Neoliberalism
as Creative
Destruction
By
DAVID HARVEY
Neoliberalism has become a hegemonic discourse with
pervasive effects on ways of thought and political
economic practices to the point where it is now part of
the commonsense way we interpret, live in, and under
stand the world. How did neoliberalism achieve such
an exalted status, and what does it stand for? In this
article, the author contends that neoliberalism is above
all a project to restore class dominance to sectors that
saw their fortunes threatened by the ascent of social
democratic endeavors in the aftermath of the Second
World War. Although neoliberalism has had limited
effectiveness as an engine for economic growth, it has
succeeded in channeling wealth from subordinate
classes to dominant ones and from poorer to richer
countries. This process has entailed the dismantling of
institutions and narratives that promoted more egalitar
ian distributive measures in the preceding era.
Keywords: neoliberalism; globalization; fiscalization;
class dominance; subordination
Neoliberalism is a theory of political eco nomic practices proposing that human
well-being can best be advanced by the maxi
mization of entrepreneurial freedoms within an
institutional framework characterized by pri
vate property rights, individual liberty, unen
cumbered markets, and free trade. The role of
the state is to create and preserve an institu
tional framework appropriate to such practices.
The state has to be concerned, for example,
with the quality and integrity of money. It must
also set up military, defense, police, and juridi
cal functions required to secure private prop
erty rights and to support freely functioning
markets. Furthermore, if markets do not exist
(in areas such as education, health care, social
security, or environmental pollution), then they
David Harvey is Distinguished Professor in the
Graduate Center of the City University of New York.
He is author of several books, including A Brief History
of Neoliberalism, The New Imperialism, Spaces of
Hope, The Limits to Capital, and The Condition of
Postmodernity.
DOI: 10.1177/0002716206296780
22 ANNALS, AAPSS, 610, March 2007
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NEOLIBERALISM AS CREATIVE DESTRUCTION 23
must be created, by state action if necessary. But beyond these tasks the state
should not venture. State interventions in markets (once created) must be kept
to a bare minimum because the state cannot possibly possess enough information
to second-guess market signals (prices) and because powerful interests will
inevitably distort and bias state interventions (particularly in democracies) for
their own benefit.
For a variety of reasons, the actual practices of neoliberalism frequently diverge
from this template. Nevertheless, there has everywhere been an emphatic turn,
ostensibly led by the Thatcher/Reagan revolutions in Britain and the United
States, in political-economic practices and thinking since the 1970s. State after
state, from the new ones that emerged from the collapse of the Soviet Union to
old-style social democracies and welfare states such as New Zealand and Sweden,
have embraced, sometimes voluntarily and sometimes in response to coercive
pressures, some version of neoliberal theory and adjusted at least some of their
policies and practices accordingly Postapartheid South Africa quickly adopted
the neoliberal frame and even contemporary China appears to be headed in that
direction. Furthermore, advocates of the neoliberal mindset now occupy posi
tions of considerable influence in education (universities and many "think
tanks"), in the media, in corporate board rooms and financial institutions, in key
state institutions (treasury departments, central banks), and also in those inter
national institutions such as the International Monetary Fund (IMF) and the
World Trade Organization (WTO) that regulate global finance and commerce.
Neoliberalism has, in short, become hegemonic as a mode of discourse and has
pervasive effects on ways of thought and political-economic practices to the point
where it has become incorporated into the commonsense way we interpret, live
in, and understand the world.
Neoliberalization has in effect swept across the world like a vast tidal wave of
institutional reform and discursive adjustment. While plenty of evidence shows
its uneven geographical development, no place can claim total immunity (with
the exception of a few states such as North Korea). Furthermore, the rules of
engagement now established through the WTO (governing international trade)
and by the IMF (governing international finance) instantiate neoliberalism as a
global set of rules. All states that sign on to the WTO and the IMF (and who can
afford not to?) agree to abide (albeit with a "grace period" to permit smooth
adjustment) by these rules or face severe penalties.
The creation of this neoliberal system has entailed much destruction, not only
of prior institutional frameworks and powers (such as the supposed prior state
sovereignty over political-economic affairs) but also of divisions of labor, social
relations, welfare provisions, technological mixes, ways of life, attachments to the
land, habits of the heart, ways of thought, and the like. Some assessment of the
positives and negatives of this neoliberal revolution is called for. In what follows,
therefore, I will sketch in some preliminary arguments as to how to both under
stand and evaluate this transformation in the way global capitalism is working.
This requires that we come to terms with the underlying forces, interests, and
agents that have propelled the neoliberal revolution forward with such relentless
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24 THE ANNALS OF THE AMERICAN ACADEMY
intensity. To turn the neoliberal rhetoric against itself, we may reasonably ask, In
whose particular interests is it that the state take a neoliberal stance and in what
ways have those interests used neoliberalism to benefit themselves rather than,
as is claimed, everyone, everywhere?
In whose particular interests is it that
the state take a neoliberal stance, and in what
ways have those interests used neoliberalism to
benefit themselves rather than, as is claimed,
everyone, everywhere?
