Review Article

Neo-liberalism in Third World Perspective

Anirban Biswas

Neo-liberalism is a world-wide phenomenon, which is sometimes called globalization. One can recall that thanks to the influence of neo-liberalism in the realm of ideas, sometimes Brazil and Mexico, and sometimes South Korea were highlighted as models of development, although the propaganda in this regard was often based on faulty logic and data. For some time, China is being projected as the ideal for India to follow. After the global meltdown of 2007-08, the impact of which is yet to be wiped out, things became a bit awry for the exponents of neoliberalism, but they are trying hard to sell their views, and this is possibly why Narendra Modi's victory in the recent Lok Sabha polls has been hailed as India's 'Second Revolution'. Here it is necessary to understand how this neo-liberalism fared in different countries in terms of growth and human capabilities. It is also necessary to understand the people's side of the equation, because it is the general experience that movements of the people have often thwarted endeavours designed to implement the neoliberal economic programme. The *book under review has undertaken the task of analysing the trajectory of growth in a number of countries during the pre-neoliberal, as well as the neoliberal period, along with the people's reactions, providing important information about as well as insight into the paths of development followed by various Asian, African and Latin American countries including India, China, South Korea, Cuba and Venezuela. Since, this collection of articles was first published in 2010 by Clarity Press, Atlanta and an Indian edition has been brought out by the well-known Aakar Books three years later, the impact of the global crisis that erupted in 2008 is nearly absent from the discussion. But there is much to learn from the articles collected in the volume, particularly because each article, contains a brief history of the economic development of the country concerned in the recent past, although the treatment of this subject is perfunctory in some articles. The insightful 'Introduction' clearly underlines the approach of the volume. It contains a brief and elegant historical outline of the thoughts on economic development and then lays bare the essence of the neoliberal agenda. "While the neoliberal agenda dubbed 'privatization' did constitute a massive divestiture by governments of enterprises they had (in many cases successfully) run, the passing of these into the hands of giant MNCs that operated like SU-style command economies can hardly be viewed as a return to laisaez faire. So-called 'deregulation' also did not amount to marketization but are regulation designed to support MNC power as the strength of organized labor and efficacy of workers rights and protections were eviscerated." (P-24) The Introduction is instructive in many other respects as well.

For a review of the book as a whole, let us first take the article on China (Limits to China's Capitalist Development by Minqi Li). The author suggests that after Mao Zedong's death, the pro-capitalist forces took over. This is a facile statement and does not help much in understanding the inner contradictions of the path of development pursued during the Mao era. There is no macroeconomic data on the growth of the economy during the Mao period. But the merit of the article lies in that the author has described the inherent weaknesses of the Chinese growth path, namely its reliance on export-led growth, the growing volume of rural-urban migration, which has significantly expanded the size of the urban proletariat, and the tendency towards the exhaustion of non-renewable resources like fossil fuel. The author's diagnosis of the inherently fragile nature of export-led growth was proved remarkably correct when the global meltdown forced the Chinese ruling elites to turn to an expansion of the domestic market. Thus Keynes was back with a vengeance. A few lines from the article are worth quoting here. "If the history could serve as any guide, then in perhaps one or two decades, the bargaining power and organizational capacity of the Chinese working class could rise to the point that they could impose serious pressure on the capitalist profit rate and accumulation. What strategies will be available for the Chinese capitalist class? It could refuse to make any concessions and repress any potential workers' rebellion. However, in one or two decades, the Chinese working class is likely to have become much more powerful than now. If the capitalist class engages in an outright confrontation with the working class, it could very well trigger a social revolution that will bring down the socialist class itself. ....To sustain long-term accumulation, the Chinese economy needs to be reoriented towards domestic consumption. While such a reorientation would help to address the problem of insufficient effective demand, the trouble is, it would require a massive income redistribution that could dramatically reduce the amount of surplus value available for the capitalist class. Economically, this could lead to another accumulation crisis as it drives down the profit rate. Politically, it is by no means clear individual capitalists would be willing to make the necessary sacrifice to save their collective class interest."(Pp95-96) The article on Venezuela (Venezuela's Oil-based Development in the Chavez Era by Gregory Wilpert) is richly informative. The writer narrates how, during 1958-1978, the Venezuelan economy witnessed a steady expansion, thanks to the increasing oil revenues, but during the closing years of this phase, there was growing indebtedness and oil prices began to decline. The prescription adopted in the face of growth of debt and massive capital flight was a devaluation of the currency and then the IMF required neo-liberal measures. The implementation of these measures led to arise in unemployment as well us inflation, and a drop in real salaries. These led to violent public protests followed by 'one of the bloodiest repressions of the so-called IMF-riots to take place in the 1980s and 1990s.' After some time, Hugo Chavez won the presidency in 1998. Chavez's economic policies, however, did not go unchallenged and could not always remain untouched by the vicissitudes of the international economic situation.All the agents of international and domestic big capital, scared at Chavez's increasing emphasis on the public sector and expansion of the social economy, used all the weapons they could lay hands on to discredit Chavez. But Chavez was successful in reorganizing the OPEC, bringing the autonomous State Oil Company under greater state supervision, and implementing a programme of land reform. He did not do away with private enterprises, but imposed a 30 percent royalty on transnationals. Possibly the most remarkable success of Chavez is the promotion of the cooperative movement with direct preferential support by the state. The Mission Che Guevara, which provides skill training and logistic support to unemployed citizens to start cooperatives, is one important facet of this alternative path of development. What is noteworthy about Venezuela's development path is the involvement of the general population, not just state activism, in the process of development.

