contradictions of capitalism are becoming so evident that it is a foregone conclusion that the working class will become a potent force in their own liberation. But the author is not so enamored of those prospects. The reaction of workers to the depredations of capitalism is often psychological self-destruction, not some form of activism. In addition, capitalism has proven to be highly resilient to challenges. It can usually call upon the full power of the state to defend its interests. And the ideology of consumerism is pervasive and subtly distorting, even equating shopping with revolutionary actions.
Understanding the nature and contradictions of capitalism is certainly a place to begin to contest it. This book does its part well.