The "Naturalization" of Neoliberalism
For any system of thought to become dominant, it requires the articulation of
fundamental concepts that become so deeply embedded in commonsense under
standings that they are taken for granted and beyond question. For this to occur,
not any old concepts will do. A conceptual apparatus has to be constructed that
appeals almost naturally to our intuitions and instincts, to our values and our
desires, as well as to the possibilities that seem to inhere in the social world we
inhabit. The founding figures of neoliberal thought took political ideals of indi
vidual liberty and freedom as sacrosanct?as the central values of civilization.
And in so doing they chose wisely and well, for these are indeed compelling and
greatly appealing concepts. Such values were threatened, they argued, not only
by fascism, dictatorships, and communism, but also by all forms of state inter
vention that substituted collective judgments for those of individuals set free to
choose. They then concluded that without "the diffused power and initiative
associated with (private property and the competitive market) it is difficult to
imagine a society in which freedom may be effectively preserved."1
Setting aside the question of whether the final part ofthe argument necessar
ily follows from the first, there can be no doubt that the concepts of individual
liberty and freedom are powerful in their own right, even beyond those terrains
where the liberal tradition has had a strong historical presence. Such ideals
empowered the dissident movements in Eastern Europe and the Soviet Union
before the end ofthe cold war as well as the students in Tiananmen Square. The
student movement that swept the world in 1968?from Paris and Chicago to
Bangkok and Mexico City?was in part animated by the quest for greater freedoms
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NEOLIBERALISM AS CREATIVE DESTRUCTION 25
of speech and individual choice. These ideals have proven again and again to be
a mighty historical force for change.
It is not surprising, therefore, that appeals to freedom and liberty surround the
United States rhetorically at every turn and populate all manner of contemporary
political manifestos. This has been particularly true ofthe United States in recent
years. On the first anniversary ofthe attacks now known as 9/11, President Bush
wrote an op-ed piece for the New York Times that extracted ideas from a U.S.
National Defense Strategy document issued shortly thereafter. "A peaceful world
of growing freedom," he wrote, even as his cabinet geared up to go to war with
Iraq, "serves American long-term interests, reflects enduring American ideals
and unites America's allies." "Humanity," he concluded, "holds in its hands the
opportunity to offer freedom's triumph over all its age-old foes," and "the United
States welcomes its responsibilities to lead in this great mission." Even more
emphatically, he later proclaimed that "freedom is the Almighty's gift to every
man and woman in this world" and "as the greatest power on earth [the United
States has] an obligation to help the spread of freedom."2
So when all of the other reasons for engaging in a preemptive war against Iraq
were proven fallacious or at least wanting, the Bush administration increasingly
appealed to the idea that the freedom conferred upon Iraq was in and of itself an
adequate justification for the war. But what sort of freedom was envisaged here,
since, as the cultural critic Matthew Arnold long ago thoughtfully observed,
"Freedom is a very good horse to ride, but to ride somewhere."3 To what desti
nation, then, were the Iraqi people expected to ride the horse of freedom so self
lessly conferred to them by force of arms?
The U.S. answer was spelled out on September 19, 2003, when Paul Bremer,
head of the Coalition Provisional Authority, promulgated four orders that
included "the full privatization of public enterprises, full ownership rights by for
eign firms of Iraqi U.S. businesses, full repatriation of foreign profits . . . the
opening of Iraq's banks to foreign control, national treatment for foreign compa
nies and . . . the elimination of nearly all trade barriers."4 The orders were to
apply to all areas ofthe economy, including public services, the media, manufac
turing, services, transportation, finance, and construction. Only oil was exempt.
A regressive tax system favored by conservatives called a flat tax was also insti
tuted. The right to strike was outlawed and unions banned in key sectors. An
Iraqi member of the Coalition Provisional Authority protested the forced impo
sition of "free market fundamentalism," describing it as "a flawed logic that
ignores history."5 Yet the interim Iraqi government appointed at the end of June
2004 was accorded no power to change or write new laws?it could only confirm
the decrees already promulgated.
What the United States evidently sought to impose upon Iraq was a full
fledged neoliberal state apparatus whose fundamental mission was and is to facil
itate conditions for profitable capital accumulation for all comers, Iraqis and
foreigners alike. The Iraqis were, in short, expected to ride their horse of free
dom straight into the corral of neoliberalism. According to neoliberal theory,
Bremer's decrees are both necessary and sufficient for the creation of wealth and
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26 THE ANNALS OF THE AMERICAN ACADEMY
therefore for the improved well-being of the Iraqi people. They are the proper
foundation for an adequate rule of law, individual liberty, and democratic gover
nance. The insurrection that followed can in part be interpreted as Iraqi resis
tance to being driven into the embrace of free market fundamentalism against
their own free will.
It is useful to recall, however, that the first great experiment with neoliberal
state formation was Chile after Augusto Pinochet s coup almost thirty years to the
day before Bremer's decrees were issued, on the "little September 11th" of 1973.
