‘The ruling ideas of any society are ever the ideas of its ruling class’

Review and recommendation of
David Harvey (2005, Oxford University Press) A Brief History of Neoliberalism

Classical economics, particularly as developed by the English moral philosopher Adam Smith and the English banker David Ricardo, gave triumphant capitalism a theoretical foundation. This intellectual grounding facilitated the further international penetration of what was in the late eighteenth and early nineteenth century still an emergent socio-economic system of production and reproduction.

Classical economics, however, has two fatal “flaws“ from the perspective of those who support capitalism. It does not obscure the class nature of the capitalist system, nor does it represent capitalism as a universal system. Karl Marx was able to develop ideas first found in classical economics into a critique of capitalism. This critique provided the working class (and its supporters among the moribund feudal order in continental Europe and elsewhere) with theoretical justification for their organized struggle against capitalism. The common link between the contending classical economic theories was acceptance of the labour theory of value and hence a privileged role for labour in a system based on an inherent class contradiction.

By the end of the nineteenth century, faced with revolutionary opposition from much of the working class and its Marxist leadership, the capitalist class gravitated towards new economic theories, favouring those that better obscured the class nature of capitalism. By the dawn of the twentieth century, the theoretical abstractions of the emergent neoclassical economists (notably the mathematical models of Leon Walras), were found better suited to the interests of the capitalist class as represented by that class’s coterie of advisors and politicians.

Neoclassical economic theory, however, did not spare capitalist societies from the business cycle and its attendant crises and dislocations, including two world wars and the inter-war Great Depression, nor from an increasingly threatening environmental crisis. At least three distinct currents of economic thought have emerged from neoclassical theory in response to these crises: the countercyclical theories associated with John Maynard Keynes, the procyclical monetarist theories associated with Milton Friedman and Friedrich Hayek and the ecological economics associated with Herman Daly. Each of these currents share the essence of neoclassical economics: the attribution of at least some part of exchange value to something other than human labour (such as capital, the presumed contribution of the capitalists to the exchange value of commodities, and natural services, the presumed contribution of nature to the exchange value of commodities).

Neoclassical economics perpetuates the popular confusion between exchange value (represented by money) and use value (which has no direct relationship to money). One convenient consequence of this confusion for capitalists, as well as autocrats of all stripes, is that it obscures the role of labour as the sole creator of exchange value, including the surpluses appropriated by the capitalists for their use alone. Another consequence is consumerism, a fetish for goods and services for their money value rather than their use value. This latter has the disastrous consequence of a failure to protect for everyone’s continuing free use those services provided by nature, such as a temperate climate, potable water, healthy soil, breathable air, magnificent diversity and natural beauty.

The monetarist trend within neoclassical economics morphed into the neoliberalism that has prevailed since the late 1970s. David Harvey’s A Brief History of Neoliberalism makes a vital contribution to our understanding of the social system that now prevails globally. Identified and clarified by Harvey (particularly Chapters 1, 2 and 3) are the theoretical propositions that mask the reality of neoliberal rule. His critique not only provides greater clarity about the social and economic consequences of neoliberal rule (particularly Chapters 4, 5 and 6). It suggests alternative paths (Chapter 7) that can lead us away from the abyss of social and environmental destruction to which neoliberal rule is leading us.

The opening chapters of Harvey’s brief history outlines the ascension of neoliberalism on the political stage and its creation of public consent. In particular, Harvey (p.19) argues, “We can … interpret neoliberalization either as a utopian project to realize a theoretical design for the reorganization of international capitalism or as a political project to re-establish the conditions for capital accumulation and to restore the power of the economic elites.”

Evident from the data he brings together in his sixth chapter (“Neoliberalism on Trial”) is the role played by the public face of neoliberalism in masking the self-serving objectives of its corporate sponsors. Judged as a project to stimulate economic growth, for example, neoliberalization has been an abject failure. As Harvey reveals (Figure 6.1, p.155), global per capital GDP grew at an average rate of 3.5% in the decade of the sixties, fell to 2.4% in the decade of the seventies, then to 1.4% in the eighties and 1.1% in the nineties, continuing its fall into the first decade of the present century.

