Neoliberalism ‘with Chinese Characteristics’

In December 1978, faced with the dual difficulties of political uncertainty in the wake of Mao’s death in 1976 and several years of economic stagnation, the Chinese leadership under Deng Xiaoping announced a programme of economic reform. We may never know for sure whether Deng was all along a secret ‘capitalist roader’ (as Mao had claimed during the Cultural Revolution) or whether the reforms were simply a desperate move to ensure China’s economic security and bolster its prestige in the face of the rising tide of capitalist development in the rest of East and South- East Asia. The reforms just happened to coincide––and it is very hard to consider this as anything other than a conjunctural accident of world-historical significance––with the turn to neoliberal solutions in Britain and the United States. The outcome in China has been the construction of a particular kind of market economy that increasingly incorporates neoliberal elements interdigitated with authoritarian centralized control. Elsewhere, as in Chile, South Korea, Taiwan, and Singapore, the compatability between authoritarianism and the capitalist market had already been clearly established. While egalitarianism as a long-term goal for China was not abandoned, Deng argued that individual and local initiative had to be unleashed in order to increase productivity and spark economic growth. The corollary, that certain levels of inequality would inevitably arise, was well understood as something that would need to be tolerated. Under the slogan of xiaokang––the concept of an ideal society that provides well for all its citizens––Deng focused on ‘four modernizations’: in agriculture, industry, education, and science and defence. The reforms strove to bring market forces to bear internally within the Chinese economy. The idea was to stimulate competition between state-owned firms and thereby spark, it was hoped, innovation and growth. Market pricing was introduced, but this was probably far less significant than the rapid devolution of political-economic power to the regions and to the localities. This last move proved particularly astute. Confrontation with traditional power centres in Beijing was avoided and local initiatives could pioneer the way to a new social order.

The Neoliberal State

The role of the state in neoliberal theory is reasonably easy to define. The practice of neoliberalization has, however, evolved in such a way as to depart significantly from the template that theory provides. The somewhat chaotic evolution and uneven geographical development of state institutions, powers, and functions over the last thirty years suggests, furthermore, that the neoliberal state may be an unstable and contradictory political form. According to theory, the neoliberal state should favour strong individual private property rights, the rule of law, and the institutions of freely functioning markets and free trade. These are the institutional arrangements considered essential to guarantee individual freedoms. The legal framework is that of freely negotiated contractual obligations between juridical individuals in the marketplace. The sanctity of contracts and the individual right to freedom of action, expression, and choice must be protected. The state must therefore use its monopoly of the means of violence to preserve these freedoms at all costs. By extension, the freedom of businesses and corporations (legally regarded as individuals) to operate within this institutional framework of free markets and free trade is regarded as a fundamental good. Private enterprise and entrepreneurial initiative are seen as the keys to innovation and wealth creation. Intellectual property rights are protected (for example through patents) so as to encourage technological changes. Continuous increases in productivity should then deliver higher living standards to everyone. Under the assumption that ‘a rising tide lifts all boats’, or of ‘trickle down’, neoliberal theory holds that the elimination of poverty (both domestically and worldwide) can best be secured through free markets and free trade. Neoliberals are particularly assiduous in seeking the privatization of assets. The absence of clear private property rights––as in many developing countries––is seen as one of the greatest of all institutional barriers to economic development and the improvement of human welfare. Enclosure and the assignment of private property rights is considered the best way to protect against the socalled ‘tragedy of the commons’ (the tendency for individuals to irresponsibly super-exploit common property resources such as land and water).

Freedom’s Just Another Word . . .

For any way of thought to become dominant, a conceptual apparatus has to be advanced that appeals to our intuitions and instincts, to our values and our desires, as well as to the possibilities inherent in the social world we inhabit. If successful, this conceptual apparatus becomes so embedded in common sense as to be taken for granted and not open to question. The founding figures of neoliberal thought took political ideals of human dignity and individual freedom as fundamental, as ‘the central values of civilization’. In so doing they chose wisely, for these are indeed compelling and seductive ideals. These values, they held, were threatened not only by fascism, dictatorships, and communism, but by all forms of state intervention that substituted collective judgements for those of individuals free to choose. Concepts of dignity and individual freedom are powerful and appealing in their own right. Such ideals empowered the dissident movements in eastern Europe and the Soviet Union before the end of the Cold War as well as the students in Tiananmen Square. The student movements that swept the world in 1968––from Paris and Chicago to Bangkok and Mexico City––were in part animated by the quest for greater freedoms of speech and of personal choice. More generally, these ideals appeal to anyone who values the ability to make decisions for themselves. The idea of freedom, long embedded in the US tradition, has played a conspicuous role in the US in recent years. ‘9/11’ was immediately interpreted by many as an attack on it. ‘A peaceful world of growing freedom’, wrote President Bush on the first anniversary of that awful day, ‘serves American long-term interests, reflects enduring American ideals and unites America’s allies.’ ‘Humanity’, he concluded, ‘holds in its hands the opportunity to offer freedom’s triumph over all its age-old foes’, and ‘the United States welcomes its responsibilities to lead in this great mission’. This language was incorporated into the US National Defense Strategy document issued shortly thereafter.