The coup, against the democratically elected and leftist social democratic gov
ernment of Salvador Allende, was strongly backed by the CIA and supported by
U.S. Secretary of State Henry Kissinger. It violently repressed all left-of-center
social movements and political organizations and dismantled all forms of popular
organization, such as community health centers in poorer neighborhoods. The
labor market was "freed" from regulatory or institutional restraints?trade union
power, for example. But by 1973, the policies of import substitution that had for
merly dominated in Latin American attempts at economic regeneration, and that
had succeeded to some degree in Brazil after the military coup of 1964, had
fallen into disrepute. With the world economy in the midst of a serious recession,
something new was plainly called for. A group of U.S. economists known as "the
Chicago boys," because of their attachment to the neoliberal theories of Milton
Friedman, then teaching at the University of Chicago, were summoned to help
reconstruct the Chilean economy They did so along free-market lines, privatiz
ing public assets, opening up natural resources to private exploitation, and facili
tating foreign direct investment and free trade. The right of foreign companies to
repatriate profits from their Chilean operations was guaranteed. Export-led
growth was favored over import substitution. The subsequent revival of the
Chilean economy in terms of growth, capital accumulation, and high rates of
return on foreign investments provided evidence upon which the subsequent
turn to more open neoliberal policies in both Britain (under Thatcher) and the
United States (under Reagan) could be modeled. Not for the first time, a brutal
experiment in creative destruction carried out in the periphery became a model
for the formulation of policies in the center.6
The fact that two such obviously similar restructurings of the state apparatus
occurred at such different times in quite different parts of the world under the
coercive influence ofthe United States might be taken as indicative that the grim
reach of U.S. imperial power might lie behind the rapid proliferation of neolib
eral state forms throughout the world from the mid-1970s onward. But U.S.
power and recklessness do not constitute the whole story. It was not the United
States, after all, that forced Margaret Thatcher to take the neoliberal path in
1979. And during the early 1980s, Thatcher was a far more consistent advocate
of neoliberalism than Reagan ever proved to be. Nor was it the United States that
forced China in 1978 to follow the path that has over time brought it closer and
closer to the embrace of neoliberalism. It would be hard to attribute the moves
toward neoliberalism in India and Sweden in 1992 to the imperial reach of the
United States. The uneven geographical development of neoliberalism on the
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NEOLIBERALISM AS CREATIVE DESTRUCTION 27
world stage has been a very complex process entailing multiple determinations
and not a little chaos and confusion. So why, then, did the neoliberal turn occur,
and what were the forces compelling it onward to the point where it has now
become a hegemonic system within global capitalism?
Why the Neoliberal Turn?
Toward the end of the 1960s, global capitalism was falling into disarray. A sig
nificant recession occurred in early 1973?the first since the great slump of the
1930s. The oil embargo and oil price hike that followed later that year in the wake
ofthe Arab-Israeli war exacerbated critical problems. The embedded capitalism of
the postwar period, with its heavy emphasis on an uneasy compact between capital
and labor brokered by an interventionist state that paid great attention to the social
(i.e., welfare programs) and individual wage, was no longer working. The Bretton
Woods accord set up to regulate international trade and finance was finally aban
doned in favor of floating exchange rates in 1973. That system had delivered high
rates of growth in the advanced capitalist countries and generated some spillover
benefits?most obviously to Japan but also unevenly across South America and to
some other countries of South East Asia?during the "golden age" of capitalism in
the 1950s and early 1960s. By the next decade, however, the preexisting arrange
ments were exhausted and a new alternative was urgently needed to restart the
process of capital accumulation.7 How and why neoliberalism emerged victorious
as an answer to that quandary is a complex story. In retrospect, it may seem as if
neoliberalism had been inevitable, but at the time no one really knew or under
stood with any certainty what kind of response would work and how.
The world stumbled toward neoliberalism through a series of gyrations and
chaotic motions that eventually converged on the so-called "Washington Consensus"
in the 1990s. The uneven geographical development of neoliberalism, and its
partial and lopsided application from one country to another, testifies to its ten
tative character and the complex ways in which political forces, historical tradi
tions, and existing institutional arrangements all shaped why and how the process
actually occurred on the ground.
There is, however, one element within this transition that deserves concerted
attention. The crisis of capital accumulation of the 1970s affected everyone
through the combination of rising unemployment and accelerating inflation.
Discontent was widespread, and the conjoining of labor and urban social move
ments throughout much ofthe advanced capitalist world augured a socialist alter
native to the social compromise between capital and labor that had grounded
capital accumulation so successfully in the postwar period. Communist and social
ist parties were gaining ground across much of Europe, and even in the United
States popular forces were agitating for widespread reforms and state interven
tions in everything ranging from environmental protection to occupational safety
and health and consumer protection from corporate malfeasance. There was, in
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28 THE ANNALS OF THE AMERICAN ACADEMY
this, a clear political threat to ruling classes everywhere, both in advanced capi
talist countries, like Italy and France, and in many developing countries, like
Mexico and Argentina.
Beyond political changes, the economic threat to the position of ruling classes
was now becoming palpable. One condition of the postwar settlement in almost
all countries was to restrain the economic power of the upper classes and for
labor to be accorded a much larger share of the economic pie. In the United
States, for example, the share of the national income taken by the top 1 percent
of earners fell from a prewar high of 16 percent to less than 8 percent by the end
ofthe Second World War and stayed close to that level for nearly three decades.
