The Malthusians who masquerade as Marxists
The alternatives to the mythical creed of ‘neo-liberalism’ offered by David Harvey and other radical authors sound far, far worse.
This article is republished from the April 2011 issue of the spiked review of books. View the whole issue here.
One of the great puzzles of contemporary political debate is what exactly critics of Western governments mean by the term ‘neo-liberalism’. Typically, the concept is associated with the ideas propagated by a familiar cast of conservative villains, including Margaret Thatcher, Ronald Reagan and Rupert Murdoch’s Fox News. Behind the scenes, pulling the strings, are said to be the financial powers of Wall Street and the City of London. But this will not do as a definition. It is rarely made clear whether the ultimate object of their attack is a theory, a set of policies, a phase of capitalism, or something else.
The mystery deepens when it comes to David Harvey, one of the most sophisticated exponents of the concept of neo-liberalism. In the current intellectual climate, it would probably come as a surprise to many to learn that the work of a 75-year-old professor of anthropology and self-proclaimed Marxist is so popular. Yet his 2010 YouTube lecture on the crises of capitalism has received over one million hits. Other critics of neo-liberalism also widely cite Harvey’s many books as authorities on the subject.
Fortunately the publication in paperback of Harvey’s latest book, The Enigma of Capital, provides an opportunity to probe the notion of neo-liberalism more closely. If anyone can spell out exactly what it means it should be him. Indeed, by page 10 he does attempt to define the term: ‘My view is that it refers to a class project that coalesced in the 1970s. Masked by a lot of rhetoric about individual freedom, liberty, personal responsibility and the virtues of privatisation, it legitimised draconian policies designed to restore and consolidate capitalist class power.’
But on closer inspection, even this definition is ambiguous. Are the ideas he mentions just superficial ‘rhetoric’ or is the legitimising role of this ideology the defining feature of the neo-liberal project? Or perhaps the draconian policies themselves are the essence of neo-liberalism? The whole of Harvey’s work is imbued with such lack of precision, and sometimes even with blatant inconsistencies.
Nevertheless it is possible to identify three broad claims running through the book that are central to Harvey’s argument: the dominance of neo-liberal ideology since the 1970s; the manipulative role of all-powerful banks; and the need to curb economic growth for the sake of the planet. If all of this sounds familiar, that’s because it is. Stripped of their Marxist language, such views are entirely mainstream.
Even so, it is worth examining each of Harvey’s contentions in more detail. By doing so it is not only possible to pinpoint his mistakes, but also to start to identify what is genuinely novel about recent developments. Identifying the real character of the attacks on popular living standards is a vital task for anyone who wants to resist them. There is no doubt that Western governments are starting to impose austerity on their populations. But the attack is not coming from free-market ideologues.
In Harvey’s view, neo-liberal ideas, based on the fusion of neo-classical economics and liberal politics, first came to the fore in the economic crisis of the 1970s. Although the ideas were not new, the growing popularity of free-market economists such as Milton Friedman and Friedrich Hayek reflected their increased importance. In political terms they were taken up first by General Augusto Pinochet, who led a bloody coup in Chile in 1973, followed by Thatcher in Britain and Reagan in America.
Harvey is careful to note the gap between neo-liberal rhetoric and practice. This is just as well for him, as successive Western governments have conspicuously failed to cut state spending over the medium or long term. Although there are differences between countries, the level of state spending in the West typically varies between 30 per cent and 50 per cent of GDP – a long way from the minimal state favoured by the likes of Friedman and Hayek (1). Instead Harvey makes the more limited claim that the neo-liberals have tried to cut welfare spending as well as noting their drive to repress wages. However, he even partly backtracks from these claims when he acknowledges how hard Britain and Scandinavia have found it to make cuts in health spending.
The first thing to notice about Harvey’s discussion of neo-liberalism is that most of the central figures are either dead or elderly. It is also over two decades since they were in office. Pinochet, Chile’s brutal dictator from 1973 to 1990, died in 2006; Reagan, America’s president from 1981 to 1989, died in 2004; Thatcher, Britain’s prime minister from 1979 to 1990, is 85. Among the free-market economists, Friedrich Hayek died in 1992 and Milton Friedman in 2006.