Neoliberalism on Trial

The two economic engines that have powered the world through the global recession that set in after 2001 have been the United States and China. The irony is that both have been behaving like Keynesian states in a world supposedly governed by neoliberal rules. The US has resorted to massive deficit-financing of its militarism and its consumerism, while China has debt-financed with non-performing bank loans massive infrastructural and fixedcapital investments. True blue neoliberals will doubtless claim that the recession is a sign of insufficient or imperfect neoliberalization, and they could well point to the operations of the IMF and the army of well-paid lobbyists in Washington that regularly pervert the US budgetary process for their special-interest ends as evidence for their case. But their claims are impossible to verify, and, in making them, they merely follow in the footsteps of a long line of eminent economic theorists who argue that all would be well with the world if only everyone behaved according to the precepts of their textbooks. But there is a more sinister interpretation of this paradox. If we lay aside, as I believe we must, the claim that neoliberalization is merely an example of erroneous theory gone wild (pace the economist Stiglitz) or a case of senseless pursuit of a false utopia (pace the conservative political philosopher John Gray), then we are left with a tension between sustaining capitalism, on the one hand, and the restoration/reconstitution of ruling class power on the other. If we are at a point of outright contradiction between these two objectives, then there can be no doubt as to which side the current Bush administration is leaning, given its avid pursuit of tax cuts for the corporations and the rich. Furthermore, a global financial crisis in part provoked by its own reckless economic policies would permit the US government to finally rid itself of any obligation whatsoever to provide for the welfare of its citizens except for the ratcheting up of that military and police power that might be needed to quell social unrest and compel global discipline.

Uneven Geographical Developments

A moving map of the progress of neoliberalization on the world stage since 1970 would be hard to construct. To begin with, most states that have taken the neoliberal turn have done so only partially–– the introduction of greater flexibility into labour markets here, a deregulation of financial operations and embrace of monetarism there, a move towards privatization of state-owned sectors somewhere else. Wholesale changes in the wake of crises (such as the collapse of the Soviet Union) can be followed by slow reversals as the unpalatable aspects of neoliberalism become more evident. And in the struggle to restore or establish a distinctive upper-class power all manner of twists and turns occur as political powers change hands and as the instruments of influence are weakened here or strengthened there. Any moving map would therefore feature turbulent currents of uneven geographical development that need to be tracked in order to understand how local transformations relate to broader trends. Competition between territories (states, regions, or cities) as to who had the best model for economic development or the best business climate was relatively insignificant in the 1950s and 1960s. Competition of this sort heightened in the more fluid and open systems of trading relations established after 1970. The general progress of neoliberalization has therefore been increasingly impelled through mechanisms of uneven geographical developments. Successful states or regions put pressure on everyone else to follow their lead. Leapfrogging innovations put this or that state (Japan, Germany, Taiwan, the US, or China), region (Silicon Valley, Bavaria, Third Italy, Bangalore, the Pearl River delta, or Botswana), or even city (Boston, San Francisco, Shanghai, or Munich) in the vanguard of capital accumulation. But the competitive advantages all too often prove ephemeral, introducing an extraordinary volatility into global capitalism. Yet it is also true that powerful impulses of neoliberalization have emanated, and even been orchestrated, from a few major epicentres. Clearly, the UK and the US led the way. But in neither country was the turn unproblematic. While Thatcher could successfully privatize social housing and the public utilities, core public services such as the national health-care system and public education remained largely immune.

