After Neoliberalism: Empire, Social Democracy, or Socialism?
Li, Minqi, Monthly Review
Since the early 1980s, the leading capitalist states in North America and Western Europe have pursued neoliberal policies and institutional changes. The peripheral and semiperipheral states in Latin America, Africa, Asia, and Eastern Europe, under the pressure of the leading capitalist states (primarily the United States) and international monetary institutions (IMF and the World Bank), have adopted "structural adjustments," "shock therapies," or "economic reforms," to restructure their economies in accordance with the requirements of neoliberal economics.
A neoliberal regime typically includes monetarist policies to lower inflation and maintain fiscal balance (often achieved by reducing public expenditures and raising the interest rate), "flexible" labor markets (meaning removing labor market regulations and cutting social welfare), trade and financial liberalization, and privatization. These policies are an attack by the global ruling elites (primarily finance capital of the leading capitalist states) on the working people of the world. Under neoliberal capitalism, decades of social progress and developmental efforts have been reversed. Global inequality in income and wealth has reached unprecedented levels. In much of the world, working people have suffered pauperization. Entire countries have been reduced to misery.
According to United Nations' Human Development Report, the world's richest 1 percent receive as much income as the poorest 57 percent. The income gap between the richest 20 percent and the poorest 20 percent in the world rose from 30:1 in 1960, to 60:1 in 1990, and to 74:1 in 1999, and is projected to reach 100:1 in 2015. In 1999-2000, 2.8 billion people lived on less than $2 a day, 840 million were undernourished, 2.4 billion did not have access to any form of improved sanitation services, and one in every six children in the world of primary school age were not in school. About 50 percent of the global nonagricultural labor force is estimated to be either unemployed or underemployed. (1)
In many countries, working people have suffered an absolute decline in living standards. In the United States, the real weekly earnings of production and nonsupervisory workers (in 1992 dollars) fell from $315 in 1973 to $264 in 1989. After a decade of economic expansion, it reached $271 in 1999, which remained lower than the average real wage in 1962. In Latin America, a continent that has suffered from neoliberal restructuring since the 1970s, about 200 million people, or 46 percent of the population, live In poverty. Between 1980 and the early 1990s (1991-1994), real wages fell by 14 percent In Argentina, 21 percent in Uruguay, 53 percent in Venezuela, 68 percent in Ecuador, and 73 percent in Bolivia. (2)
The advocates of neoliberalism promised that the neoliberal "reforms" or "structural adjustments" would usher in an era of unprecedented economic growth, technological progress, rising living standards, and material prosperity. In fact, the world economy has slowed towards stagnation In the neoliberal era. The average annual growth rate of world GDP declined from 4.9 percent between 1950 and 1973, to 3.0 percent between 1973 and 1992, and to 2.7 percent between 1990 and 2001. Between 1980 and 1998, half of all the "developing countries" (including the so-called "transition economies") suffered from falling real per capita GDP. (3)
The global economy has been kept afloat by the debt-financed U.S. economy. Between 1995 and 2002, the U.S. economy accounted for 96 percent of the cumulative growth in world GDP. (4) The U.S. expansion has been financed by reducing domestic savings, raising the private sector debts to historically unprecedented levels, and running large and ever-rising current account deficits. The process is unsustainable. The enormous imbalances have to be corrected one way or the other. If the United States cannot continue to generate ever-rising current account deficits and none of the other large economies are capable of functioning effectively as the autonomous driving force, the neoliberal global economy will be under powerful downward pressures and exposed to the threat of increasingly frequent and violent financial crises. …