David Harvey, A Brief History of Neoliberalism.

“The extraction of tribute via financial mechanisms is an old imperial practice. It has proven very helpful in the restoration of class power, particularly in the world’s main financial centres, and it does not always need a structural adjustment crisis to work. When entrepreneurs in developing countries borrow money from abroad, for example, the requirement that their own state should have sufficient foreign exchange reserves to cover their borrowings translates into the state having to invest in, say, US Treasury bonds. The difference between the interest rate on the money borrowed (for example 12 per cent) and the money deposited as collateral in US Treasuries in Washington (for example 4 percent) yields a strong net financial flow to the imperial centre at the expense of the developing country.”


“…a whole series of… specific contradictions that need to be highlighted.

  1. On the one hand the neoliberal state is expected to take a back seat and simply set the stage for market functions, but on the other it is supposed to be activist in creating a good business climate and to behave as a competitive entity in global politics. In its latter role it has to work as a collective corporation, and this poses the problem of how to ensure citizen loyalty. Nationalism is an obvious answer, but this is profoundly antagonistic to the neoliberal agenda. This was Margaret Thatcher’s dilemma, for it was only through playing the nationalism card in the Falklands/Malvinas war and, even more significantly in the campaign against economic integration with Europe, that she could win re-election and promote further neoliberal reforms internally. Again and again, be it within the European Union, in Mercosur (where Brazilian and Argentine nationalisms inhibit integration), in NAFTA, or in ASEAN, the nationalism required for the state to function effectively as a corporate and competitive entity in the world market gets in the way of market freedoms more generally.
  2. Authoritarianism in market enforcement sits uneasily with ideals of individual freedoms. The more neoliberalism veers towards the former, the harder it becomes to maintain its legitimacy with respect to the latter and the more it has to reveal its anti-democratic colors. This contradiction is paralleled by a growing lack of symmetry in the power relation between corporations and individuals such as you and me. If ‘corporate power steals your freedom’ then the promise of neoliberalism comes to nothing. This applies to individuals in the workplace as well as in the living space. It is one thing to maintain, for example, that my health-care status is my personal choice and responsibility, but quite another when the only way I can satisfy my needs in the market is through paying exorbitant premiums to inefficient, gargantuan, highly bureaucratized but also highly profitable insurance companies. When these companies even have the power to define new categories of illness to match new drugs coming on the market then something is clearly wrong. Under such circumstances, maintaining legitimacy and consent, as we saw in Chapter 2, becomes an even more difficult balancing act that can easily topple over when things start to go wrong.
  3. While it may be crucial to preserve the integrity of the financial system, the irresponsible and self-aggrandizing individualism of operators within it produces speculative volatility, financial scandals, and chronic instability. The Wall Street and accounting scandals of recent years have undermined confidence and posed regulatory authorities with serious problems of how and when to intervene, internationally as well as nationally. International free trade requires some global rules of the game, and that calls forth the need for some kind of global governance (for example by the WTO). Deregulation of the financial system facilitates behaviors that call for re-regulation if crisis is to be avoided.
  4. While the virtues of competition are placed up front, the reality is the increasing consolidation of oligopolistic, monopoly, and transnational power within a few centralized multinational corporations: the world of soft-drinks competition is reduced to Coca Cola versus Pepsi, the energy industry is reduced to five huge transnational corporations, and a few media magnates control most of the flow news, much of which then becomes pure propaganda.
  5. At the popular level, the drive towards market freedoms and the commodification of everything can all too easily run amok and produce social incoherence. The destruction of forms of social solidarity and even, as Thatcher suggested, of the very idea of society itself, leaves a gaping hold in the social order. It then becomes peculiarly difficult to combat anomie and control the resultant anti-social behaviors such as criminality, pornography, or the virtual enslavement of others. The reduction of ‘freedom’ to ‘freedom of enterprise’ unleashes all those ‘negative freedoms’ that Polanyi saw as inextricably tied in with the positive freedoms. The inevitable response is to reconstruct social solidarities, albeit along different lines—hence the revival of interest in religion and morality, in new forms of associationism (around questions of rights and citizenship, for example) and even the revival of older political forms (fascism, nationalism, localism, and the like). Neoliberalism in its pure form has always threatened to conjure up its own nemesis in varieties of authoritarian populism and nationalism. As Schwab and Smadja, organizers of the once purely celebratory neoliberal annual jamboree at Davos, warned as early as 1996:

‘Economic globalization has entered a new phase. A mounting backlash against its effects, especially in the industrial democracies, is threatening a disruptive impact on economic activity and social stability in many countries. The mood in these democracies is one of helplessness and anxiety, which helps explain the rise of a new brand of populist politicians. This can easily turn into revolt’.”


