The 21cs Critique of Neo-Liberalism

The rise of 21cs regimes grew out of the crises and demise of neo-liberal regimes which pervaded Latin America from the mid 1970’s to the end of the 1990’s. Their demise was hastened by a string of popular uprisings which propelled the ascent of center-left regimes based on their rejection of neo-liberal socio-economic doctrines and promise of basic changes favoring the great majorities. While there are important programmatic differences among the 21cs regimes, they all shared a common critique of six features of neo-liberal policies.

(1) They rejected the idea that the market should have precedence and dominance over the state, by which they meant that the logic of capitalist class profit maximization should exclusively shape public policy. The collapse of the market driven capitalism in the recession of 2000 -2002 and mass impoverishment discredited the doctrine of “rational markets” as banks and business bankruptcies skyrocketed, the middle class lost their savings and the streets and plazas filled with unemployed workers and peasants.

(2) The 21cs regimes condemned deregulation of the economy which led to the rise of speculators over an above productive capitalism. Under the aegis of neo-liberal rulers regulatory legislation in place since the Great Depression was abrogated and in its place, the policies of capital controls, and financial oversight were suspended in favor of a “self-regulated” regime in which market players established their own rules, thus leading, according to their critics, to speculation, financial swindles and the pillage of public and private treasuries.

(3) The predominance of finance over production was the centerpiece of the anti-capitalist discourse of the 21cs regimes. Implicit was a differentiation between ‘bad’ capitalism which earned wealth without producing goods and services over ‘good’ capitalism, which presumably did produce value of social utility.

(4) Related to its overall critique of neo-liberalism was a specific critique of the lowering of tariff barriers, the privatization of public enterprises at below their true market value, the denationalization of ownership of strategic resources and the massive growth of inequality.

(5) The 21cs argued that neo-liberal regimes surrendered the economic levers of the economy to private and foreign bankers (like the IMF) who imposed deflationary measures instead of reflating the economy through infusions of stale spending. The political leaders of the center-left used this critique of neo-liberalism and the implicit future promise to break decisively with neo-liberal capitalism, without committing themselves to a specific break with capitalism of another variety.

While the center-left critique of neo-liberal capitalism appealed to the popular classes, their rejection of 20cs, was directed at the middle class and to reassure the productive classes (business class) that they would not encroach on private ownership as a whole.

Critique of 20th Century Socialism

In a kind of political balancing act to their opposition to neo-liberalism, 21cs advocates have also put distance to what they dub “twentieth century socialism”. Partly as a political tactic to disarm or neutralize the numerous and powerful critics of past socialist regimes and partly to further claims of a novel, up-to-date variant socialism in tune with the times, the 21cs make the following critique and highlight their differences with 20th century socialism.

(1) Past socialism was dominated, by a heavy handed bureaucracy that misallocated resources and stifled innovation and personal choices.

(2) The old socialism was profoundly undemocratic both in the way it ruled, the organization of elections and the one part state. The repression of civil rights, and all market activity figures large in the 21cs narrative.

(3) The 21cs conflate democracy as a system with the electoral road to power or regime change. Changes of government resulting from armed struggle, especially guerilla movements are condemned, though all three 21cs governments came to power via elections which followed popular upheavals.

(4) One of the key arguments put forth by 21cs regimes is that in the past socialists failed to take account of the specifications of each country. Concretely they emphasize differences in racial, ethnic, geographic, cultural, historical traditions, political practices etc. which are now considered in defining 21st cs.

(5) Related to the previous point 21cs emphasize the new global configuration of power in the 21st century which shapes the policies and potentialities of 21cs. Among the new factors, they cite the disappearance of the former USSR and China’s conversion to capitalism; the rise and relative decline of a US centered global economy; the rise of Asia, especially China; the emergence of Venezuelan promoted regional initiatives; the rise of ‘center-left’ regimes throughout Latin America; and diversified markets, in Asia, within Latin America the Middle East and elsewhere.

(6) The 21cs regimes claim that the “new configuration of society and state” is not a ‘copy’ of any other past or present socialist state. It is almost as if every measure, policy, or institution is the design of the contemporary 21cs regime. Originality or novelty is an argument to enhance the legitimacy of the regime before external and internal critics from the anti-communist Right and to dismiss substantive criticism from the Left.

