What do we mean by neoliberalism?

by May 16, 2023All Articles

IT CAN NO LONGER BE DOUBTED THAT we are living in an age of unceasing crisis. And South Africa can no longer be considered as an exception in the socio-economic problems it faces. At home and abroad, we face unyielding economic instability, explosive political conflict, looming climate disaster and rapid breakdowns in social cohesion. How can we look beyond this dizzying chaos and best understand the fragility of our world today?

The crises of the 21st century, in South Africa and abroad, are rooted in the dominance of neoliberal capitalism. Author David Harvey provides a comprehensive definition. Firstly, he sees neoliberalism as a: theory of political economic practices that proposes that human well-being can be best advanced by liberating individual entrepreneurial freedom and skills within a framework characterised by strong property rights, free markets and free trade.

Importantly, scholars like Harvey have extended this definition to identify the political interests which propelled neoliberalism onto the global scene. Neoliberalism is more than just economic policy and practice. It is “a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites”.

To begin wrapping your mind around the political ambitions of neoliberalism, ask yourself this: if the poor and working class have been mostly losing since South Africa became a market democracy, who has been winning?

A brief history of creative destruction

Continuous competition amongst capitalists and the endless drive for accumulation unleash transformative innovation and destruction within societies. As capitalism develops and changes, it destroys the old in order to bring forth the new, often at the cost of drastically destabilizing human life.

The neoliberal experiment began with the Chilean coup d’état on September 11th 1973. This saw the removal of Marxist president Salvador Allende and the seizing of power by CIA-backed General Augusto Pinochet.

The capitalist system has undergone a series of significant changes since it was enforced upon the world through the process of primitive accumulation centuries ago. This refers to the process by which producers are separated from the means of production, establishing the pre- conditions for the accumulation of capital. In 16th century England it started with the aristocracy enclosing commonly owned land. Those who could not afford to own land had to sell their labour in order to live. 

In what would become imperial colonies, the process started with the colonial dispossession and expropriation of land. This then gave way to accumulation through the extraction of resources and the rapid development of industrial production. Alongside this was the nearly universal enforcement of private property and the exploitative wage relation.

By 1945, the economic and social conditions produced by capitalism had led to two world wars, and an economic recession that devastated a generation.

There was a “golden age” of capitalism in the 1950s and early 1960s. From the renewed strength of organised labour, and through the struggles of organised working people, there was a reduction in the unregulated power of capitalists. Some of the wealth from production was redirected towards the well-being of the public at large. Social democracy had its brief successes.

By the 1970s, global capitalism was once again in severe crisis. A series of economic shocks significantly restrained the process of capital accumulation. The global recession in the early 1970s and the 1973 oil embargo and subsequent oil price hikes created mass unemployment.

Unsurprisingly, economic instability produced political discontent and dissidence. Mass movements arose across the US and Western Europe, seeking alternatives to the capitalist economic system and social order. In Europe, socialist parties in Europe were renewed.

In the US and Europe, there was an era of fierce political mobilisation from the anti-Vietnam war movement, radical feminism, civil rights groups, militant environmentalists and effectively organized trade unions.

By the conclusion of the 1970s, the capitalist class, primarily in the US and the UK, went on the offensive to restore capitalism’s profitability. The neoliberal experiment began with the Chilean coup d’etat on September 11th 1973. This saw the removal of Marxist president Salvador Allende and the seizing of power by CIA-backed General Augusto Pinochet.

Through Pinochet’s dictatorship, Chile began implementing neoliberal reforms, advised by economists from the Chicago School in the US. At its core, neoliberalism is based on a desire to increase the dominance of the “free market” and restrict the activity of government. While public services are being delivered by the government through its own employees, they are removed from the world of profit. This neoliberal approach seeks to bring as much economic activity as possible into the world of the market and profit.

So in Chile, state-owned enterprises were privatised, the industry was deregulated and there was an austerity programme to restrict government expenditure on public goods. These measures all reduced the role of the state and increased the scope of capital.

