What’s the common link behind the attacks on the industrial and political rights of workers in the advanced capitalist world? What drives all governments, be they of traditionally conservative parties like the Liberals in Australia or of a ‘social democratic’ character as in Britain, to have identical policies on all the key questions.
The common programme is neoliberalism, a policy that returns capitalist governments to the ‘liberal’ (as in free of government control) policies of the period from the 19th century up until the Great Depression. If we don’t understand neoliberalism and the socialist alternative to it, we will misdiagnose the problem to one of ‘evilness’ of individual politicians or parties. This will lay the basis for more attacks as another seemingly less ‘evil’ capitalist politician or party will gain support.
What is neoliberalism?
Neoliberalism is the only face of capitalism many young people know. It’s the type of capitalism we are currently living under. Neoliberalism is widely used as a description of the revived form of economic liberalism that became increasingly important in international economic policy discussions from the 1970s onwards.
Neoliberalism refers to a political-economic philosophy that rejects government intervention in the domestic economy. It focuses on free-market methods, fewer restrictions on business operations, and property rights. In foreign policy, neoliberalism favours the opening up of foreign markets by political means, using economic pressure, diplomacy, and/or military intervention. Opening of markets refers to free trade and an international division of labour. It promotes reducing the role of national governments to a minimum. To improve profits it strives to reject or mitigate labour policies such as the minimum wage, and collective bargaining rights.
In short neoliberalism means handing over immense power to the big business elite, just as John Howard has done in Australia. But all of these things aren’t just the ugly face of Howard; they’re the ugly face of modern capitalism globally. They are the result of policies that were aggressively implemented by the bosses in response to a specific crisis. This crisis was the economic downturn that took place after the Second World War.
Between 1945 and the early 1970s the economy was booming, this meant low unemployment, strong unions and government spending on social services. This was the nice face of capitalism otherwise known as Keynesianism. Governments intervened in the economy to generate demand in a period of recession to stop it getting worse. During this period most of the advanced capitalist countries moved in this direction.
After the Second World War, a global economic upturn meant that bosses were making big profits. Workers used their improved bargaining power to increase their share of the wealth produced. Capitalism was also being moderated by the existence of planned economies in the Soviet bloc countries and by revolutionary movements in Vietnam, France, Portugal and elsewhere.
Even though workers were getting a larger share of the wealth they still were not getting all of the wealth that they were producing. This meant that they could not buy back all of the goods that they produced. On top of this there was a tendency for the rate of profit to fall during the boom as bosses spent increasingly more on capital goods to improve productivity, thereby (proportionally) using less labour – the source of new profit at the end of the day. This led to a slow down in the economy in the early to mid 1970s. Productivity decreased as post war technology (like the production of cars electrical equipment etc) reached its limits.
Then in 1973 there was a sharp rise in oil prices which triggered a world slump. This was a turning point at which most capitalists started abandoning Keynesian policies and starting down the slippery slope of neoliberalism.
Capitalist governments started forcefully implementing free market policies. They privatised state industries, deregulated the labour market and further reduced wages.
National capitalists attacked workers around the globe and the post war conditions were wound back. This was done by attacking unions and introducing casualised workforces. Many of these attacks were carried out by the so called workers leaders. Time and again union leaders and social democratic governments collaborated with the ruling class. In many cases this gave capitalists a way to get their counter reforms through often with less resistance from workers.
In Australia this was played out during the Accord years of the 1980s. Australian workers faced the same attack on wages but dressed up in sheep’s clothing. Aided by the ACTU and the Hawke Labor government, bosses managed to fix wages at a rate often lower than inflation. Neoliberalism has also meant increased exploitation of the so called ‘Third World’. Free Trade agreements have been used to further ‘open up’ Third World markets and resources to multinational companies.
However, it hasn’t all gone the bosses’ way. Workers have challenged the neoliberal agenda. In the 1980s and 1990s, bosses faced massive strike waves in Italy, France, Spain and elsewhere across Europe. In Britain, the key resistance was in the form of the miner’s strike of the mid 1980s. In Australia outbreaks of resistance came from the builders’ labourers, the nurses and the pilots.
In the United States in 1981 President Reagan defeated the air traffic controllers strike. In Britain in 1985 Thatcher defeated the miners. In Australia the Hawke government destroyed the Builders’ Labourers Federation. Unfortunately on many occasions workers were sold out by trade union leaders who could see no alternative to the so called free market.
The shift to the right in policy was fast-tracked after the collapse of the Stalinist regimes of Russia and Eastern Europe in 1989-91. With the lack of a mass democratic socialist alternative to Stalinism, the Peoples’ Power movement led to capitalist restoration. This removed the counter-weight of a planned economy. It was a major ideological victory for the capitalists. For many workers the possibility of an alternative to capitalism seemed gone.
Despite this, working class resistance has had the effect of slowing down the neoliberal assault in some cases. In well unionised industries in Australia workers have managed to mostly preserve their wages and conditions so far. However, victories have been isolated and attacks are now being stepped up.
Who wins from neoliberal policies?
Neoliberalism for workers has meant the aggressive driving down of wages and conditions to the point of the development of a working poor. Wages have been in decline through the reduction in full time work and increase in part time and casual jobs. As capital is attracted to where the lowest wages are, production industries (like manufacturing) in advanced capitalist countries have been wiped out. This has meant a massive rise in unemployment or underemployment. In fact, total unemployment in the advanced capitalist countries has grown by 10 million every decade since the 70s. This has had the effect of reducing workers bargaining power; thereby compounding the problem.
