From Neoliberalism to Possible Alternatives

Resumen

Este artículo tiene como objetivo mostrar posibles alternativas al neoliberalismo. Una alternativa progresista a esta última fase del capitalismo tiene que tener un punto de partida y de llegada. El punto de partida es el capitalismo neoliberal: sus principios, su desempeño económico en los últimos 40 años y cómo los neoliberales tomaron el poder. El punto de llegada consiste en el tipo de desarrollo que queremos para nuestro futuro y los medios que utilizaremos para lograrlo. Hay, al menos, tres posibles opciones progresistas al neolibera-lismo en la actualidad: (1) el retorno al keynesianismo, (2) el retorno al socialismo real, y (3) las nuevas experiencias de desarrollo, como Mondragón, Kerala, y el llamado socialismo del siglo xxi. Los resultados de esta investigación muestran que el desempeño económico y social del neoliberalismo ha sido pobre, pero cualquier alternativa progresista al neoliberalismo debe ser eficiente y establecer los medios de cómo lograr sus metas.

Abstract

This article aims to show possible alternatives to neoliberalism. We think that a progressive solution to this last phase of capitalism has to have both a departure and an arrival point. The departure point is neoliberal capitalism: what it is now, what it has been during its per-formance in the last 40 years, and how neoliberals have seized power. The arrival point consists in the kind of development we want for our future and the means we use to achieve it. Currently, there are at least three possible progressive options to neoliberalism: (1) return to keynesianism, (2) return to real socialism, and (3) encourage new development experiences such as Mondragon, Kerala, and the so-called socialism of the 21st century. Our conclusions show that neoliberal economic and social performance has been poor but that any progressive alternative to neoliberalism must display economic superiority to neoliberalism and establish the means of how to achieve its goals.

1. Introduction

The objective of this article is to outline possible alternatives to capitalism in its neoliberal phase. In 2007, the deepest world crisis since the Great Depression started and has continued with neither a theoretical nor a practical solution to date. As a response to the crisis, countries have applied keynesian but mostly neoliberal policies. However, such policies have not produced economic growth or any human development. We think that a progressive solution to this last phase of capitalism has to have both a departure and an arrival point. The departure point is neoliberal capitalism: what it is now, what it has been during its performance in the last 40 years, and how neoliberals have seized power. The arrival point consists in the kind of development we want for our future and the means we use to achieve it. Of course, there must be a correspondence between the ends and the means. Currently, there are at least three possible progressive options to neoliberalism: (1) return to keynesianism, (2) return to real socialism, and (3) encourage new development experiences such as Mondragon, Kerala, and the so-called socialism of the 21^st century. Whatever option that can possibly supersede neoliberalism must, in our opinion, fulfill the following requirements: (1) define the concept of development and (2) define how progressive options are going to seize power.

This paper proceeds as follows after this introduction. In Section 2, we outline the main characteristics of neoliberalism; in Section 3, we describe the economic and social performance of neoliberalism; in Section 4, we take into account how neoliberals have seized power on a global scale; in Section 5, we highlight the progressive alternatives to neoliberalism; and in Section 6, we present some requirements that any progressive option must fulfill. Finally, we outline concluding remarks.

2. What is capitalism and neoliberalism

Capitalism is a profit-making system in the short run, characterized by high productivity, competitive markets, private property, and the exploitation of labor. Whereas, from a theoretical standpoint, only one form of capitalism has existed, it has existed historically and throughout the world in many concrete forms that differ greatly: for example, keynesianism and neoliberalism. In order to consider a possibly more egalitarian economic system in the world, we must study the empirical principles in which, today, the latest phase of capitalism is rooted. Figure 1 shows capitalist characteristics throughout the history of humankind; generally speaking, the following trends can be distinguished from primitive communism to capitalism:

• (1)

  Increasing productivity, with transitions represented by the white and black colors in the first rectangle. Productivity increased in capitalism from the Industrial Revolution onwards, except for the neoliberal period, during which productivity has grown less than in other capitalist phases;

• (2)

  Increasing private property (black color) (see rectangle 2);

• (3)

  Unrestrained markets (black color). In other modes of production, competitive markets did not exist or were restricted to politics, culture, religion, etc., (white and gray colors). Most of the 19^th century, in the opinion of some scholars, was characterized by unregulated markets, the Golden Age was characterized by regulated markets (above all, financial markets), and neoliberalism has been characterized by unregulated markets (above all, financial markets); and

• (4)

  The abandonment of meaningful job for workers (black color). The main differences between keynesian and neoliberal capitalism, in addition to those mentioned previously, are that the latter opposes policies that could promote social justice and the intervention of the state in long-term development activities.