While growth was strong such restraints seemed not to matter, but when growth
collapsed in the 1970s, even as real interest rates went negative and dividends
and profits shrunk, ruling classes felt threatened. They had to move decisively if
they were to protect their power from political and economic annihilation.
The coup d'etat in Chile and the military takeover in Argentina, both
fomented and led internally by ruling elites with U.S. support, provided one kind
of solution. But the Chilean experiment with neoliberalism demonstrated that
the benefits of revived capital accumulation were highly skewed. The country
and its ruling elites along with foreign investors did well enough while the peo
ple in general fared poorly. This has been such a persistent effect of neoliberal
policies over time as to be regarded a structural component of the whole project.
Dumenil and Levy have gone so far as to argue that neoliberalism was from the
very beginning an endeavor to restore class power to the richest strata in the pop
ulation. They showed how from the mid-1980s onwards, the share of the top
1 percent of income earners in the United States soared rapidly to reach 15 percent
by the end of the century. Other data show that the top 0.1 percent of income
earners increased their share of the national income from 2 percent in 1978 to
more than 6 percent by 1999. Yet another measure shows that the ratio of the
median compensation of workers to the salaries of chief executive officers
increased from just over thirty to one in 1970 to more than four hundred to one
by 2000. Almost certainly, with the Bush administration's tax cuts now taking
effect, the concentration of income and of wealth in the upper echelons of soci
ety is continuing apace.8
And the United States is not alone in this: the top 1 percent of income earners
in Britain doubled their share of the national income from 6.5 percent to 13 per
cent over the past twenty years. When we look further afield, we see extraordinary
concentrations of wealth and power within a small oligarchy after the application of
neoliberal shock therapy in Russia and a staggering surge in income inequalities
and wealth in China as it adopts neoliberal practices. While there are exceptions to
this trend?several East and Southeast Asian countries have contained income inequal
ities within modest bounds, as have France and the Scandinavian countries?the
evidence suggests that the neoliberal turn is in some way and to some degree asso
ciated with attempts to restore or reconstruct upper-class power.
We can, therefore, examine the history of neoliberalism either as a Utopian
project providing a theoretical template for the reorganization of international
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NEOLIBERALISM AS CREATIVE DESTRUCTION 29
capitalism or as a political scheme aimed at reestablishing the conditions for cap
ital accumulation and the restoration of class power. In what follows, I shall argue
that the last of these objectives has dominated. Neoliberalism has not proven
effective at revitalizing global capital accumulation, but it has succeeded in
restoring class power. As a consequence, the theoretical utopianism ofthe neolib
eral argument has worked more as a system of justification and legitimization.
The principles of neoliberalism are quickly abandoned whenever they conflict
with this class project.
Neoliberalism has not proven effective at
revitalizing gfobal capital accumulation, but it
has succeeded in restoring class power
Toward the Restoration of Class Power
If there were movements to restore class power within global capitalism, then
how were they enacted and by whom? The answer to that question in countries
such as Chile and Argentina was simple: a swift, brutal, and self-assured military
coup backed by the upper classes and the subsequent fierce repression of all soli
darities created within the labor and urban social movements that had so threat
ened their power. Elsewhere, as in Britain and Mexico in 1976, it took the gentle
prodding of a not yet fiercely neoliberal International Monetary Fund to push
countries toward practices?although by no means policy commitment?to cut
back on social expenditures and welfare programs to reestablish fiscal probity. In
Britain, of course, Margaret Thatcher later took up the neoliberal cudgel with a
vengeance in 1979 and wielded it to great effect, even though she never fully over
came opposition within her own party and could never effectively challenge such
centerpieces of the welfare state as the National Health Service. Interestingly, it
was only in 2004 that the Labour Government dared to introduce a fee structure
into higher education. The process of neoliberalization has been halting, geo
graphically uneven, and heavily influenced by class structures and other social
forces moving for or against its central propositions within particular state forma
tions and even within particular sectors, for example, health or education.9
It is informative to look more closely at how the process unfolded in the
United States, since this case was pivotal as an influence on other and more
recent transformations. Various threads of power intertwined to create a transi
tion that culminated in the mid-1990s with the takeover of Congress by the
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30 THE ANNALS OF THE AMERICAN ACADEMY
Republican Party. That feat represented in fact a neoliberal "Contract with
America" as a program for domestic action. Before that dramatic denouement,
however, many steps were taken, each building upon and reinforcing the other.