The article on South Korea (The Chimera of'Prosperity in Post-IMF South Korea by Seongin Jeong and Richard Westra) seems to this reviewer an extremely important contribution to this volume. The contributors have shown that Korea's development in the post-War period was due to a number of factors that had nothing to do with the leo-liberal myth of free markets. Korea was assigned an important place in the US-led crusade against communism and hence received astronomical amounts of US aid, and the latter wanted the export economy of Korea to develop. Another important element was the successful implementation of land reform, which the USA supported in order to forestall the possibility of a Chinese-type revolution. Jeong and Westra have also demonstrated that the Asian economic crisis of 1997-98 was due to the pursuit of neo-liberal policies that had opened the gates of speculated dollar demoniated financial flows. The two contributors have here made a highly penetrating observation that 'under neoliberal compulsions there is also no tendency toward the diminution in state economic activity but in fact its acceleration, as figures on such activity as a proportion of GDP illustrate.' (p-197) This is as true of Korea as of the USA itself. The neoliberal compulsions accepted for economic recovery have, however, led to intensified exploitation of the working class. Yet there is hardly anything near the miracle. The contributors have provided us with valuable insights into the mechanism of recovery, arguing that the post-crisis upswing was due to government injections of funds rather than 'some opaque IMF directing of market forces'. While the pre-crisis high wages led to an expansion of the domestic market, the post-crisis exploitation of labour, and rise in unemployment following the Wall Street meltdown-the dependence of Korea on export market grew owing to the neo-liberal impulsion- has reignited the flame of mass struggle.

The article on Brazil ("Late Neoliberalism" in Brazil : Social and Economic Impacts of Trade and Financial Liberalization by Paul Cooney Seisdedos) excellently analyzes how the crisis associated with the Import Substituting Industrialization (ISI) led to the debt trap and the MF-dictated Structural Adjustments Programs (SAPs). It is interesting that the pursuit of the neoliberal package could not prevent a currency crisis, which led to massive flight of dollars and a large devaluation of the real, the currency introduced in Brazil in 1994. It is also curious that even after the Leftists represented by the PT (Partido dos Trabalhadoress—Worker's Party) came to power the neoliberal regime remained intact, and the rate of growth of the GDP remained significantly below that achieved during the ISI period. The PT however, succeeded partially in reducing poverty and inequality through the Bolsa Familia programs. Referring to this, the contributor however makes a pertinent point, "Its budget during 2003-07 was $27.7 billion, while that paid out to foreign bankers was $263.3 billion. Thus, service for foreign debt was almost ten times what was spent to alleviate poverty temporarily. In fact, what Brazil truly needs is a jobs program to reduce unemployment and improve real wages in order to make a serious dent in addressing its perennial problem of income and wealth inequality. Such contrasts provide an unfortunate though sobering insight with respect to the true priorities of a government allegedly representing the interests of workers." (P-84) The contributor has made a few remarks on the impact of the global meltdown and argued that it is not the elite but the more vulnerable sections, namely the poor and the unemployed.