(7) The 21cs regimes make a point of emphasizing the fact that the leadership has no links past or present with Communism and in the case of Bolivia and Ecuador openly reject Marxism both as a tool of analysis or as a bases for policy prescription. The exception is President Chavez whose ideology is a blend of Marxism and nationalism linked to the thought of Simon Bolivar. Both Correa and Morales eschew class divisions, counterpoising a ‘citizen’s revolution’ against a corrupt party oligarchy, in the case of the former, and a culturally oppressed Andean Indian communities against an “European oligarchy”.

Bolivia

Bolivia is the poorest country in latin america while having considerable supplies of minerals and natural gas, and is taking an anti-confrontational strategy to exploit them. in many ways, this strategy takes many of the principles of neoliberalism and combines them with cultural programs and limited social programs. Jeffrey Webber has been a longtime critic of Evo Morales' neoliberal tendencies which continue from his trade union days, and makes the argument that Morales is a reconstituted neoliberal:

For example, a recent study of a Canadian subsidiary, Pan American Silver, operating in the department through a shared-risk contract with the state company COMIBOL (COMIBOL effectively controls about 30% of the project), shows that the company will pay merely 17% taxes and royalties on projected gross sales value over the next 30 years. The taxes going to the municipality where the company is located, one of the poorest in the country, are just over 0.5%. This is straightforward looting. By comparison, in various shared risk contracts in Chile (hardly a socialist haven) taxes and royalties going to all levels of the state amount to up to 51%, whereas, in Peru, it’s on the order of 26%.

...

Reconstituted Neoliberalism

Neoliberal continuities in Bolivia’s political economy under Morales are not restricted to mining, and this is increasingly evident to perceptive thinkers from across the political spectrum. “What has changed in these last few years,” asks Roberto Laserna, one of Bolivia’s most renowned neoliberal intellectuals. “A lot, if one observes the process in terms of its discourse and symbols and maintains a short-term perspective. But very little if one is attentive to structural conditions and observes the economic and social tendencies with a longer-term view.” I rarely agree with Laserna, but on this point he is precisely on target.

Most of Morales’ first four years can be described, from an economic perspective, as high growth and low spending. Prior to the fallout of the worldwide economic crisis, which really started to impact the Bolivian economy in late-2008 and early-2009, the country’s gross domestic product (GDP) had grown at an average of 4.8 percent under Morales. It peaked at 6.1 percent in 2008, and dropped to an estimated 3.5 percent in 2009, which was still the highest projected growth rate in the region. This growth was based principally on high international prices in hydrocarbons (especially natural gas) and various mining minerals common in Bolivia.

Government revenue increased dramatically because of changes to the hydrocarbons tax regime in 2006. But fiscal policy remained austere until the global crisis struck. Morales ran budget surpluses, tightly reigned in inflation, and accumulated massive international reserves by Bolivian standards. Public investment in infrastructure, particularly road building, increased significantly, but social spending rose only modestly in absolute terms, and actually declined as a percentage of GDP under Morales.

Fiscal policy changed in 2008 and 2009, as a consequence of a sharp stimulus package designed to prevent recession in the face of the global crisis. The social consequences of reconstituted neoliberalism—whatever the rhetoric of sympathisers on the international left—have been almost no change in poverty rates under Morales, and deep continuities in social inequality. Both of these axes persist as monumental obstacles standing in the way of social justice in the country.

The realities of these dynamics do not escape even some hard-line supporters of the government, such as Ariel Vergara Garnica, Excecutive Secretary of the Federación Sindical Única de Trabajadores Campesinos de Tarija (Federation of Peasant Workers of Tarija, FSUTCT). In a recent interview, after praising the government’s respect for human dignity, responsible development, and Mother Earth, Vergara Garinca was asked about the economy under Morales: “Bolivia has grown economically at a rate of approximately 4 percent ; however, in spite of the fact that many say that this growth has brought big economic benefits for Tarija , these aren’t being felt by the people, because they have been concentrated in a few hands, and have never reached the general population.”