To begin with, by 1970 or so, there was a growing sense among the U.S. upper
classes that the antibusiness and anti-imperialist climate that had emerged
toward the end of the 1960s had gone too far. In a celebrated memo, Lewis
Powell (about to be elevated to the Supreme Court by Richard Nixon) urged the
American Chamber of Commerce in 1971 to mount a collective campaign to
demonstrate that what was good for business was good for America. Shortly
thereafter, a shadowy but influential Business Round Table was formed that still
exists and plays a significant strategic role in Republican Party politics. Corporate
political action committees, legalized under the post-Watergate campaign
finance laws of 1974, proliferated like wildfire. With their activities protected
under the First Amendment as a form of free speech in a 1976 Supreme Court
decision, the systematic capture of the Republican Party as a class instrument of
collective (rather than particular or individual) corporate and financial power
began. But the Republican Party needed a popular base, and that proved more
problematic to achieve. The incorporation of leaders of the Christian right,
depicted as a moral majority, together with the Business Round Table provided
the solution to that problem. A large segment of a disaffected, insecure, and
largely white working class was persuaded to vote consistently against its own
material interests on cultural (antiliberal, antiblack, antifeminist and antigay),
nationalist and religious grounds. By the mid-1990s, the Republican Party had
lost almost all of its liberal elements and become a homogeneous right-wing
machine connecting the financial resources of large corporate capital with a pop
ulist base, the Moral Majority, that was particularly strong in the U.S. South.10
The second element in the U.S. transition concerned fiscal discipline. The
recession of 1973 to 1975 diminished tax revenues at all levels at a time of rising
demand for social expenditures. Deficits emerged everywhere as a key problem.
Something had to be done about the fiscal crisis of the state; the restoration of
monetary discipline was essential. That conviction empowered financial institu
tions that controlled the lines of credit to government. In 1975, they refused to
roll over New York's debt and forced that city to the edge of bankruptcy. A pow
erful cabal of bankers joined together with the state to tighten control over the
city. This meant curbing the aspirations of municipal unions, layoffs in public
employment, wage freezes, cutbacks in social provision (education, public health,
and transport services), and the imposition of user fees (tuition was introduced in
the CUNY university system for the first time). The bailout entailed the con
struction of new institutions that had first rights to city tax revenues in order to
pay off bond holders: whatever was left went into the city budget for essential ser
vices. The final indignity was a requirement that municipal unions invest their
pension funds in city bonds. This ensured that unions moderate their demands to
avoid the danger of losing their pension funds through city bankruptcy.
Such actions amounted to a coup d'etat by financial institutions against the
democratically elected government of New York City, and they were every bit as
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NEOLIBERALISM AS CREATIVE DESTRUCTION 31
effective as the military overtaking that had earlier occurred in Chile. Much of
the city's social infrastructure was destroyed, and the physical foundations (e.g.,
the transit system) deteriorated markedly for lack of investment or even mainte
nance. The management of New York's fiscal crisis paved the way for neoliberal
practices both domestically under Ronald Reagan and internationally through
the International Monetary Fund throughout the 1980s. It established a princi
ple that, in the event of a conflict between the integrity of financial institutions
and bondholders on one hand and the well-being of the citizens on the other, the
former would be given preference. It hammered home the view that the role of
government was to create a good business climate rather than look to the needs
and well-being of the population at large. Fiscal redistributions to benefit the
upper classes resulted in the midst of a general fiscal crisis.
Whether all the agents involved in producing this compromise in New York
understood it at the time as a tactic for the restoration of upper-class power is an
open question. The need to maintain fiscal discipline is a matter of deep concern
in its own right and does not have to lead to the restitution of class dominance. It
is unlikely, therefore, that Felix Rohatyn, the key merchant banker who brokered
the deal between the city, the state, and the financial institutions, had the rein
statement of class power in mind. But this objective probably was very much in
the thoughts of the investment bankers. It was almost certainly the aim of
then-Secretary ofthe Treasury William Simon who, having watched the progress
of events in Chile with approval, refused to give aid to New York and openly
stated that he wanted that city to suffer so badly that no other city in the nation
would ever dare take on similar social obligations again.11
The third element in the U.S. transition entailed an ideological assault upon the
media and upon educational institutions. Independent "think tanks" financed by
wealthy individuals and corporate donors proliferated?the Heritage Foundation
in the lead?to prepare an ideological onslaught aimed at persuading the public
ofthe commonsense character of neoliberal propositions. A flood of policy papers
and proposals and a veritable army of well-paid hired lieutenants trained to pro
mote neoliberal ideas coupled with the corporate acquisition of media channels
effectively transformed the discursive climate in the United States by the mid
1980s. The project to "get government off the backs ofthe people" and to shrink
government to the point where it could be "drowned in a bathtub" was loudly pro
claimed. With respect to this, the promoters ofthe new gospel found a ready audi
ence in that wing of the 1968 movement whose goal was greater individual liberty
and freedom from state power and the manipulations of monopoly capital. The
libertarian argument for neoliberalism proved a powerful force for change. To the
degree that capitalism reorganized to both open a space for individual entrepre
neurship and switch its efforts to satisfy innumerable niche markets, particularly
those defined by sexual liberation, that were spawned out of an increasingly indi
vidualized consumerism, so it could match words with deeds.
This carrot of individualized entrepreneurship and consumerism was backed
by the big stick wielded by the state and financial institutions against that other
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32 THE ANNALS OF THE AMERICAN ACADEMY
wing of the 1968 movement whose members had sought social justice through
collective negotiation and social solidarities. Reagan's destruction ofthe air traf
fic controllers (PATCO) in 1980 and Margaret Thatcher's defeat of the British
miners in 1984 were crucial moments in the global turn toward neoliberalism.