The article on Cuba (Cuba : A Project: to Build Socialism in a Neoliberal World by A L Campbell) is highly illuminating in that it has discussed the possibility of capitalist restoration in Cuba and discussed the barriers to such a restoration. In China, such barriers were forcibly removed by the dominant sections of the ruling party, probably supported by the army. Foreign Direct Investment in Cuba is employed in joint ventures only, and the contribution of these ventures to national income, capital formation and exports is not very significant in a macro-sense. More importantly, the Cuban laws do not permit any duplication of these ventures in the private domestic economy. Then agricultural product markets are also controlled in various ways. Of course, Cuba, surrounded by a capitalist world, cannot afford to remain in a state of autarky and have had to make certain consessions, but, as the contributor points out, "major barriers remain in Cuba's institutional structure and social consciousness that would have to be first eliminated before global neoliberalism could impose on Cuba its inherent goal, the abandonment of Cuba's project of attempting to build socialism." (pp 115-16) The article, however, would have been more useful had there been a review of Cuba's development from the Revolution to the end of COMECON. The article on Mexico (The Exhaustion of Neo-lineralism in Mexico by Cliff DuRand) has described in brief how the Structural Adjustment Programme was forced on this country following a debt crisis and how it has affected the people adversely in the form of declining wages high unemployment and reduced export earnings—a result of the crisis in the USA and Europe, The article on the African countries (African Resistance to Global Finance, Free Trade and Corporate Profit-Making by Patrick Bond) particularly emphasizes the various kinds of resistance to the forces of neoliberalism and the various struggles to gain greater economic freedom. It is a lengthy article, but full of details.

In the well-written essay on the Indian economy (Neoliberalism in India by Ananya Mukherjee Reed), the contributor repeats the familiar arguments against globalization, illustrating the New Economic Policy's dismal failures in respect of eradication of poverty, inequality and hunger with concrete figure and referring to the dehumanizing coexistence of these phenomena with the growth in the number of private billionaires, a process actively aided by the state. The contributor has mentioned the events of Singur and Nandigram too. The statistics on this are useful enough. To this reviewer, the most noteworthy feature of the essay lies in its pointing out utter non-innovative character of the Indian IT sector and the inability of the public investment in the R&D sector to yield developmental gain. Let me quote Mukherjee-Reed at some length, "With respect, to innovation, it is claimed that the emergence of the information technology in India is indeed a story of innovation-driven growth. This view is, however, increasingly challenged, in particular by industry insiders. Analysis suggests that the spectacular growth of this sector, led by its role as the 'back-office of the world' depends on wage differentials between skilled labour (vis-a-vis the North)—rather than substantive innovation. This actual apathy with regard to radical innovation appears even more ironic in India in that in India, substantial public investment has been allocated towards the development of Research & Development (R&D) and higher education infrastructure over the last fifty years. However, the massive public investment has so far yielded only private returns. Its developmental returns are far from being realized. ...Two factors are important in understanding the disjuncture between private returns and social (and developmental) gains. The first is the choice of technology, which still does not create opportunities for employment (especially in the organized sector). The second involves the exclusionary nature of India's educational system, which prevents the majority from acquiring marketable skills and entering the organized sector. However, proposals for widening access through measures such as affirmative action have met with violent resistance from the upper classes. This elite’s resistence is not new: what is new is the state's increasing vulnerability to the claims of the elite and its commitment to the logic of resolving inequalities via the market". (P-82)

This seemingly longish review does not, however provide a complete study of the book; the article on Syria and Egypt, and that on Thailand have been left out of discussion owing to the space constraint. Yet the foregoing discussion should convince the readers of this weekly about the importance and merits of the book, which is certainly a valuable contribution to the study of imperialist globalization and its impact on the third world. It will definitely shatter the illusions nurtured by the shameless propagandists who earn their career by owing allegiance to the IMF, the World Bank and the WTO.

*Confronting Global Neo-Liberalism: Third World Resistance and Development Strategies
Edited by Richard Westra, Published by Aakar Books, Delhi -110091

Vol. 47, No.11-14, Sep 21 - Oct 18 2014