Neoliberalism: Context for a New Workers' Struggle

By: Peter Rachleff

What do flight attendants, auto workers, college professors, clerical workers, and public employees have in common?  We – and most of our counterparts in the U.S., Latin America, Europe, Asia, Africa, indeed, all over the world – are under the gun, the gun of "neoliberalism."  More than 150 years ago, Karl Marx and Frederick Engels ended their Communist Manifesto with the call: "Workers of the World Unite.  You Have Nothing to Lose But Your Chains."  But for the next century and a half, rather than unite on a global basis, workers competed with each other for privileges, advantages, and jobs, falling prey to nationalism and racism, even to the point of fighting wars to the death against each other.  Now, perhaps for the first time in the history of the capitalist system, capital is attacking labor all over the world, in all industries, with the same techniques, demands, and pressures.  As grim as the recent past, present, and immediate future might appear, with wage and benefit cuts, economic insecurity, draconian reorganizations of work rules and job descriptions, declining rates of unionization and declining effectiveness of conventional strikes, the prospects for the emergence of a global labor movement have never been better.

Capitalism emerged from the Great Depression and World War II with a reorganized political economy.  Keynesianism – the promotion of macro-economic growth through the manipulation of aggregate demand – became the dominant government, business, and labor policy framework, and it became the dominant school of thought in academic economics throughout the world.  Governments "fine-tuned" inflation and unemployment through regulating interest rates and increasing or decreasing demand, relying on deficit spending or budget surpluses.  Employers and unions collectively bargained contracts which began with the premise that increases in productivity would be rewarded with increases in wages, enabling large numbers of workers to become meaningful consumers.  A critical political-economic context for this system was the particular world order, in which the U.S. and U.S.-based businesses dominated the European and Asian economies which had been devastated by WWII.  This world order was legitimated by military as well as economic power at the height of the Cold War.  Much of the rest of the world, only recently freed from European colonialism, became available for U.S. exploitation of national resources, labor, and markets.  For an entire generation, most Americans, including workers, experienced a rising standard of living and an economic security all the more impressive by comparison to the Depression that many of them had experienced in their own lifetimes.

This system began to fray in the mid-1960s and was spinning apart by the mid-1970s.  The uses of deficit spending to cover the costs of both the "War on Poverty" and the Vietnam War – what my first economics teacher called "trying to have guns and butter at the same time" – drove the relationship between inflation and unemployment beyond their assumed parameters.  The more both of these wars appeared to be progressing in the wrong direction, the more money had to be borrowed or printed, and then thrown at the problems.  Inflationary policies that had once spurred growth now seemed to block it.  A new economic term was coined, "stagflation." In early 1972, economists reported that the "Phillips curve" (which described that relationship) had "shifted" from 4%-to-4% to 7%-to-7% almost as if they were astronomers announcing the discovery of a new moon around Saturn.  Mortgage rates shot up to 20% and beyond.  Keynesianism had entered a deep, potentially fatal, crisis.

Meanwhile, the global context was changing.  Japan and West Germany were recovering from their war setbacks and becoming sources of competition for U.S. businesses.  Middle Eastern countries were finding their own voices, overcoming their tendencies towards competition with each other, and organized into OPEC (the "Organization of Petroleum Exporting Countries"), raising the price of fuel and petroleum-based products rapidly.  President Richard Nixon was forced to take the U.S. off the gold standard, not only feeding domestic inflation but also weakening the strength of the upper hand the U.S. had enjoyed as the world's banker.  The ability of the U.S. government and U.S.-based capital to shift the burden of their problems onto others, while remaining within the structures and practices of Keynesianism, was fading.

To make matters even worse, corporate employers faced an increasingly militant working class at home.  Rather than being assuaged by a generation of wage and benefit increases, unionized workers demanded more compensation, less work, and more time off.  African American workers, whose boat had not yet been lifted by the rising tide of Keynesian growth, demanded not only political and civil rights, but sought to use their increased political power to gain jobs, higher wages, and access to better housing, education, and healthcare.  Public employees, from hundreds of thousands of postal workers across the country, to teachers and municipal and state employees, organized and demanded collective bargaining rights, seeking to raise their compensation and solidify their employment futures.  In the first half of the 1970s, U.S. workers averaged close to 400 "large strikes" (more than 1,000 participants) per year.