But even these dates give an exaggerated view of the influence of neo-liberal ideas. As Harvey acknowledges, if the essence of neo-liberal theory is support for a minimal state – that it should confine itself to providing an army, police force, judiciary and basic infrastructure – then it was never implemented in practice. Yet even on a rhetorical level politicians were backing away from it during the 1980s. As Paul Krugman, a Nobel prize-winning economist and no radical, has noted: ‘By 1992, monetarist and rational expectations theorists had lost virtually all influence over actual policy, in the United States and elsewhere.’ (2)
The likes of David Cameron in Britain or Barack Obama in America might sometimes be accused of being neo-liberal, but neither of them argues that a minimal state is politically desirable. When Cameron, for instance, demands spending cuts in Britain, he typically uses the language of an accountant: it is a regrettable necessity because the books do not balance. To the extent that there is a debate today, it focuses on the exact timing and scale of the cuts necessary.
Nor is it true that international organisations, such as the International Monetary Fund (IMF) or the World Bank, preach the idea of a minimal state. For instance, back in 1997 the World Bank published its annual World Development Report, its flagship publication, on ‘The State in a Changing World’. The document explicitly argued against the promotion of a minimal state in development. Of course, both the IMF and World Bank still play an important role in imposing austerity on poorer countries. But rather than imposing a much smaller state they typically insist on an elaborate framework of rules that poor countries must follow.
Often, privatisation measures are taken as a form of neo-liberalisation, but this is highly misleading. For instance, despite the privatisation of many state enterprises in Britain, there is no downward trend in public spending. The main motivation has been for states to find a short-term way of raising revenue by selling assets rather than having to increase taxes.
This does not mean that privatisation is an unimportant trend. But what it represents is a further blurring of the line between the state and the economy rather than a rolling back of the public sector. Indeed, in some respects it involves an extension of state involvement in businesses. So if, say, a private firm is given a contract to run a hospital or a school, it means that the company is getting extra revenue from the state. It can also mean reductions in wages or security of tenure if employees are forced to move from one type of entity to another. But none of these nuances are captured by the crass model of neo-liberalism, which assumes that private businesses are curbing state power.
Harvey’s casual aside on the neo-liberals finding it to hard to cut health spending in Britain over the years also reveals his poor grasp of important trends. For many years, health spending in Britain rose significantly in real terms rather than falling. However, as Michael Fitzpatrick has discussed extensively in spiked and elsewhere, this coincided with an intrusive trend towards health promotion (3). The health authorities increasingly took on the role of interfering in the most intimate aspects of the lives of ordinary people. It has become commonplace for medical practitioners to devise detailed rules about permissible foods, alcohol consumption and sexual practices. Harvey’s focus on cardboard cut-out neo-liberals as the enemy blinds him to important assaults on the personal lives of ordinary people.
The supposed gap between neo-liberal rhetoric and reality brings us to Harvey’s second key contention: the power of what he calls the ‘state-finance nexus’. In this model, the state and financial institutions have fused. This development in turn gives the latter a huge sway over the rest of society: ‘It endows a privileged class of financiers with immense social power over producers, merchants, landholders, developers, wage labourers and consumers.’
It is the power of finance which, in Harvey’s view, goes a long way to explaining why neo-liberal principles cannot be implemented. When financial institutions get into trouble, their support for a minimal state rapidly vanishes. Instead they demand that the state spends whatever is necessary to bail them out. Therefore the banks benefit from private profits when it suits them but are underwritten by the state when they get into trouble.
The political pitfalls of Harvey’s narrow attack on the banks – or the ‘state-finance nexus’, in his language – should be obvious. He may sometimes insist on the systemic character of the crisis but the thrust of his argument suggests that greedy bankers are largely to blame. This draws attention away from a proper debate on the fundamental causes of economic weakness. Scapegoating bankers also makes it easier for politicians to divert attention from their own culpability for failing to tackle economic problems.