At the same time, this dynamic has been recognized recently by no less an establishment authority than the World Bank Director for the Andean Region, Felipe Jaramillo. In an exclusive interview with La Paz daily Página Siete this week Jaramillo did begin with a call for improvement in the Bolivian investment climate – an aural tick not easily cast aside after years spent as a PhD student in the economics department of Stanford, followed by a stint as Vice-Minister of Finance in Colombia, and then World Bank posts in Asia and Europe.

Grounding himself in the data, however, Jaramillo praised the macroeconomic management of Morales, particularly his government’s fiscal and monetary austerity, commitment to extremely low inflation, and unprecedented accumulation (by Bolivian standards) of international reserves. This assessment explains why, earlier in the week, the World Bank agreed to provide Bolivia with $US 150 million in concessional loans for various projects, loans which are of course subject to a series of neoliberal conditionalities with which the Morales government appears set to comply. The same is true of a $US 30 million loan from the Inter-American Development Bank agreed to simultaneously.

Bolivia's handling of gas subsidies was thoroughly neoliberal as well:

Governing by Obeying the People: Bolivia's Politics of the Street

From across North Africa to Wisconsin, activists are navigating a new terrain of global protest and relationships with their governments. Whether in ousting old tyrants or dealing with new allies in office, the example of Bolivia holds many lessons for social movements. An illustrative dynamic is now unfolding in this Andean country where the movements hold sway over the government palace, and the leftist President Evo Morales says he "governs by obeying the people." But sometimes the people don't give him any other choice.

The day after Christmas last year, while Morales was away in Venezuela, Vice President Alvaro Garcia Linera announced that, as a way to cut government spending, subsidies on gas would be slashed, resulting in a roughly 73% price increase for Bolivians. In cash-strapped Bolivia, where much of the population lives below the poverty line, this austerity measure was to be born largely on the backs of the poor.

The neoliberal aspects of the policy shocked and outraged much of the country. Bolivian political commentator Rafael Bautista wrote that the gas price hikes followed the same neoliberal logic as Morales' rightwing predecessors, embracing the concept that "to have more money we must sacrifice those who never have anything..." Bautista continued, "but who establishes these prices? It's not the poor, it's the market." In this case the government was listening to the market over the people, and the price was to be paid with the "hunger of the poor."

The move also betrayed the decades-old social struggle to use natural resources for the benefit of the country. Bolivia has the largest natural gas reserves in South America, and Morales himself was ushered into office on a wave of protests demanding nationalization of gas and popular access to natural resources. He followed through with partial nationalization in 2006, and has met other campaign promises such as rewriting the constitution, expanding land reform and social services, and empowering indigenous communities.

Bolivia's social movements responded to the gas price hike announcement immediately, organizing protests, strikes and road blockades across the country to demand that the government back down. Even coca growers, Morales' staunch allies, set up road blockades on a major highway. Bus drivers went on strike, and community organizations in El Alto marched, attacking government buildings. It was a historically-broad rejection of the policy, with more than just the usual organizations and sectors heading into the streets.

In an effort to offset the increase in gas and food prices, the Morales government raised the wages of public employees by 20%. Yet the salary increase would not help workers in the private and massive informal sector. The government also offered assistance to farmers of rice, wheat and corn. Yet the gas prices and subsequent cost of food, basic goods and transportation continued to rise.

Finally, on December 31st, as the protests showed no sign of stopping, Morales relented, saying he would reverse the price increase. In a televised speech, he said he would "continue to govern by obeying the people.” (He was drawing from the phrase Mandar Obedeciendo, Lead by Obeying, a slogan used by the Zapatistas.)

Was he obeying the people, or was he simply forced to respond to their pressure? In either case, his move was significant; while politicians around the world have recently been responding to protests against austerity measures with tanks and bullets, Morales responded by (eventually) agreeing with protesters and backing down. This illustrates the autonomy of the Bolivian social movements and the power they have over the government.