Figure 1.

Capitalist characteristics in societies throughout the history of humankind.

3. Neoliberal economic performance

We have just seen the main empirical principles in which neoliberal capitalism are rooted. Social and economic performance of the capitalist neoliberal era is discussed elsewhere (Felix, 2000; Franke and Chasin, 2000; Duménil and Lévy 2005; McNally, 2011; Maass, 2010; Isidro Luna, 2013). We highlight only two aspects of the economic and social conditions in this section: (1) a downturn in growth rates from 1973/74 onwards and (2) an increase in global inequality, among countries (convergence).

Growth rates during the neoliberal period lagged far behind those of the Golden Age. From 1950-72, average growth rates were 4.7 percent, but during the neoliberal era (1973-2008) growth rates were 3.4 percent. During the former period, growth rates occurred not only in developed countries but also in underdeveloped countries in a process of convergence with the us. During neoliberalism, the main characteristic of the global economy has been stagnation. From 1999 to 2008, the world economy rebounded to 4.1 percent. However, this rebound is the manifestation of just two economies in the world: China and India.

Conversely, a neoliberal success has been the increase of inequality. It is too easy to see that inequality has increased among countries because the standard deviation increased over time in gdp per capita at ppp (see Table 1).

Table 1.

Statistics on gdp per capita at ppp, 1990 prices. Dollars.

Indicator	1820	1860	1900	1940	1980	2000	2008
Median	615	1745	1729	2626	2644	3421	4464
Mean	736	1803	2044	3037	5068	6288	8066
Standard deviation	327	594	1169	1814	5451	6804	8175

Source: Author's elaboration with data from Maddison (2014)

4. How neoliberalism seizes power

If neoliberalism is inefficient in allocating resources, why is it in power? Neoliberalism it is no in power because of its economic superiority but because it has been a political project of the top classes in the world. Its objective has been the increase of the rate of profit that had decreased in the 1970s (Duménil and Lévy, 2001, 2002; Harvey, 2005). This ruling class has at least three components: a conservative capitalist sector that is concerned with both profits and rules of conduct (involving racism and fanatic religions), a liberal sector that cares only about profits, and a managerial sector that receives stratospheric wages.

To increase the rate of profit, neoliberals have used the competitive market but mostly the state in six ways: (1) to defeat unions and inhibit their organization; (2) to privatize profitable State Owned Enterprises (soes) that require low capital (so the investment is low and the profit high); (3) to protect the now private enterprises of competition; (4) to ensure internal security through the police and army; (5) to maintain low inflation, high interest rates, and free mobility of capital in order to provide a good environment for financial activities; and (6) to transfer resources from the poor people to the wealthy people. Of courses, the application of some measures has depended upon the historical conditions of each country. Now we proceed to describe how neoliberalism seizes power around the world.

Neoliberalism was imposed for the first time in Chile (1973) with the overthrow of Salvador Allende. Later, at the end of the 1970s and early 1980s, it reached England (1979) and the us (1980). Neoliberalism was incorporated by Latin American countries throughout the 1980s and, finally, the countries of Eastern Europe at the beginning of the 1990s. In some occasions, to take the power neoliberals used violence, in other they used peaceful means, and in other occasions they took advantage of specific historical events.

For example, the strategy followed in Chile was a broad political agenda with brutal violence, since the socialist president, as Harnacker (1999) says, had won the government but not the power, so he had to face this agenda: (1) a clear strategy of the right to divide the left-wing political parties, (3) the attack carried out by the mass media, (3) the lack of loyalty of the armed forces, (4) the intent of the capitalist sector to stifle the national economy, (5) a campaign promoting freedom and private property, and (6) the shaping of thought in important universities and centers of knowledge and of Chilean students by more important universities in the United States, such as the University of Chicago.

In the us, neoliberalism was established in a democratic way by means of a clear strategy followed by the National Association of Manufacturers (nam) and the National Chamber of Commerce that took over universities (Harvey, 2005), which in turn created campaigns to promote freedom in the mass media and founded neoliberal think tanks (Crotty, 2000). In addition, neoliberals used the fiscal crisis of the states as proof that the public sector was inefficient, and they also took over the Republican Party and later in the 1990s partially took control over the Democratic Party.¹ Neoliberals also instituted a campaign against unions, which were defeated in the 1980s. Finally, once the power was gained, there was a concomitant increase in military spending, a tax policy in favor of the wealthy, a rise in interest rates, and the deregulation of the financial system to promote free mobility of capital.