Parenthetically, environmental policy advisors to neoliberal governments, such as Peter Victor in Canada and Tim Jackson in the UK, who have argued for “degrowth” might just as well save their breath.1 Neoliberal capitalism is managing to accomplish “degrowth” in its own fashion, unaccompanied by any diminution in the continuing degradation of nature. These authors would do better to join those environmentalists who do not spare neoliberal governments criticism for their subservience to predatory capitalism and their failure to respond in a meaningful way to the increasing threat of irreversible climate change. While neo-liberal policy has prevailed, the Earth’s capacity to absorb our waste products and provide us with a suitably temperate climate, fertile soil, potable water and safe, breathable air has continued to be undermined at an undiminished rate.

Capital accumulation has evidently continued for those at the top of the wealth pyramid, but without the promised trickle down of greater income and wealth to the majority. The base of the pyramid has shrunk, while the top has reached greater heights (Figures 1.2, 1.3, 1.4, 1.6 and 6.2, p.16,17,18, 25 and 158). While failing in its proclaimed aim of making everyone better off, neoliberalization has been spectacularly successful as a project to restore the power of the economic elites. As Harvey documents, income and wealth inequality, both within and between countries, has by the second decade of the twenty first century reached levels that were last seen in the early part of the last one.

Until and unless an effective political opposition to the rule of the capitalist financial oligarchy re-emerges with anything close to its former strength, there is no evident end in the current trends towards concentration of income and wealth on the one hand and the depredation of nature on the other. As Harvey documents (Figure 1.6, p.25), while productivity of labour has nearly doubled in the United States since the early 1970s, average real wages have actually fallen substantially.

In a chapter on the characteristics of the neoliberal state (Chapter 3), Harvey observes (p.79) that “…all is not well with the neoliberal state….At the heart of the problem lies a burgeoning disparity between the declared aims of neoliberalism - the well-being of all - and its actual consequences - the restoration of class power.” At this point, Harvey highlights a series of contradictions between theory and practice that characterize neoliberalism and are well worth the reader’s attention. His des cription of the increasing use of state power by the neoconservatives to isolate the ruling elite from the consequences of its policies is worth the price of the book.

In examining the uneven geographical consequences of neoliberal policies (Chapters 4-6), China merits an entire chapter from Harvey. The title of Chapter 5, “Neoliberalism ‘with Chinese Characteristics’” already reflects Harvey’s conclusion that over the past three decades China has increasingly integrated into the global capitalist system. Whether the Chinese leadership has left open an escape hatch from that system is a question Harvey was unable to answer, at least by the time the book was published (2005).

It seems to this reviewer, however, considering the evidence and arguments advanced by Harvey, that an internal political revolution in China is likely needed to re-open the door to the Chinese people for an alternate path. The Chinese leadership has already largely abandoned responsibility for the welfare of the Chinese people in favour of the welfare of its burgeoning capitalist class. Characterized by authoritarian rule, China’s governmental system is more likely to serve as a model for neoconservatives globally than as a stepping stone to something more socially and economically democratic.

In Chapter 6, Harvey concludes that “the main substantive achievement of neoliberalization … has been to redistribute, rather to generate, wealth and income.” The main method of achieving this has been what Harvey describes as “accumulation by dispossession”, including:
(i) privatization of what is initially publically owned and commodification of what is initially available from nature without cost;
(ii) financialization, characterized by deregulation of the financial system and a consequent marked increase in financial speculation, predation, fraud and thievery and a several orders of magnitude increase in the turnover of financial transactions in international markets;
(iii) the management and manipulation of crises, not only those recent Third World and US crises documented by Harvey, but notably also the crisis of 2007-8 and its continuing aftermath;
(iv) state redistribution, primarily by reducing social wealth, including public education, health care, unemployment insurance, public pension programs and the like and by revisions to the tax code, including reduction in corporate taxes and taxes paid by those at the top of the wealth and income ladder.

