Capitalist economies now faced a choice: deepen socialistic reform, public ownership and initiative and invest in the still growing Third World to expand demand or, as the neoliberals bank-rolled by capital recommended, lift postwar restrictions on capital at home and campaign to lift them abroad. The former favoured working people and the Third World and the latter capital and its comprador lackeys.
Capital won. The left was weak, politically and intellectually, historically split over reformism, the First World War, successive socialist revolutions after 1917, pervasive and insidious Cold War repression and welfare states and improved living conditions. It could not organise the vast majority – workers, women, nationalist movements – that had everything to gain from the first option and everything to lose from the second into a meaningful political alternative. Nor could the Third World. Despite socialist and revolutionary advances in, for instance, Afghanistan, South Yemen, Angola and Nicaragua, developmental and revolutionary processes faced intense pressure from imperialist and comprador forces and betrayal from unfolding counterrevolution in the Soviet Union.
Neoliberalism announced its arrival with an attack on working people and their historic gains and a massive interest rate shock sending most Third World countries careening into two ‘lost decades’ of development. Working people’s misery spread to the former Soviet Union and European socialist countries with capitalist restoration there.
Yet, though neoliberalism reigned, it failed. It could not resume dynamic capitalist growth even in imperialist economies. It had to fail. It is intellectually disingenuous. Emerging in capitalism’s monopoly phase, it sought to defend capital’s privileges against empowered working classes, and later against socialisms and autonomous national development, by singing the praises of economic liberty, property rights and free market competition. By sponsoring its revival over half a century later, neoliberal capital dreamt of nothing less than pre- 1914 authoritarian and imperial capitalism.
However, the historical clock can never be turned back and neoliberalism advanced unevenly – going farthest in the already more liberal Anglo-American heartland of capitalism – and faced popular opposition at every step.
Domestically, neoliberal policies rolled back state ownership, regulation and social protection. It attacked trade unions and left working people with high unemployment, stagnant real wages, fewer benefits, a smaller welfare state, more powerful employers and fewer social services.
Internationally, the International Monetary Fund and the World Bank became imperial countries’ overbearing bailiffs. Overlooking creditor responsibility, they forced Third World countries to repay debt. In the 1980s and 1990s, as they ramped up exports, markets for the few primary commodities and low-tech industrial goods they produced were glutted and prices, export revenues and incomes fell. By demanding a shrunken state, they also prevented the state-directed combined development Third World countries needed to become more productive, competitive and able to repay debt with less effort. Meanwhile, in all-too-many Third World countries, imperial capital enjoyed greater access to resources, goods and labour, quashing sovereignty, people’s democracy and national development.
However, a moribund capitalism could only misuse its political advantages. It could not reverse declining economic growth, productivity growth and investment. Its miserly refusal to pay decent taxes, wages or supply prices worsened demand conditions and inequality, as did its offshoring of manufacturing to lower wage locations.
Worse, instead of investing in production, capital, especially in imperial countries, increasingly indulged in unproductive, predatory and speculative financial activity. The US facilitated this. After the dollar was forced off gold in 1971, it systematically encouraged dollar-denominated financial activity so demand for, and the value of, the dollar remained high. Rising debt and asset bubbles sucked money out of working people, small businesspeople, governments and taxpayers while inflating the wealth of tiny elites as governments resolved increasingly frequent financial crises to favour creditors.
Information and communications technology (ICT) played a most ironic part in all this. Soviet era experimental cybernetics had demonstrated ICT’s potential for democratic socialist economic management and planning. Neoliberal capitalists used it instead to offshore production while controlling it, aid the concentration and centralisation of capital, indulge in plunder and financial speculation, appropriate land and resources, increase control over employees and manipulate customers, short-circuiting rather than addressing the demand problem and proliferating false needs in oceans of unfulfilled real need. Such capitalisms diminished human wellbeing, the quality and quantity of jobs, and social services.
Neoliberal capitalism also led, despite slowing growth, to the ecological emergency of pollution, climate change, biodiversity loss and unspeakable cruelty to farmed animals as capital turned everything the earth offers humanity gratis into plunder and profit. Indeed, the current pandemic may be just the latest zoonotic virus to jump to humans thanks to accelerated encroachment on and destruction of wildlife habitats.
Despite clear scientific consensus pointing to the need for state and international action, capitalism’s insistence on profit and market-driven ‘solutions’ is only making things worse.
Neoliberalism worsened capitalism’s growth performance each decade and after 2008, growth was slower than during the Great Depression. By the late 2010s, most acute observers expected a major economic crisis of hollowed out capitalist productive systems typified by the neoliberal leaders, the US and the UK, as protests and social unrest proliferated. In the event, the pandemic triggered the crisis, exposing and worsening the shocking perversity of neoliberal capitalist economies as never before.
Reviving economies and addressing the ecological emergency and the pandemic will require industrial policy, state investment, social redistribution, environmental planning and public health infrastructure on a scale comparable to socialism and require ending capitalists’ control over the state and policy.
The road to it lies wide open. Popular discontent with neoliberal capitalism is broad and deep, especially among those also marginalised by gender, race and in other ways.