With the rise of working-class militancy, the growing appeal of Black power and feminist ideologies (some of which quite openly questioned capitalism), the anti-war movement and the failure of the Vietnam War, the crisis of the presidency (Nixon and Agnew both leaving office in disgrace), an energy crisis in which city upon city urged its residents to turn down their thermostats and put on more sweaters, the rise of mortgage rates to a level which crippled the housing industry, the fiscal crisis of New York City, seemingly out of control inflation, alienated and militant workers, ghetto revolts, and more, there seemed to be a political and ideological crisis of legitimacy just as deep as the economic crisis of Keynesianism and global capitalism.  It is little surprise that this conjuncture generated deep structural, organizational, and ideological shifts among leading global capitalists, particularly those based here in the U.S.

These shifts did not lead to a new full-blown vision and practice overnight.  Rather, a series of projects, conversations, campaigns, experiments, and ideas, some of which succeeded, some of which failed, some implemented by individual capitalists, some implemented by individual governments, gradually became the practice of the bourgeois class and the key economic and political institutions they controlled.  "Supply-side economics," deindustrialization, capital flight, the formation and strengthening of transnational economic institutions like the International Monetary Fund, the World Bank, and the World Trade Organization, the use of "permanent replacements" to undercut strikes and bust unions, demands for "concessions" in wages and benefits, the introduction of "lean" production and decentralization (so-called "post-Fordism"), and pressures on state and local governments to underwrite corporate investments, combined with each other and were spun with a burgeoning anti-government ideology, promoting tax cuts, on the one hand, and slashing social expenditures on education, healthcare, and services, on the other.  In the place of the government-provided "safety net," this ideology hailed individual responsibility, self-discipline, and, increasingly, Christian fundamentalism.   The cohesive class strategy to be known as "neoliberalism" was taking shape.

Why is it called "neoliberalism"?  This name harkens back to the philosophical and economic "liberalism" that accompanied the emergence of free market capitalism out of the government-controlled eras of feudalism, mercantilism, and colonialism.  This initial "liberalism," championed by the likes of Adam Smith, John Stuart Mill, and John Locke, celebrated the market, unencumbered by government interference, as a "rational" and "efficient" institution, in which providers of inputs would be rewarded in proportion to the value of their contributions.  As capitalists – bankers and corporate execs, their lawyers, political agents, and media flaks – responded to what they saw in the 1970s as the crisis of Keynesianism, particularly its government-provided social benefits, its willingness to constrain corporate behavior, and its implicit "social contract" between employers and their unionized workers, they sought to restore a "market" environment, on a global as well as a national basis, in which they would have a free hand to invest where they wanted, employ whom they wanted for whatever wages and benefits they wanted to pay, and buy and sell wherever they wanted.  This is their "neoliberalism."

Twenty to twenty-five years of experience gives us the hindsight to see the key elements of "neoliberalism" as well as to make a preliminary accounting of its consequences.  These elements include:

+ Free Trade.  This includes more than the absence of tariffs, taxes, and customs duties.  It means the right to export and invest capital, to buy materials, make parts, sell products, and transport materials and products without concern for government regulations.  Notice that labor is not allowed to move freely.

+ Financialization.  Through speculation, credit, and stock manipulations, finance capital siphons wealth not only from the working class, but also from manufacturing, retail, and other industries.  The total daily turnover of financial transactions in international markets rose from $2.3 billion in 1983 to $130 billion in 2001.  With each transaction, the representatives of financial capital took a commission, transferring capital from one sector to another.  Within some sectors, such as airlines, banks and other lenders gained ownership of planes, collecting fat monthly leases even as one airline after another within the industry lost money.

+ Deregulation. Beginning with the Staggers Act of 1978 which substantially deregulated transportation, this has meant the diminution of government oversight and control over corporate economic behavior.  Interestingly, notice that labor is typically still subject to controls, e.g., over the right to strike. 

+ Commodification.  Services and goods which were once available on the basis of citizenship or community membership have become commodities with price tags.  Water, telecommunications, electricity, culture, and even clean air, become available only to those who can afford to pay for them.  Popular rights of access and use become scarce goods, the property of the elite.