Although several of the critiques here are accurate, Webber is ignoring the substantial changes in wealth distribution:

What about the charge leveled against Morales by Webber that he is pursuing a policy of "reconstituted neoliberalism"? Is there any evidence to prove that the first Morales administration saw the "deepening and consolidation" of a new type of neoliberalism in disguise? That there has been "almost no change in poverty rates"? Even if we ignore the impacts of the global economic crisis, of capital's constant attacks via economic sabotage, capital flight, and coup attempts, and the government's urgent need to attend to an infinite amount of equally important and competing interests among its base, the facts speak for themselves.

Under Morales Bolivia's GDP has doubled, and state control over the economy has increased from 17% of GDP to 34% (a fourfold increase in monetary terms). As a result of the nationalization of gas reserves, government revenues from this sector have jumped from US$673 million in the year before Morales came to power, to US$2,235 million in 2010, representing a rise of almost 350%. During the same time, public investment has increased fivefold. Similarly, over the same period, poverty levels have fallen from 60% to 49.6%, while extreme poverty has dropped from 38% to 25%. The gap between the richest 10% and poorest 10% has shrunk from 128 times more wealth to 60 times more wealth. Average incomes have risen from US$950 in 2004 to US$1,833 in 2010. On top of this, access to basic services such as education, health, water, and electricity have dramatically increased. What other neoliberal government (reconstituted or otherwise) can point to such figures?

Bolivia's weakness has led to a resurgence in neo-fascism, with the flames being fanned by 85 million Democracy Dollars every year. James Petras wrote a fantastic article about how the anti-confrontation stance from Morales enabled the growth of this movement:

Bolivia: Fascism Seizes Power - Morales Complains

James Petras also critiques Morales' economic policies, especially in his handling of natural gas nationalization and land reform:

http://petras.lahaine.org/?p=1695

Hence his ‘revolutionary nationalization’ of petrol and gas was little more than a tax increase on the rate paid by the multi-nationals (MNC) to the state. Not a single MNC was expropriated. Even the price of gas of $5usd per million cubic feet to Argentina was 40% below the world price – and Brazil’s payment, one year after ‘nationalization’ was still the same $4 dollar—in some instances
as low as 1.9 usd--- as during the Sanchez de Losado-Mesa period. Theater, textual readings and rhetoric are entertaining and occasionally provide some insight into the style but not the material substance – the political economy of a regime.

...

Contemporary positive comparison of Morales’ to Chavez’ ‘nationalism’ is also
misplaced. Chavez has expropriated large landed estates and resettled over 100,000 families, expropriated major US power and electrical companies, engaged in massive social spending and created new forms of direct citizen participation. Morales has co-opted social movement leaders and attempted to subordinate the movements they lead to his party-parliamentary politics. He
rejects expropriation of privately-owned estates of the 100 biggest landowners and he maintains an austerity budget despite having the highest returns on energy and mining exports in history because of favorable international prices. Without a clear theoretical framework, it is impossible to proceed to a comprehensive and deep understanding of the current and future direction of the
Morales regime.

A good chart is included in this essay contrasting a revolutionary model, a standard neoliberal model, and the Morales anti-confrontation model:

From the above synoptic overview of the three political-economic projects it is clear that the only political force favoring structural changes are the social revolutionary movements. Morales policies are basically incremental changes organized toward reforms of the capitalist system to incorporate a broader sector of capitalists, to expand the state capitalist sector and to
provide greater representation for sectors of the private petit bourgeoisie. His policies revolve around ‘moralizing’ the bourgeois – to ensure they pay taxes, avoid corrupting officials, abide by regulations and report real profits and earnings.
It is precisely in Morales bourgeois ethical agenda that he most differs from the predator kleptocratic Sanchez de Losada’s policies. This is clear from the continuity of the same agro-export, big business and banking elites and MNC’s in the commanding heights of the economy.
It is also evident tin the same disparities in income and landownership.

...

In summary, the empirical record demonstrates that Morales represents a new style of capitalist rule, a reform of capitalist ‘modus operandi’, new rules of capitalist expansion, an eclectic foreign policy and a modified coalition of capitalist rulers. In no way does it represent a radical or revolutionary break with capitalism – it represents an attempt to ‘moralize’ existing capitalist elites

Edited by pogfan1996 (Aug. 30, 2011 10:21:07)