The assault upon institutions, such as trade unions and welfare rights organiza
tions, that sought to protect and further working-class interests was as broad as it
was deep. The savage cutbacks in social expenditures and the welfare state, and
the passing of all responsibility for their well-being to individuals and their
families proceeded apace. But these practices did not and could not stop at
national borders. After 1980, the United States, now firmly committed to neolib
eralization and clearly backed by Britain, sought, through a mix of leadership,
persuasion?the economics departments of U.S. research universities played a
major role in training many of the economists from around the world in neolib
eral principles?and coercion to export neoliberalization far and wide. The purge
of Keynesian economists and their replacement by neoliberal monetarists in the
International Monetary Fund in 1982 transformed the U.S.-dominated IMF into
a prime agent of neoliberalization through its structural adjustment programs vis
ited upon any state (and there were many in the 1980s and 1990s) that required
its help with debt repayments. The Washington Consensus that was forged in the
1990s and the negotiating rules set up under the World Trade Organization in
1998 confirmed the global turn toward neoliberal practices.12
The new international compact also depended upon the reanimation and recon
figuration ofthe U.S. imperial tradition. That tradition had been forged in Central
America in the 1920s, as a form of domination without colonies. Independent
republics could be kept under the thumb of the United States and effectively act,
in the best of cases, as proxies for U.S. interests through the support of strongmen?
like Somoza in Nicaragua, the Shah in Iran, and Pinochet in Chile?and a coterie
of followers backed by military assistance and financial aid. Covert aid was available
to promote the rise to power of such leaders, but by the 1970s it became clear that
something else was needed: the opening of markets, of new spaces for investment,
and clear fields where financial powers could operate securely. This entailed a
much closer integration of the global economy with a well-defined financial archi
tecture. The creation of new institutional practices, such as those set out by the
IMF and the WTO, provided convenient vehicles through which financial and
market power could be exercised. The model required collaboration among the top
capitalist powers and the Group of Seven (G7), bringing Europe and Japan into
alignment with the United States to shape the global financial and trading system
in ways that effectively forced all other nations to submit. "Rogue nations," defined
as those that failed to conform to these global rules, could then be dealt with by
sanctions or coercive and even military force if necessary. In this way, U.S. neolib
eral imperialist strategies were articulated through a global network of power rela
tions, one effect of which was to permit the U.S. upper classes to exact financial
tribute and command rents from the rest ofthe world as a means to augment their
already hegemonic control.13
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NEOLIBERALISM AS CREATIVE DESTRUCTION 33
Neoliberalism as Creative Destruction
In what ways has neoliberalization resolved the problems of flagging capital
accumulation? Its actual record in stimulating economic growth is dismal.
Aggregate growth rates stood at 3.5 percent or so in the 1960s and even during
the troubled 1970s fell to only 2.4 percent. The subsequent global growth rates
of 1.4 percent and 1.1 percent for the 1980s and 1990s, and a rate that barely
touches 1 percent since 2000, indicate that neoliberalism has broadly failed to
stimulate worldwide growth.14 Even if we exclude from this calculation the cata
strophic effects of the collapse of the Russian and some Central European
economies in the wake of the neoliberal shock therapy treatment of the 1990s,
global economic performance from the standpoint of restoring the conditions of
general capital accumulation has been weak.
Despite their rhetoric about curing sick economies, neither Britain nor the
United States achieved high economic performance in the 1980s. That decade
belonged to Japan, the East Asian "Tigers," and West Germany as powerhouses of
the global economy. Such countries were very successful, but their radically differ
ent institutional arrangements make it difficult to pin their achievements on
neoliberalism. The West German Bundesbank had taken a strong monetarist line
(consistent with neoliberalism) for more than two decades, a fact suggesting that
there is no necessary connection between monetarism per se and the quest to
restore class power. In West Germany, the unions remained strong and wage levels
stayed relatively high alongside the construction of a progressive welfare state. One
ofthe effects of this combination was to stimulate a high rate of technological inno
vation that kept West Germany well ahead in the field of international competition.
Export-led production moved the country forward as a global leader.
In Japan, independent unions were weak or nonexistent, but state investment
in technological and organizational change and the tight relationship between
corporations and financial institutions (an arrangement that also proved felicitous
in West Germany) generated an astonishing export-led growth performance, very
much at the expense of other capitalist economies such as the United Kingdom
and the United States. Such growth as there was in the 1980s (and the aggregate
rate of growth in the world was lower even than that of the troubled 1970s) did
not depend, therefore, on neoliberalization. Many European states therefore
resisted neoliberal reforms and increasingly found ways to preserve much of their
social democratic heritage while moving, in some cases fairly successfully, toward
the West German model. In Asia, the Japanese model implanted under authori
tarian systems of governance in South Korea, Taiwan, and Singapore also proved
viable and consistent with reasonable equality of distribution. It was only in the
1990s that neoliberalization began to pay off for both the United States and
Britain. This happened in the midst of a long-drawn-out period of deflation in
Japan and relative stagnation in a newly unified Germany. Up for debate is
whether the Japanese recession occurred as a simple result of competitive pres
sures or whether it was engineered by financial agents in the United States to
humble the Japanese economy.
