Lecture 5 (2009)
In the last lecture we started speaking about the theory of neoliberalism. Today we are going to look more closely at what is meant by neoliberalism. This is because neoliberalism is often used when speaking about globalisation. In some instances it is referred to as ‘corporate globalisation’, meaning the global interconnectedness that emerges in the interests of transnational corporations. In general, it refers to a set of political and economic principles that correspond with that period of increasing global interconnectedness that has been called globalisation. Please note that most of today’s lecture provides the background detail that will allow for the rest of the course to be more meaningful to you. You will not be expected to know the detail of the origins of neoliberalism globally or in South Africa. However, you should have a general sense of what neoliberalism is and how it has been experienced globally and in South Africa.
According to David Harvey:
“Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterised by strong private property rights, free markets, and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee, for example, the quality and integrity of money. It must also set up those military, defence, police, and legal structures and functions required to secure private property rights and to guarantee, by force if need be, the proper functioning of markets. Furthermore, if markets do not exist (in areas such as land, water, education, health care, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks the state should not venture. State interventions in markets (once created) must be kept to a bare minimum because, according to the theory, the state cannot possibly possess enough information to second-guess market signals (prices) and because powerful interest groups will inevitably distort and bias state interventions (particularly in democracies) for their own benefit.” (Harvey, 2005: 2)
Some of the defining features of neoliberalism are:
- Extension of the hand and logic of the market (profit) into all spheres of life; changed/reduced role for the state
- Individualism – Thatcher – “There is no more society, just individuals”; later added ‘and their families’
- cuts in social spending (health, welfare and education)
- cuts in the public service
- entrepreneurialism
- privatisation
- flexibilisation of labour
- growth first, everything else will follow – ‘trickle-down’ economics
- export orientation of markets
- trade liberalisation (reduction/removal of tariffs – WTO, 1994, effects on textile and footwear industries in SA; Export Processing Zones – EPZs)
- tax cuts for big business
[Background (Not Examinable) – The first experiment with the implementation of neoliberal policies happened in Chile in 1973, after the coup led by Pinochet against Allende, backed by local business elites supported by the CIA, US corporations, and US Secretary of State, Henry Kissinger, when a group of economists based at the University of Chicago, studying under Milton Friedman, were invited to assist with the reconstruction of the Chilean economy. The ‘Chicago boys’, as they came to be known, had been developing a set of political and economic principles that came to be known as neoliberalism. They encouraged the new Chilean regime to accept a loan from the IMF that came with a set of policy positions that Chile would have to adopt – a neoliberal structural adjustment programme (SAP). By the 1970s, the post-war accumulation strategies of the rest of the developed world (Keyensianism/embedded liberalism) were also floundering. The Bretton Woods system was in disarray, and in 1971 the system of fixed exchange rates was abandoned; inflation was soaring; there was high unemployment; and the world economy was said to be experiencing a ‘crisis of over-accumulation’. Chile provided the experiment to which was looked for a solution. David Harvey also adds that in 1973 oil producing countries (Saudi Arabia, Kuwait and Abu Dhabi) began to pose a threat to the power of the west in the wake of the OPEC hike in the price of oil. Under military threat, the Saudis started to recycle their petro-dollars through New York investment banks, leading to an over-accumulation of capital in US markets, in turn resulting in a search for new areas of investment, an added incentive to adopt neoliberal policies. The US, through the IMF and WB, began to open up these markets through encouraging SAPs to impose neoliberal policies on newly independent and developing economies. In 1979 Margaret Thatcher became Prime Minister in Britain and in 1980 Ronald Reagan was elected President in USA. These are two figures who are attributed with championing the implementation of neoliberal policies.]
Harvey speaks of ‘neoliberalisation’ – the practice of implementing neoliberalism – to emphasise the heterogeneous and contingent nature of the experience of neoliberalism. This simply means that the implementation of the theory of neoliberalism happens in different ways in different places, and should therefore be understood in this manner.
So we could summarise neoliberalism as a way of opening up new markets, and facilitating the removal of state controls over the market at a global level, as well as of promoting an ethic of individualism and entrepreneurship in all aspects of life – that operates at the level of the economic, political, cultural and social.
But for any theory or set of practices to take root in the world, there is a need for their acceptance and naturalisation in society.
David Harvey states:
“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 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 civilisation’. 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 individuals free to choose.” (Harvey, 2005:5)
We will come back to explore these discourses of individualism and freedom that come to uphold neoliberal practices through the example of South Africa in later lectures.