Finally, in Latin America, the set of neoliberal policies was prepared by the debt crisis of 1982. These countries had to accept Structural Adjustment Lendings (sals). These sals consisted of a stabilization program (reductions in public spending or exchange rate alignments) and economic restructuring (trade and financial liberalization and the reduction in the size of the public sector). The implementation of these programs was the charge of the World Bank (wb) and the International Monetary Fund (imf). Later, the policies imposed in Latin America would be a model summarized in what is known as the Washington Consensus.

5. Alternatives to neoliberalism

The current economic crisis has exacerbated stagnation and inequality. To solve the crisis, neoliberals propose to go deeper in institutions such as individualism, private property, and competitive markets, with no pretension of social justice. Ultimately, this current crisis can be solved in a progressive way or in a negative way (Harvey, 2005). The last option could be carried out by a conservative capitalist sector that not only cares for profits but also for rules of conduct (involved with racism and fanatic religious groups). Then, there are three possible progressive options to neoliberalism: (1) return to keynesianism, (2) return to real socialism, and (3) embrace new socialist development experiences based on Mondragon, Kerala, and the so-called socialism of the 21st century.

As was stated above, capitalism is a world system based on the exploitation of labor; its objective is to obtain the largest profit possible in the short run. Therefore, a progressive option to capitalism has to strengthen the power of workers and peasants and diminish the power of capitalists. In doing so, socialism is not the only option, but also a keynesian capitalism. The prosperity that characterized the Golden Age has never been repeated in capitalist countries from the 19^th century to the present day. From the 1940s to the1970s, there was economic growth in the majority of the countries in the world; there was exploitation in a Marxian sense but wages and the volume of employment increased. The business cycle was smoothed; then, keynesians will propose a reindustrialization of countries, capital controls, a rise in public spending, and an end to neoliberal austerity programs.

A further progressive option is real socialism. During the 20^th century, socialism was a model of development that competed with keynesianism and development economics. Today, for scholars such as Li (2013, 11 and 12), real socialism is the only option to the current economic crisis:

• The 20th century socialist economies were essentially models of national development within the general historical framework of the capitalist world system. Instead, as capitalism ceases to be a viable historical system, socialism may prove to be the only viable solution to the fundamental crisis confronting humanity in the 21st century.

For Li, neoclassical criticisms of socialism do not represent any hindrance to the establishment of it. First of all, capitalism is inefficient as is socialism. Information and incentive problems can be solved only partially in socialism because decisions are taken based on wrong information (as well as it is in capitalist). Incentive problems can be solved via a gradual transformation of the consciousness of people. However, Li does not further explain the last issue. The great advantage of socialism over capitalism is that the former outscores the latter in fulfilling social needs.

In our opinion, the idea of planning does not involve whether socialism is as good or as bad as capitalism. Social production and consumption as well as planning were key for Marx, as expressed in the Grundrisse (Marx, 1973, 108 and 109):

• On the basis of communal production, the determination of time remains, of course, essential. The less time the society requires to produce wheat, cattle, etc., the more time it wins for other production, material or mental. Just as in the case of an individual, the multiplicity of its development, its enjoyment and its activity depends on economization of time. Economy of time, to this all economy ultimately reduces itself. Society likewise has to distribute its time in a purposeful way, in order to achieve a production adequate to its overall needs; just as the individual has to distribute his time correctly in order to achieve knowledge in proper proportions or in order to satisfy the various demands on his activity. Thus, economy of time, along with the planned distribution of labour time among the various branches of production, remains the first economic law on the basis of communal production. It becomes law, there, to an even higher degree.

So, in a socialist economy planning must be possible and its performance must be better than in a capitalist society. It is better not because it responds to social needs but because it also holds high productivity. More used values for people have to be produced with less labor time (Marx1981), “Socialism will show itself to be superior to capitalism only if it proves better at husbanding time,” point out Cockshott and Cottrell (2005, 47).

Unfortunately, real socialism did not achieve high development of productive forces and neither change social consciousness. Up to this point, we have described two alternatives to neoliberalism. Both of them outscored neoliberalism in economic performance and social indicators. However, they also had several drawbacks, including: (1) the inability of solving the world crisis in the 1970s. This situation gave rise to the famous Thatcher's phrase “there is no alternative”, (2) the absence of democracy in the case of socialism and the low political participation in the case of capitalism, (3) the destruction of the environment, (4) the presence of exploitation in both systems. In the case of capitalism, capitalists exploited workers and peasants. In socialism, the state exploited workers and peasants, and (5) the resilience of old institutions in both modern systems. Thus, in our opinion, other experiences of development have to be taken into account, three of which include Mondragon, Kerala, and the so-called socialism of the 21st century.