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34 THE ANNALS OF THE AMERICAN ACADEMY
So why, then, in the face of this patchy if not dismal record, have so many been
persuaded that neoliberalization is a successful solution? Over and beyond the
persistent stream of propaganda emanating from the neoliberal think tanks and
suffusing the media, two material reasons stand out. First, neoliberalization has
been accompanied by increasing volatility within global capitalism. That success
was to materialize somewhere obscured the reality that neoliberalism was gener
ally failing. Periodic episodes of growth interspersed with phases of creative
destruction, usually registered as severe financial crises. Argentina was opened
up to foreign capital and privatization in the 1990s and for several years was the
darling of Wall Street, only to collapse into disaster as international capital with
drew at the end of the decade. Financial collapse and social devastation was
quickly followed by a long political crisis. Financial turmoil proliferated all over
the developing world, and in some instances, such as Brazil and Mexico, repeated
waves of structural adjustment and austerity led to economic paralysis.
On the other hand, neoliberalism has been a huge success from the standpoint
ofthe upper classes. It has either restored class position to ruling elites, as in the
United States and Britain, or created conditions for capitalist class formation, as
in China, India, Russia, and elsewhere. Even countries that have suffered exten
sively from neoliberalization have seen the massive reordering of class structures
internally. The wave of privatization that came to Mexico with the Salinas de
Gortari administration in 1992 spawned unprecedented concentrations of wealth
in the hands of a few people (Carlos Slim, for example, who took over the state
telephone system and became an instant billionaire).
With the media dominated by upper-class interests, the myth could be propa
gated that certain sectors failed because they were not competitive enough,
thereby setting the stage for even more neoliberal reforms. Increased social
inequality was necessary to encourage entrepreneurial risk and innovation, and
these, in turn, conferred competitive advantage and stimulated growth. If condi
tions among the lower classes deteriorated, it was because they failed for personal
and cultural reasons to enhance their own human capital through education, the
acquisition of a protestant work ethic, and submission to work discipline and flexi
bility. In short, problems arose because of the lack of competitive strength or
because of personal, cultural, and political failings. In a Spencerian world, the argu
ment went, only the fittest should and do survive. Systemic problems were masked
under a blizzard of ideological pronouncements and a plethora of localized crises.
If the main effect of neoliberalism has been redistributive rather than genera
tive, then ways had to be found to transfer assets and channel wealth and income
either from the mass of the population toward the upper classes or from vulnera
ble to richer countries. I have elsewhere provided an account of these processes
under the rubric oi accumulation by dispossession.15 By this, I mean the continu
ation and proliferation of accretion practices that Marx had designated as "primitive"
or "original" during the rise of capitalism. These include (1) the commodification
and privatization of land and the forceful expulsion of peasant populations (as in
Mexico and India in recent times); (2) conversion of various forms of property
rights (common, collective, state, etc.) into exclusively private property rights;
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NEOLIBERALISM AS CREATIVE DESTRUCTION 35
(3) suppression of rights to the commons; (4) commodification of labor power and
the suppression of alternative (indigenous) forms of production and consumption;
(5) colonial, neocolonial, and imperial processes of appropriation of assets (includ
ing natural resources); (6) monetization of exchange and taxation, particularly of
land; (7) the slave trade (which continues, particularly in the sex industry); and (8)
usury, the national debt, and, most devastating of all, the use of the credit system
as radical means of primitive accumulation.
The state, with its monopoly of violence and definitions of legality, plays a cru
cial role in backing and promoting these processes. To this list of mechanisms, we
may now add a raft of additional techniques, such as the extraction of rents from
patents and intellectual property rights and the diminution or erasure of various
forms of communal property rights?such as state pensions, paid vacations,
access to education, and health care?won through a generation or more of social
democratic struggles. The proposal to privatize all state pension rights (pioneered
in Chile under Augusto Pinochet's dictatorship) is, for example, one of the cher
ished objectives of neoliberals in the United States.
In the cases of China and Russia, it might be reasonable to refer to recent
events in "primitive" and "original" terms, but the practices that restored class
power to capitalist elites in the United States and elsewhere are best described
as an ongoing process of accumulation by dispossession that grew rapidly under
neoliberalism. In what follows, I isolate four main elements.
1. Privatization
The corporatization, commodification, and privatization of hitherto public
assets have been signal features of the neoliberal project. Its primary aim has
been to open up new fields for capital accumulation in domains formerly
regarded off-limits to the calculus of profitability. Public utilities of all kinds
(water, telecommunications, transportation), social welfare provision (public
housing, education, health care, pensions), public institutions (such as universi
ties, research laboratories, prisons), and even warfare (as illustrated by the
"army" of private contractors operating alongside the armed forces in Iraq) have
all been privatized to some degree throughout the capitalist world.
Intellectual property rights established through the so-called TRIPS (Trade
Related Aspects of Intellectual Property Rights) agreement within the WTO
defines genetic materials, seed plasmas, and all manner of other products as pri
vate property. Rents for use can then be extracted from populations whose prac
tices had played a crucial role in the development of such genetic materials.