+ Privatization.  Around the world, governments, sometimes under pressure from the International Monetary Fund and the World Bank, have sold off public enterprises.  In even the most economically advanced economies, contracting out and out sourcing have encouraged private sector competition for public sector provision of services (education, postal service, etc.).
 
+ Accumulation by dispossession.  The combination of commodification and privatization forms the basis for a return of what Marx called "primitive accumulation."  New capital is created by actively stripping small owners and producers, individually or collectively, as the basis for the state, of their use rights or ownership of goods (land in many countries) and services.  These commodities and the industries which produce them become private property, sources of profit and wealth for the bourgeois class who purchases them.

+ Cut labor costs.  By shrinking the unionized sector of the workforce and reducing the power of unions, employers cut wages and benefits while increasing productivity.  More and more workers are positioned as casual, temporary, adjunct, and contingent.    They replace higher-paid, veteran workers with newly hired workers, immigrants, or workers employed outside the U.S. altogether via international out-sourcing.  During the era of neoliberalism in the U.S., for instance, workers have lost 20% of their net pay while adding 160 hours, a whole month, to their average work year.  Workers who cannot keep up their consumption by selling more individual and family labor or taking on more credit are forced to consume some of the assets they might have accumulated.  Thus, in 2005, American families spent down $600 billion of their savings embodied in their home equity.

+ Cut the social wage.   By reducing government-provided social services in education, healthcare, and the like, workers are forced to purchase goods and services (commodification), sell more labor/work more hours to purchase what they need, or just plain go without.  For example, the number of Americans without health insurance has increased from approximately thirty-seven million to forty-seven million since Bill and Hilary Clinton announced that there was a health case "crisis" that they were going to "fix."

+ Increase inequality.  Under such practices, it should be little surprise that inequality has skyrocketed throughout the world, particularly in the U.S. itself.  Forty-five percent of American workers earn less than $13.25, which amounts to $27,600 a year.  This is more than seven of the ten top categories in job growth projected for the next ten years. Between 1972 and 2001, earnings for the top 10% of income earners rose 34%, only about 1% per year.  They rose 87% for the top 1%, those earning over $402,000 per year.  For the top one-tenth of one percent, those earning more than $1.7 million per year, income rose 181%, and the top one-hundreth of one percent, those earning more than $6 million per year, income rose 497%.  

These elements have added up to what commentators have called a "one-sided class war" or a "race to the bottom," all over the world.  Workers from Chile to Canada, from India to South Africa, from France to China, have faced pressures to boost their productivity and lengthen their work weeks, wage cuts, diminished social and economic security, and reduced public services, along with a silencing of their political voices.  While these practices have wrapped within ideologies of individual freedom and promises of macro economic growth, they have been experienced as "Work harder and get less to show for it" by most workers.  Insecurity has become the order of the day.  In the U.S., not only do 47 million men, women, and children not have health insurance, but one-third of companies employing 200 or more workers provide no health benefits to retirees, and only one worker in four has even been promised a pension.

David Harvey, in his new book, A Brief History of Neoliberalism (Oxford University Press, 2005), makes a compelling argument that:
    
+ 1) Neoliberalism has failed to regenerate macro economic growth.  GNP and GDP figures for the 1990s and first decade of the 21st century lag well behind comparable measures for the 1960s and 1970s.

+ 2) Neoliberalism should be understood as a strategy to restore the class power of the national and global elites which came under fire in the 1960s and 1970s.  Indeed, it has been successful in promoting increased economic inequality within and between countries and increased concentrations of wealth and political power.  "Structural adjustment" programs in poor countries, on the one hand, and tax-cuts and reduced social spending in highly developed countries, on the other, have put proportionately more money in rich people's pockets and less in poor people's.

+ 3)  Despite its theoretical disdain for the state, neoliberalism in practice has embraced interventionist state practices, from the breaking of strikes to the waging of war.  The more securely the state has been taken in hand by the elite, the more confidently its powers are wielded to protect and further their interests.  As for the nation-state itself, far from withering away under globalization, it has become all the more armored and armed.

+ 4)  Despite its lionization of individual freedom, neoliberalism in practice has promoted fundamentalist restrictions on human behavior, on the one hand, and the commodification of social relations, on the other.  It has also undermined the social rights (to education, pensions, social security, healthcare, recreation, and more) that generations of men and women struggled and sacrificed to gain and which became the material floor upon which we could pursue our quests for individual freedom. 
    