[Background to SA – Not Examinable - Stephen Gelb has argued that, as in developed capitalist countries, post-second world war, in SA the white population thrived economically, with strong social welfare protections and secure jobs for whites; the opposite was true for black people. Apartheid bolstered a system of ‘racial Fordism’, with the economy being based on two strategies – import substitution and cheap African labour. This was successful at first, partly due to the fixed price of gold. But in 1971 the fixed exchange rate system was dropped, with the result that the gold price began to fluctuate; the market for local goods became saturated; there was an increase in the price of imported capital goods required for local manufacturing as a result of the global crisis; inflation rose; unemployment increased. The apartheid government faced a ‘balance of payments’ crisis (it could not afford to pay its debts to foreign banks e.g. Swiss and German banks) and took a loan from the IMF in 1976. The 1980s, then, saw the apartheid government implement a number of reforms, some of them neoliberal, including the introduction of the logic of privatisation in the provision of black housing and in the electrification of parts of Soweto. Many argue that it was the apartheid economy’s inability to deal with the effects of the global crisis, growing local protest, the armed struggle, and economic sanctions that forced the apartheid government into negotiations with the ANC. Hein Marais adds that changes in the alliance of political forces at a global level, with the collapse of the Soviet Union, meant that the liberation movement was constrained with regard to the possibilities for change open to it. Many people argue that the ANC had no option but to give up the armed struggle, negotiate, and continue on the path of neoliberalism already embarked on by the apartheid government. This was a point of debate within the liberation movement and continues to be a debate today.]
By all accounts, the South African transition was the result of and would come to be shaped by globalised relations and forces.
1994 – ANC came into electoral office on the basis of a widely canvassed manifesto/programme – the Reconstruction and Development Programme (RDP), the result of a wide-reaching consultative process within and outside of the Alliance (ANC, COSATU and SACP). The RDP was sold as the means to ‘the better life for all’, and a concretisation of a means to realise some of the ideals of the Congress movement earlier set out in the Freedom Charter, adopted at the Congress of the People in 1955, as a collective statement of the oppressed people of SA.
The RDP was based on four pillars:
- creating opportunities for all South Africans to develop to their full potential;
- boosting production and household income through job creation, productivity and efficiency, improving conditions of employment, and creating opportunities for all to sustain themselves through productive activity;
- improving living conditions through better access to basic physical and social services, health care, and education and training for urban and rural communities, and
- establishing a social security system and other safety nets to protect the poor, the disabled, the elderly and other vulnerable groups. (Nyman, 2001).
The RDP also made a strong case for “people-driven development” in which citizens would contribute actively to decisions made about how their problems would be addressed. The RDP therefore painted a picture of a ‘partnership’ to be developed between the newly democratic state and its citizens that emphasised the participation of citizens in decision-making rather than their passive acceptance of policies produced on their behalf. This participatory approach of the RDP was not, however, to be realised.
In 1996, government announced the adoption of GEAR – the Growth, Employment & Redistribution Strategy, a macro-economic policy framework that had been drafted by a team of fifteen economists and representatives of the World Bank, Development Bank of South Africa and government. There was no consultation with civil society, and GEAR was introduced as ‘non-negotiable’ by Minister of Finance, Trevor Manuel, and President Nelson Mandela. Civil society organisations, including the Congress of South African Trade Unions (COSATU), called GEAR neoliberal, and organised protests against it. The article by Roseline Nyman, in your course pack, outlines some of the arguments and demands made by the union movement against GEAR.
GEAR proposed the following:
- competitiveness in the export market
- the promotion of small and medium sized businesses to create jobs
- export led growth
- the introduction of flexible labour policies e.g. casualisation, part-time jobs, and seasonal jobs
- a reduction in the size of the public service and its restructuring
- a prioritisation of national debt repayment
- a gradual reduction of exchange control
- a reduction in tariffs
- a reduction in corporate and individual tax
- tax exemption for approved business projects
- different forms of privatisation:
- a cut in government expenditure in areas that can be taken over by the private sector (e.g. the delivery of basic services)
- a sale of ‘non-strategic’ state assets
- the creation of private-public-partnerships (PPPs) in transport and telecommunications
(adapted from Nyman, 2001)
GEAR also set itself a number of targets. It stated that the adoption of the above proposals would result in the creation of 400 000 jobs by the year 2000 and 6% growth rate by the year 2000.
While the popular argument in SA civil society is, as is made by Nyman, that the ANC government ‘sold out’ its people in its move from the RDP to GEAR, some theorists (Gelb, Bundy) point to the fact that the RDP, while redistributive in some aspects (e.g. delivery of basic services), nevertheless prioritises an export-driven growth path through which ‘development’ may be funded and thus facilitated.
Others argue that the pressures brought to bear on the post-apartheid government by international forces such as the IMF and World Bank gave it no alternative but to adopt its own ‘homegrown structural adjustment programme’ in the form of GEAR. While GEAR did not proceed out of the signing of any structural adjustment agreement, a loan was taken from the IMF in 1993 by the joint governing structure set up to determine the nature of the elections and the process of transition (the Transitional Executive Council – TEC), and advice was taken from the IMF and World Bank in the drafting of GEAR.
The question of the alternative to neoliberalism has been raised most starkly in protests from groups and communities fighting against its various effects. This is what we begin to explore in the next lecture.