The Construction of Consent

How was neoliberalization accomplished, and by whom? The answer in countries such as Chile and Argentina in the 1970s was as simple as it was swift, brutal, and sure: a military coup backed by the traditional upper classes (as well as by the US government), followed by the fierce repression of all solidarities created within the labour and urban social movements which had so threatened their power. But the neoliberal revolution usually attributed to Thatcher and Reagan after 1979 had to be accomplished by democratic means. For a shift of this magnitude to occur required the prior construction of political consent across a sufficiently large spectrum of the population to win elections. What Gramsci calls ‘common sense’ (defined as ‘the sense held in common’) typically grounds consent. Common sense is constructed out of longstanding practices of cultural socialization often rooted deep in regional or national traditions. It is not the same as the ‘good sense’ that can be constructed out of critical engagement with the issues of the day. Common sense can, therefore, be profoundly misleading, obfuscating or disguising real problems under cultural prejudices. Cultural and traditional values (such as belief in God and country or views on the position of women in society) and fears (of communists, immigrants, strangers, or ‘others’) can be mobilized to mask other realities. Political slogans can be invoked that mask specific strategies beneath vague rhetorical devices. The word ‘freedom’ resonates so widely within the common-sense understanding of Americans that it becomes ‘a button that elites can press to open the door to the masses’ to justify almost anything. Thus could Bush retrospectively justify the Iraq war. Gramsci therefore concluded that political questions become ‘insoluble’ when ‘disguised as cultural ones’. In seeking to understand the construction of political consent, we must learn to extract political meanings from their cultural integuments. So how, then, was sufficient popular consent generated to legitimize the neoliberal turn? The channels through which this was done were diverse. Powerful ideological influences circulated through the corporations, the media, and the numerous institutions that constitute civil society––such as the universities, schools, churches, and professional associations.

Introduction

Future historians may well look upon the years 1978–80 as a revolutionary turning-point in the world’s social and economic history. In 1978, Deng Xiaoping took the first momentous steps towards the liberalization of a communist-ruled economy in a country that accounted for a fifth of the world’s population. The path that Deng defined was to transform China in two decades from a closed backwater to an open centre of capitalist dynamism with sustained growth rates unparalleled in human history. On the other side of the Pacific, and in quite different circumstances, a relatively obscure (but now renowned) figure named Paul Volcker took command at the US Federal Reserve in July 1979, and within a few months dramatically changed monetary policy. The Fed thereafter took the lead in the fight against inflation no matter what its consequences (particularly as concerned unemployment). Across the Atlantic, Margaret Thatcher had already been elected Prime Minister of Britain in May 1979, with a mandate to curb trade union power and put an end to the miserable inflationary stagnation that had enveloped the country for the preceding decade. Then, in 1980, Ronald Reagan was elected President of the United States and, armed with geniality and personal charisma, set the US on course to revitalize its economy by supporting Volcker’s moves at the Fed and adding his own particular blend of policies to curb the power of labour, deregulate industry, agriculture, and resource extraction, and liberate the powers of finance both internally and on the world stage. From these several epicentres, revolutionary impulses seemingly spread and reverberated to remake the world around us in a totally different image. Transformations of this scope and depth do not occur by accident. So it is pertinent to enquire by what means and paths the new economic configuration––often subsumed under the term ‘globalization’––was plucked from the entrails of the old. Volcker, Reagan, Thatcher, and Deng Xaioping all took minority arguments that had long been in circulation and made them majoritarian (though in no case without a protracted struggle).

Freedom’s Prospect

In his annual message to Congress in 1935, President Roosevelt made clear his view that excessive market freedoms lay at the root of the economic and social problems of the 1930s Depression. Americans, he said, ‘must forswear that conception of the acquisition of wealth which, through excessive profits, creates undue private power’. Necessitous men are not free men. Everywhere, he argued, social justice had become a definite goal rather than a distant ideal. The primary obligation of the state and its civil society was to use its powers and allocate its resources to eradicate poverty and hunger and to assure security of livelihood, security against the major hazards and vicissitudes of life, and the security of decent homes.1 Freedom from want was one of the cardinal four freedoms he later articulated as grounding his political vision for the future. These broad themes contrast with the far narrower neoliberal freedoms that President Bush places at the centre of his political rhetoric. The only way to confront our problems, Bush argues, is for the state to cease to regulate private enterprise, for the state to withdraw from social provision, and for the state to foster the universalization of market freedoms and of market ethics. This neoliberal debasement of the concept of freedom ‘into a mere advocacy of free enterprise’ can only mean, as Karl Polanyi points out, ‘the fullness of freedom for those whose income, leisure and security need no enhancing, and a mere pittance of liberty for the people, who may in vain attempt to make use of their democratic rights to gain shelter from the power of the owners of property’. What is so astonishing about the impoverished condition of contemporary public discourse in the US, as well as elsewhere, is the lack of any serious debate as to which of several divergent concepts of freedom might be appropriate to our times. If it is indeed the case that the US public can be persuaded to support almost anything in the name of freedom, then surely the meaning of this word should be subjected to the deepest scrutiny.