For bosses neoliberalism has meant an amazing restoration of profits which has resulted in the massive rich poor divide we see today. (1% owns almost as much as the bottom 90%). The bosses have achieved their goal. However, by increasing their share of the wealth so much, they have set in place a set of conditions that will ultimately lead to the downfall of neoliberalism.
The result of massive wealth inequality is that workers can’t afford to buy back the products they produce. This is the key contradiction in capitalism. To purse their own profit interests’ bosses drive down wages and remove the market for their own goods. This in turn has given rise to a raft of contradictory factors. These factors have led to the precarious state of the global economy we see today. This imbalance is best exemplified by comparing the massive US current account deficit to the huge surpluses in Asia.
In the 1980s and early 1990s it seemed that neoliberalism had worked. Profits were up and there was a sense of being able to make fast money, at least among the middle classes. Bosses in the advanced capitalist countries couldn’t believe how clever they were. Their new policies sucked huge amounts of capital from the pockets of workers and the economies of the Third World. Limited real growth came through industries developed around servicing the rich in areas like tourism. Bosses also exploited the new markets they had opened up in the Third World.
Short lived growth
This period of growth was short lived and the bosses soon had to turn towards speculative investment as the market for products dried up. The so called booms of the 1980s and 1990s, having a reliance on speculation, actually deepened the problem. This is illustrated in the case of Argentina who followed the neoliberal directives and deregulated their economy. While this initially led to apparent growth, the result was the bursting of a bubble that saw a massive economic collapse at the end of the 90s.
If speculative investment (gambling on the stock market) was a major factor in the past two decades it is even more of an issue now. In the past couple of years there has been a sharp increase in this kind of stock market activity, using short term, high risk strategies. Because of the ever increasing accumulation of wealth in the hands of the capitalists they are speculating with ever increasing volumes of capital. This increases volatility and is always a symptom of an approaching crisis.
Firstly, the crisis of over-production, as mentioned before, means workers are increasingly unable to buy back what they produce. In order to stay competitive capitalists must cut prices. Lowering prices but maintaining profits means reducing wages. Lower wages means less demand for products. Less demand for products means erosion of productive capacity. This means higher unemployment and so on. Under neoliberalism the race to the bottom for workers continues.
The shaky state of the economy
Tied to all of this is the issue of debt. The decline of production and turn towards financial speculation has produced a disproportionate debt burden. Capitalist investment has relied heavily on debt and, in the wake of low wages, workers have done the same. Here in Australia workers on average spend $126 for every $100 they earn. Given the reliance of the economy on consumers, debt in this area is a particular liability. The ongoing erosion of wages makes repayment increasingly unlikely. This brings us to the third factor.
Through the 1990s neoliberal policy ensured the globalisation of financial markets. This allows enormous amounts of capital to flow quickly to anywhere bosses think they are able to make a quick buck. It also means that a collapse in one region spreads quickly across other continents. We saw this when the speculative bubble in Asia burst in the late 1990s.
These are just some of the factors that underpin the precarious neoliberal economy of today. Combined, these factors ensure that despite periodic upturns, real growth figures are much lower today than in the post war years. Given the cumulative nature of the problems, even this low growth rate seems unsustainable.
All that is needed in the current period is a rise in oil prices, the beginnings of which we are already seeing. A significant rise would lead to a sharp slowdown in China or the US, the only current growth economies. This could have enormous consequences globally.
There is a strong possibility that sooner or later capitalist governments will be forced to revisit some Keynesian policies in an attempt to find a way out of the slump. This was attempted in Japan in the 1990s with little success. The government introduced massive spending packages that failed to stimulate real growth. This however will be no solution to the long term problem of capitalism.
Despite the obvious contradictions, most bosses still think that handing over power to market forces is the way to overcome all problems. In the short to medium term these policies still support their profit interests. It is the continued adherence to neoliberalism by capitalists globally that requires governments to continue attacking wages and conditions nationally.
A quarter of a century of neoliberal policies has resulted in a dictatorship of the market. Deregulation and the selling off of public assets has reduced the ability of governments to regulate economic trends – even if they wanted to. The pressure of world financial markets means governments are fighting to attract capital on a national and state basis. This is why former workers parties, like the Labor Party, are in such an untenable position. Under free market capitalism there is no alternative path.
The cumulative effect of neoliberalism means all governments are involved in a continual process of undercutting wages and conditions. Their role is to ensure the smooth implementation of these inevitable developments. The threat faced by capitalists is not ultimately how the economic monster they have created will affect profit margins. It is how the working class will respond when the facade crumbles. They key battle in the coming period will be for workers minds.
We say that the alternative to neoliberal capitalism is a socialist planned economy. A socialist system would stop privatisation and support workers rights. Instead it would re-nationalise industry under democratic workers’ control and management.
Programmes of public works would re-employ the unemployed on decent wages and provide for a livable pension and welfare system.
The facts are you can not control what you do not own. For working people to be able to share out the wealth that they produce they need to have control over it. To make sure that it is not used to fill the pockets of greedy multinational companies it means breaking with neoliberalism and capitalism and striving for socialism.
By Erinn Sales and Anthony Main