Harvey’s characterisation of a state-finance nexus is not just weak in narrow political terms but in its analytical content, too. It would be more accurate to say that a nexus has emerged between financial and non-financial corporations. Non-financial firms increasingly play the financial markets themselves, often through their risk-management operations, while also often offering financial services to their customers. Meanwhile, financial institutions are increasingly involved in other companies through such vehicles as investment funds. The line between finance and non-finance has become increasingly blurred. Yet Harvey’s analysis of capitalism fails to address this key development.
The final element of Harvey’s scheme is the most tortured and the most imbued in Marxist language. At its core is the assumption that the neo-liberal economy is producing too much capital (by which he generally seems to mean material goods) for it to absorb. He argues that one way capitalism can deal with this problem is to extend credit to the mass of the population to increase its purchasing power – although that in turn can lead to the creation of a financial bubble. Another is to stimulate luxury consumption by the wealthy. A final alternative, he says, is to reinvest the surplus capital in such areas as privatised state enterprises.
Although Harvey is equivocal at times, he generally argues that rising consumption is pushing capitalism against its natural limits. On several occasions he asserts that environmental constraints make it impossible to sustain annual economic growth of three per cent – although he never makes it clear where this figure comes from. Elsewhere he has explicitly called for a steady-state economy with zero growth.
The Engima of Capital concludes with a call for a vaguely defined anti-capitalist alliance of workers, the dispossessed, grassroots organisations, traditional left-wing organisations and others. Harvey even claims there are millions of ‘de facto communists’ around, although they apparently do not realise it.
It is not necessary to do a detailed textual analysis to see that Harvey’s points are entirely at odds with the thrust of Marx’s argument. The main aim of Capital, Marx’s theoretical masterwork, is to show how under capitalism the drive to raise productivity (produce more stuff) comes into conflict with the imperatives of profitability. Although capitalism can produce growth, which Marx welcomes, it tends to be uneven and crisis-ridden. For Marx, it was desirable to overthrow capitalism in order to attain an even more productive society.
Ending the scourge of scarcity is, in Marx’s view, a necessary pre-condition for realising the human potential. It is only then that people can be truly free to do as they please. Should they so wish, as Marx puts it, they can ‘hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner’ (4). The good life cannot be achieved in a society still dominated by want.
Harvey’s arguments, in contrast, are more akin to those of Thomas Malthus (1766-1834), the notorious campaigner against ‘overpopulation’. Whereas Marx wanted society to produce more, both Malthus and Harvey present output as inherently limited. And where Marx wanted to remove economic constraints, both Malthus and Harvey view the imposition of extra limits as necessary. Indeed, the essence of Harvey’s convoluted attack on neo-liberalism is a demand for economic restraint.
In effect, Harvey has turned Marx into a green and has transformed left into right. Whereas socialist movements used to campaign for popular prosperity – higher working-class living standards in the old terminology – the critics of neo-liberalism rail against what they see as excess consumption. The green egalitarianism that Harvey advocates is essentially a call to share out the misery more widely across society.
Ultimately, most critics of contemporary society do the same thing. They use such terms as ‘market fundamentalism’ (Joseph Stiglitz), the ‘shock doctrine’ (Naomi Klein), the ‘Washington Consensus’, or ‘globalisation’. And ultimately, these all represent narrow and backward-looking critiques of capitalism. If Harvey differs from the others, it is mainly in being less explicit in his desire for the state to play the central role in curbing economic progress.
The prevailing outlook of austerity is not neo-liberalism but green anti-capitalism. Mainstream notions of environmental restraint are far more influential than belief in the free market. Anyone wishing to defend popular living standards first needs to challenge this Malthusian dogma, even when – or rather especially when – it is dressed up in the language of Marx.
Daniel Ben-Ami is a journalist and author based in London. Visit his website here. His new book, Ferraris For All: In Defence of Economic Progress, is published by Policy Press. (Buy this book from Amazon(UK).)
The Enigma of Capital and the Crises of Capitalism, by David Harvey, is published by Profile Books. (Buy this book from Amazon(UK)).
This article is republished from the April 2011 issue of the spiked review of books. View the whole issue here.