Mondragon Cooperacion Cooperativa (mcc) is a corporate group that emerged after wwii, founded by a Catholic priest working with a group of five engineers with the objective of raising the volume of employment and encouraging growth in the Basque region (Spain). The paramount characteristic of Mondragon is the self-management abilities it tries to enhance in the workers (as the personal participation in making management decision (Campbell, 2011, 1)) and the necessary institutions to accomplish this, such as the General Assembly, the Governing Council, and the Social Council. Today, Mondragon has 289 companies not only in the Basque region but also throughout the world. In addition, it furnishes employment to 80 321 people worldwide.² Some scholars question whether mcc has responded adequately to the challenges of globalization, being able to face international competition successfully (Clamp, 2000; Azevedo and Gitaby 2010). Good thing of Mondragon is the self-management abilities, but the drawback is the markets remain.

Kerala in India is an experience of development with high people participation and administration through the state (see Parayil, 2000; Franke and Chasin, 2000). It has been a successful case of “public action to democratic means” (Parayil, 2000, 10). In spite of historically poor economic performance, Kerala has obtained good social indicators. In some of them, Kerala has achieved the same level of development as advanced countries. Kerala has a long history of social movements combined with political participation dating back to the end of the 19^th century when an intermediate caste organized against social “exclusion practiced by the upper-caste Hindus” (Kannan, 2000, 58). Subsequently, some upper castes, Catholics, Muslims, and above all lower castes organized to build new educational institutions in the first quarter of the 20^th century with “their aim of casteless society” (Ibid., 58). In the mid-1950s, several communist organizations in Kerala encouraged new ways of education. Currently, Kerala promotes education and presents a paramount rate of unionization (see Heller, 2000; Dreze and Sen, 2002).

Mondragon and Kerala have achieved the means to provide a better quality of life for people. They have shown two important ingredients to a better society: (1) something can be done with scarce resources, and (2) organization of people produces good results in a society. In addition to this, according to Allen (2011), Marx's idea of the transition from capitalism to socialism has to follow this pattern: first of all a revolution has to occur led by the workers. The peasants will then embrace the revolution, followed by the intermediate classes, and so on. Kerala's struggle seems to fit this pattern. Thus, important lessons can be learned from it. However, mcc and Kerala experiences have not been carried out in a national-state level, and specifically Kerala has undergone very low rates of economic growth.

The last option is 21^st century socialism. The option refers to the experiences of some Latin American countries, especially Venezuela, after 2004. Accounts of the Latin American kind of socialism can be found in Lebowitz (2006). According to Lebowitz (2006, 89), this brand of socialism must encourage a new kind of knowledge:

• Here, too, was a vision of the new Bolivarian subjects producing themselves - both in the political sphere (“the participation of the people in forming, carrying out and controlling the management of public affairs is the necessary way of achieving the involvement to ensure their complete development, both individual and collective”), and in the economic sphere (“self - management, co-management, cooperatives of all forms, including those of a financial nature, savings funds, community enterprises and other forms of associations guided by the values of mutual cooperation and solidarity”). This is a constitution that demands a “democratic, participatory and protagonist” society, a constitution whose principle is the full development of human beings as subjects is based upon their “active, conscious and joint participation in the processes of social transformation embodied in the values which are part of the national identity.

Then, 21^st century socialism must be based on a communal system of production and consumption. In the Venezuelan case, both are represented in the Enterprises of Social Production (eps) and the Commune Councils.³ Lebowitz also outlines some theoretical ideas about how socialism can be established and some problems to consider: (1) to gain control of the state through democratic means, (2) to gradually modify the consciousness of the people, (3) to build new men and women through their own process of organization of production, (4) to change the meaning of producing-- not the production of commodities but rather the full development of human beings, and (5) to build socialism in each country attended by particular characteristics, i.e., different correlations of forces.

All the experiences so far seen have shown the importance of people participation and education. However, they do not shed light about how a new progressive option can be established in the long run along with a high rate of growth.

6. Means to achieve ends

In our point of view, the progressive option that supplants neoliberalism must fulfill the following requirements: (1) stating a concept of development, and (2) defining how progressive options are able to seize power (if possible).

6.1 The concept of development

Even though there are many books about development, defining the concept is still challenging. Simply, development must include null growth rates or higher than zero and the improvement of some social indicator. In a broader sense, development must include the full development of all human potential (Marx, 2001). This kind of abstract concept must involve meaningful production and consumption. In both processes, a human being is reproduced as a human being not as an object, and with no room for exploitation. The common middle-ground between these two views of development can be found in Sen (1999, 3 and 6), who states: “a process of expanding the real freedoms that people enjoy [among these freedoms] ...freedom of exchange and transaction is itself part and parcel of the basic liberties that people have reason to value.”