Inequality soared, unemployment boomed and the Chilean people endured years of hardship. The rise of neoliberalism in Latin America and Sub-Saharan Africa in the 1980s opened up new markets for foreign investment. Public services were contracted out to global companies instead of being carried out by government employees.

This laid the ground for an interconnected, global economy underpinned by trade agreements beneficial to multinational corporations and advanced capitalist nations. 

Neoliberalism in the Rainbow Nation

We took an IMF loan on the eve of our first democratic election and had already succumbed to the guile and subtle threats of the corporate world which had been chipping away at our revolutionary resolve for some years… we walked into that misguided belief that there was no other option.

These are the words of former ANC Minister and MK veteran Ronnie Kasrils. By the dawn of democracy in 1994, the ANC had already made compromises and concessions that locked South Africa into a global neoliberal order.

Then came the Growth, Employment and Redistribution (GEAR) programme, adopted in 1996. This was an absolutely typical statement of neoliberal policy. It included:

  • Austerity, reducing the budget deficit by reducing government spending on public services.
  • Liberalisation of trade and privatisation of state-owned enterprises.
  • Deregulation of capital flows, opening South Africa to the world market.

The role of the state was to facilitate profit-making enterprise, not to deliver services itself. And each major neoliberal policy has worked to drastically dilute the economic agency of the working class, increase the population’s dependency on the private sector and unveil new spheres of accumulation. This ultimately bolsters the power of economic elites within the key economic sectors of financial services, mining, retail and telecommunications.

Central to public-private partnerships has been outsourcing. The claim is that this reduces costs for state-owned utilities and increases the efficiency of their operations. In reality, reliance on private sector capabilities has inflated operational costs at SOEs such as Eskom. At the same time, it creates fertile ground for corrosive procurement-related corruption.

We have seen privatisation of state-owned utilities such as Telkom, as well as public-private partnerships. Another feature in South Africa has been corporatisation of public services. This requires a provider of public service to act like a company and recover all costs through revenue from sales, make investments on the basis of expected returns, and pay dividends to shareholders. Eskom stands as a testimony to how destructive this neoliberal policy can be. Electricity has become significantly commodified, massively increased in price, and as a result is not available to all.

Central to public-private partnerships has been outsourcing. The claim is that this reduces costs for state-owned utilities and increases the efficiency of their operations. In reality, reliance on private sector capabilities has inflated operational costs at SOEs such as Eskom. At the same time, it creates fertile ground for corrosive procurement-related corruption.

Economic liberalisation stands alongside privatisation as a pillar of neoliberalism. The significant relaxation of financial and exchange controls in the late 1990s did not stimulate productive investment in industry by the private sector. Rather, it locked South Africa into decades of dependency on foreign investment by corporate capital for economic growth. Economic liberalisation converges with the ANC’s commitment to export-led growth to kill domestic industries that cannot compete with cheap imports. It is behind the explosion in the size of South Africa’s financial sector and the reduction in productive investment, leading to deindustrialisation and unemployment. As hundreds of thousands of jobs are shed over many years, poverty deepens and economic growth stagnates. But the elite within the financial sector continue to accumulate tremendous amounts of capital. 

Reducing the public sector and growing the finance sector work to complement another neoliberal policy beloved by the South African government: imposing labour market flexibility; reducing restrictions on how employers can behave towards their employees. This works to keep labour accessible and cheap for employers.

It is tragic but unsurprising hat a significant portion of South Africa’s labour force has been described as “the working poor”. This is especially farm workers and domestic workers, although they are joined by an increasing number of precarious workers working for outsourced employers. They are employed on poverty wages. A 2015 study by Wits University and the National Minimum Wage Research Initiative revealed that “60% of African workers and 56% of Coloured workers earn below R4,125 a month”. Moreover, numerous studies reveal that non-compliance with labour regulations is not exceptional but common in the new South Africa.

Privatisation, liberalisation, deregulation and austerity. The key features of neoliberalism. And major causes of unemployment, poverty and misery.

Andile Zulu is a political writer, Energy Democracy Officer at the AIDC and member of the Amandla! Collective.

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