To keep this review reasonably readable, it is possible only to offer a sample of the gems the book contains in the hope that the reader will be inspired to obtain the book and give it a careful read. In that spirit, the following thought from Harvey’s concluding chapter is offered:

“The first lesson we must learn … is that if it looks like class struggle and acts like class war then we have to name it unashamedly for what it is. The mass of the population has either to resign itself to the historical and geographical trajectory defined by overwhelming and ever-increasing upper-class power, or respond to it in class terms.” (p.202)


1 Peter A. Victor (2008, Edward Elgar) Managing Without Growth: Slower by Design, Not Disaster; Tim Jackson (2009, Earthscan) Prosperity Without Growth: Economics for a Finite Planet.

Welcome!

This website was launched September 1, 2010 in support of a green social democratic alternative to neoliberal capitalist policy and practice. The primary result is a work by Charles and Karen McFadden of seven chapters, grouped under the title, Towards a Green Social Democratic Alternative to Capitalism available here in pdf and html formats.

Below under the heading What’s New can be found the most recent materials posted on this website, including opinion pieces, book reviews, articles and selections from the 2017 edition of the main work.  For the interest of new and returning visitors, new materials will be included quarterly.

What's New

NEW & REVISED

Authors' Preface

1.6 The epochal nature of the period we are entering

6.0 The socialism we need against the "socialism" of the 20th century

6.8 Additional concerns about 20th century variants of "socialism"

6.9 The people united!

7.1 Policy alternatives and political movements to advance them

OPINION

Charles and Karen McFadden, Is revolutionary transformation on the agenda

Charles and Karen McFaddenHumanity on the Brink

Charles and Karen McFaddenMovements of Resistance to Movements for System Change

Charles McFaddenTranslating Green Principles into Education Policy and Practice

Charles and Karen McFadden, The Role of Revolutionaries in the Labor Movement

REVIEWS

Charles and Karen McFadden, “The Shape of Water” as an Antidote to the Age of Trump 

Charles McFadden, Decolonizing the U.S. & Canada: The People United for a More Just Sustainable Future

Karen and Charles McFaddenCan emergent early 21st century neo-fascism be defeated without coming to grips with late 20th century restructuring of capitalism into a global system

Karen and Charles McFaddenA Dominant Capitalism or a Sustainable Environment? Why we can't have both.

US CORNER

William I. RobinsonThe Crisis of Global Capitalism and Trump's March to War

William I. RobinsonTrumpism, 21st Century Fascism, and the Dictatorship of the Transnational Capitalist Class

CANADA CORNER

George HewisonWINNIPEG 1919 & THE COLD WAR

George HewisonArt Manuel - "Unsettling Canada

George HewisonThe NDP and LEAP

RECOMMENDED

Albert Einstein, David Swanson, Jill Stein, Chris Hedges, William I. Robinson, and others Selected articles for Winter 2018

FEATURED WORK

ECONOMICS

1.7 The dynamics of capitalism as a system and the limits of single issue reforms

2.11 The economy in transition towards a new deal for labor and the community

3.1 The challenge of a moribund economic system

3.7 Public banking: A cornerstone of a green social democracy

4.7 Economics and culture

6.5 Using the non-market economy as an opportunity to begin moving beyond capitalism

HISTORY

1.6 The epochal nature of the period we are entering

2.0 Theoretical Perspective: Defining Green Social Democracy

2.5. Socialism and green social democracy in historical materialist theory

4.3 Culture in historical perspective

5.1 Contrasting a green social democratic world with the currently prevailing, but challenged neo-liberal one

6.2 Socialism and capitalism as coexisting social systems

LABOR

2.11 The economy in transition towards a new deal for labor and the community

5.7 Defeating neo-liberal capitalism: The role of social movements

7.3 Justice: Creating a just society, based on the right of all to a dignified, secure existence

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Creative Commons License: Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) applies to all work posted on this website except that which appears with authors whose last name is other than McFadden, in which case standard copyright should be assumed to apply.