Like every other political, cultural, and ideological structure to emerge out of capitalism at a particular stage of its development, neoliberalism has been both reality (wage and benefit cuts, etc., are all too real) and smokescreen.  It has rapidly become the dominant discourse in elections, school  board meetings, collective bargaining negotiations,classrooms, and popular media.  It appears as if "there is no alternative."

But, of course, as throughout history, there are alternatives, and they are emerging at
the levels of ideas and movements.  In just the last decade, we have seen the emergence of the Zapatistas in Chiapas, the Hugo Chavez administration in Venezuela, the factory occupations in Argentina, the shack dwellers' movement in South Africa, the young workers' movement in France, the anti-dam movement in India, a nascent labor movement in China, and more…  The World Social Forum movement has sought to find ways to knit these and other movements together, albeit with fits and starts, breakthroughs and setbacks.  Despite the limited progress so far, the idea that "another world is possible" is spreading.

Here in the United States, the spread and deepening of neoliberalism has had widespread consequences.  Barbara Bowen, president of the Professional Staff Congress, the 35,000-plus member faculty union at the City University of New York, presented a paper to the "How Class Works" conference at SUNY-Stony Brook in June which pointed out that 70% of the new college-level teaching jobs created throughout the United States are casual, temporary, part-time, adjunct.  When 10,000 mechanics responded to management  demands for a 50% reduction in jobs and a 26% reduction in wages and benefits by striking, Northwest Airlines implemented a strategy that combined outsourcing to non-union facilities in the U.S. and outside the U.S. altogether, the employment of permanent replacements through inside contracting, the filing of bankruptcy to gain leverage over not only the mechanics but all of the unions at the airline, and the threat of walking away from their already underfunded pensions.  From Northwest to Delta, from Delco to GM, so-called "legacy" employers (that is, those with retirees to whom they have financial obligations) have announced that they can no longer "compete" if they are forced to live up to those obligations. When the state of Minnesota announced that it was running a budget deficit, the Republican governor unilaterally decided to drop 30,000 adults from "MinnesotaCare," the state-subsidized healthcare program.  And so it goes.

The story is much the same across the globe.  In South Africa, the post-apartheid government's adoption of neoliberalism has placed not only decent-paying jobs beyond the reach of millions of their citizens, but has also housing, electricity, healthcare, and water.  In Brazil, the Workers' Party has failed to stop or even slow the displacement of indigenous peoples from rain forests, allowing the clean-cutting of trees for massive soy bean farms and other corporate enterprises.  In India, Coca-Cola redirects the water of underground aquifers to enable it to manufacture of its sugary soft drinks while family and village wells go dry.  In Chile, social security has been privatized and wage-earners and their families are forced to tie their futures to the stock market.  In China, millions of peasants and small village residents migrate to rapidly growing, polluted cities with inadequate infrastructure and social services in order to find jobs which have relocated in search of lower and lower wages.  Everywhere we look, working people's lives are getting harder. 

Workers throughout the world face the same enemy.  It is not a particular corporation or a particular state; it is not even a transnational institution like the World Bank, the World Trade Organization, or the International Monetary Fund.  No, it is the very organization of the world economic system, neoliberalism.  Even though individual struggles – of particular groups of workers, in particular countries – have been notably unsuccessful in the past two decades, there has been an impressive and important growth in the structures, practices, and relationships of international communication, organization, and solidarity.  Protests against the WTO, the IMF, and the World Bank, on the hand, and conventions of the World Social Forum and its regional branches, on the other, have laid some foundations for global workers' movements.  Little by little, internet communications, the solicitation of solidarity funds or even solidarity actions, are adding substance to these relationships.

I don't have the space in this article to offer more depth on these new ventures, but I hope I have offered some useful contributions: 1) to understand the beast that is ravaging the lives of working people the world over; 2) to understand how and why it has arisen, and how it operates; 3) to lay a basis for global solidarity and the construction of global movement; and 4) to encourage activists to place particular struggles within their global contexts and to seek ways and means to build transnational solidarities, not in some utopian future, but in the here and now.

Peter Rachleff
St. Paul, Minnesota
August 10, 2006

Peter is a labor historian, a Professor of History at Macalester College in St. Paul, and has been active in support of the mechanics and flight attendants at Northwest Airlines.