Even though all three kinds of development involved in the three concepts are difficult to achieve, choosing one is very important because it provides the standard that society considers worthy and the set of institutions we can use to accomplish it. For example, taking the middle concept, markets can produce growth and increase productivity. However, markets also produce the following:

(1) A commodification of human beings. To live, a human being has to work. Without means of productions, people have to sell their labor force to capitalists. In that process, human beings have disappeared. Human beings can be considered a factor of production that can be defined according to a modern concept: human capital, (2) An enhancement of values such as individualism and competition. For Mill (1867, 49), markets have some advantages but he also recognizes the claims of some socialists:

• It is the principle of individualism and competition, each one for himself and against all the rest. It is grounded on opposition of interests, not harmony of interests, and under it every one is required to find his place by struggle, by pushing others back or being pushed back by them. Socialists consider this system of private war (as it may be termed) between every one and every one, especially fatal in an economical point of view and in a moral. Morally considered, its evils are obvious. It is the parent of envy, hatred, and all uncharitableness; it makes every one the natural enemy of all others who cross his path, and every one's path is constantly liable to be crossed.

Therefore, more important than technical problems, such as planning from the transition to capitalism to another alternative such as socialism, is the modification of some institutions that are rooted in our society.

6.2 How progressive movements are going to seize power

In seizing power, neoliberals used violence as well peaceful means (see section 4). Does the same option exist for progressive options to neoliberalism? If the option chosen is keynesianism, this will be the alternative that would present fewer problems than other options. For this reason, some postkeynesians think that the current crisis can be solved with some political movement. Huberban's words remain true-- if neoliberals fought fiercely to take power, they would not cede now to another capitalist path with more social justice. Selection of the socialism alternative would lead us to the following conundrum suggested by Hayek (2001): Can socialism be achieved by non-socialist means? These questions prompt other two additional: (1) Is it possible to achieve socialism by peaceful means? And, (2) Is it possible to achieve socialism without taking the power of the state? Regarding the first question, historically, socialist alternatives implemented by means of an armed revolution or a democratic means have occurred. Russia is an example of the first case; Chile is an example of the second. The Chilean experience has been the fundamental reason to argue that socialism by pacific ways is not possible because if you do not destroy your enemy when you have the opportunity, he will destroy you when he grasps the power. Politically, this assertion can be true, but it contradicts the principles of socialism based on the full development of the capabilities of all individuals (solidarity, cooperation, and altruism). Regarding the second question, it poses the same problem, how something that is not socialism can produce socialism in the long run. “You cannot build a society of non-power relations by conquering the state. Once the logic of power is adopted the fight is lost,” states Holloway (Author's translation 2002, 35). In his rebuttal to Bakunin's Statism and Anarquism (2010), Marx singles out that confrontations and a certain type of state can exist as long as the remnants of the old society have not disappeared. However, this assertion leads to the following question: How long will it take for these old remnants to disappear? Of course, it depends on class struggle but the answer may be centuries. The state is a capitalist institution, and some of the progressive option experiences (including those of Kerala or Venezuela) rest on the state as well as on the former real socialism. Can the state build a new socialist society?

7. Conclusions

In any historical moment, the future is unknown and social change is possible. Some scholars believe that with the current economic crisis we are seeing the dismissal of neoliberalism. The mobilization of people all around the world but especially in Latin America has been put forth as an example of this view. Similar feelings have been expressed regarding previous failures. After the Great Depression, Polanyi (2001) thought that free markets would never again dominate the ideas of policy-makers. Also, Blackburn (1991) thought that with the downfall of real socialism, this system would never again be an alternative to capitalism. Neoliberalism is a failure because it has produced lower growth rates than keynesianism and real socialism. Furthermore, it has not satisfied people's basic needs. However, its failure does not mean that these options are an alternative to capitalism for two principal reasons: (1) society has changed--keynesianism and real socialism did very good things, but that was in the past (the institutional frame where keynesianism and real socialism were embedded no longer exists), and (2) both systems failed in facing the challenges of this evolving society. New development experiences are based more on people's freedom and self-management. These experiences have proven that something can be done with limited resources using democratic means. However, a plan is needed to establish in the short run as well in the long run the necessary institutions to achieve the plan. How will the alternative address the following problems: (1) civil wars, (2) outflow of capital, (3) economic backwardness, (4) counter revolutions, (5) the remnants of old institutions, (6) political dissent, and (7) material poverty?