“Neoliberalism ‘with Chinese Characteristics’

In December 1978, faced with the dual difficulties of political uncertainty in the wake of Mao’s death in 1976 and several years of economic stagnation, the Chinese leadership under Deng Xiaoping announced a programme of economic reform. We may never know for sure whether Deng was all along a secret ‘capitalist roader’ (as Mao had claimed during the Cultural Revolution) or whether the reforms were simply a desperate move to ensure China’s economic security and bolster its prestige in the face of the rising tide of capitalist development in the rest of East and South-East Asia. The reforms just happened to coincide—and it is very hard to consider this as anything other than a conjunctural accident of world-historical significance—with the turn to neoliberal solutions in Britain and the United States. The outcome in China has been the construction of a particular kind of market economy that increasingly incorporates neoliberal elements interdigitated with authoritarian centralized control. Elsewhere, as in Chile, South Korea, Taiwan, and Singapore, the compatibility between authoritarianism and the capitalist market had already been clearly established.

            While egalitarianism as a long-term goal for China was not abandoned, Deng argued that individual and local initiative had to be unleashed in order to increase productivity and spark economic growth. The corollary, that certain levels of inequality would inevitably arise, was well understood as something that would need to be tolerated. Under the slogan of xiaokang—the concept of an ideal society that provides well for all its citizens—Deng focused on ‘four modernizations’: in agriculture, industry, education, and science and defence. The reforms strove to bring market forces to bear internally within the Chinese economy. The idea was to stimulate competition between state-owned firms and thereby spark, it was hoped, innovation and growth. Market pricing was introduced, but this was probably far less significant than the rapid devolution of political-economic power to the regions and to the localities. This last move proved particularly astute. Confrontation with traditional power centres in Beijing was avoided and local initiatives could pioneer the way to a new social order. Innovations that failed could simply be ignored. To supplement this effort, China was also opened up, albeit under strict state supervision, to foreign trade and foreign investment, thus ending China’s isolation from the world market. Experimentation was initially limited, mainly to Guangdong province close to Hong Kong, conveniently remote from Beijing. One aim of this opening to the outside was to procure technology transfers (hence the emphasis on joint ventures between foreign capital and Chinese partners). The other was to gain enough foreign reserves to buy in the necessary means to support a stronger internal dynamic of economic growth.

            These reforms would not have assumed the significance we now accord to them, nor would china’s extraordinary subsequent economic evolution have taken the path and registered the achievements it did, had there not been significant and seemingly unrelated parallel shifts in the advanced capitalist world with respect to how the world market worked. The gathering strength of neoliberal policies on international trade during the 1980s opened up the whole world to transformative market and financial forces. In so doing it opened up a space for China’s tumultuous entry and incorporation under the world market in ways that would not have been possible under the Bretton Woods system. The spectacular emergence of China as a global economic power after 1980 was in part an unintended consequence of the neoliberal turn in the advanced capitalist world.

Internal Transformations

To put it this way in no way diminishes the significance of the tortuous path of the internal reform movement within China itself. For what the Chinese had to learn (and to some degree are still learning), among other things, was that the market can do little to transform an economy without a parallel shift in class relations, private property, and all the other institutional arrangements that typically ground a thriving capitalist economy. The evolution along this path was both fitful and frequently marked by tensions and crises, in which impulses and even threats from outside certainly played their part. Whether it was all a matter of conscious though adaptive planning (‘groping the stones while crossing the river’ as Deng called it) or the working out, behind the backs of the party politicians, of an inexorable logic deriving from the initial premises of Deng’s market reforms, will doubtless long be debated.

            What can be said with precision, is that China, by not taking the ‘shock therapy’ path of instant privatization later foisted on Russia and central Europe by the IMF, The World Bank, and the ‘Washington Consensus’ in the 1990s, managed to avert the economic disasters that beset those countries. By taking its own peculiar path towards ‘socialism with Chinese characteristics’ or, as some now prefer to call it, ‘privatization with Chinese characteristics’, it managed to construct a form of state-manipulated market economy that delivered spectacular economic growth (averaging close to 10 per cent a year) and rising standards of living for a significant proportion of the population for more than twenty years. But the reforms also led to environmental degradation, social inequality, and eventually something that looks uncomfortably like the reconstitution of capitalist class power.”