Bio-piracy is rampant, and the pillaging of the world's stockpile of genetic
resources is well under way to the benefit of a few large pharmaceutical compa
nies. The escalating depletion of the global environmental commons (land, air,
water) and proliferating habitat degradations that preclude anything but capital
intensive modes of agricultural production have likewise resulted from the
wholesale commodification of nature in all its forms. The commodification
(through tourism) of cultural forms, histories, and intellectual creativity entails
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36 THE ANNALS OF THE AMERICAN ACADEMY
wholesale dispossessions (the music industry is notorious for the appropriation
and exploitation of grassroots culture and creativity). As in the past, the power of
the state is frequently used to force such processes through even against popular
will. The rolling back of regulatory frameworks designed to protect labor and the
environment from degradation has entailed the loss of rights. The reversion of
common property rights won through years of hard class struggle (the right to a
state pension, to welfare, to national health care) into the private domain has
been one of the most egregious of all policies of dispossession pursued in the
name of neoliberal orthodoxy.
The corporatization, commodification, and
privatization of hitherto public assets have
been signal features ofthe neoliberal project.
All of these processes amount to the transfer of assets from the public and
popular realms to the private and class-privileged domains. Privatization,
Arundhati Roy argued with respect to the Indian case, entails "the transfer of
productive public assets from the state to private companies. Productive assets
include natural resources: earth, forest, water, air. These are the assets that the
state holds in trust for the people it represents. ... To snatch these away and sell
them as stock to private companies is a process of barbaric dispossession on a
scale that has no parallel in history."16
2. Financialization
The strong financial wave that set in after 1980 has been marked by its specu
lative and predatory style. The total daily turnover of financial transactions in
international markets that stood at $2.3 billion in 1983 had risen to $130 billion
by 2001. This $40 trillion annual turnover in 2001 compares to the estimated
$800 billion that would be required to support international trade and productive
investment flows.17 Deregulation allowed the financial system to become one of
the main centers of redistributive activity through speculation, predation, fraud,
and thievery. Stock promotions; Ponzi schemes; structured asset destruction
through inflation; asset stripping through mergers and acquisitions; and the pro
motion of debt incumbency that reduced whole populations, even in the
advanced capitalist countries, to debt peonage?to say nothing of corporate fraud
and dispossession of assets, such as the raiding of pension funds and their decimation
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NEOLIBERALISM AS CREATIVE DESTRUCTION 37
by stock and corporate collapses through credit and stock manipulations?are all
features ofthe capitalist financial system.
The emphasis on stock values, which arose after bringing together the interests
of owners and managers of capital through the remuneration of the latter in stock
options, led, as we now know, to manipulations in the market that created immense
wealth for a few at the expense ofthe many. The spectacular collapse of Enron was
emblematic of a general process that deprived many of their livelihoods and pen
sion rights. Beyond this, we also must look at the speculative raiding carried out by
hedge funds and other major instruments of finance capital that formed the real
cutting edge of accumulation by dispossession on the global stage, even as they sup
posedly conferred the positive benefit to the capitalist class of "spreading risks."
3. The management and manipulation of crises
Beyond the speculative and often fraudulent froth that characterizes much of
neoliberal financial manipulation, there lies a deeper process that entails the
springing of the debt trap as a primary means of accumulation by dispossession.
Crisis creation, management, and manipulation on the world stage has evolved
into the fine art of deliberative redistribution of wealth from poor countries to
the rich. By suddenly raising interest rates in 1979, Paul Volcker, then chairman
ofthe U.S. Federal Reserve, raised the proportion of foreign earnings that bor
rowing countries had to put to debt-interest payments. Forced into bankruptcy,
countries like Mexico had to agree to structural adjustment. While proclaiming
its role as a noble leader organizing bailouts to keep global capital accumulation
stable and on track, the United States could also open the way to pillage the
Mexican economy through deployment of its superior financial power under con
ditions of local crisis. This was what the U.S. TreasuryAVall Street/IMF complex
became expert at doing everywhere. Volker's successor, Alan Greenspan, resorted
to similar tactics several times in the 1990s. Debt crises in individual countries,
uncommon in the 1960s, became frequent during the 1980s and 1990s. Hardly
any developing country remained untouched and in some cases, as in Latin
America, such crises were frequent enough to be considered endemic. These
debt crises were orchestrated, managed, and controlled both to rationalize the
system and to redistribute assets during the 1980s and 1990s. Wade and Veneroso
captured the essence of this trend when they wrote of the Asian crisis?provoked
initially by the operation of U.S.-based hedge funds?of 1997 and 1998:
Financial crises have always caused transfers of ownership and power to those who keep
their own assets intact and who are in a position to create credit, and the Asian crisis is
no exception . . . there is no doubt that Western and Japanese corporations are the big
winners. . . . The combination of massive devaluations pushed financial liberalization,
and IMF-facilitated recovery may even precipitate the biggest peacetime transfer of
assets from domestic to foreign owners in the past fifty years anywhere in the world,
dwarfing the transfers from domestic to U.S. owners in Latin America in the 1980s or in
Mexico after 1994. One recalls the statement attributed to Andrew Mellon: "In a
depression assets return to their rightful owners."18
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38 THE ANNALS OF THE AMERICAN ACADEMY
The analogy to the deliberate creation of unemployment to produce a pool of
low-wage surplus labor convenient for further accumulation is precise. Valuable
assets are thrown out of use and lose their value. They lie fallow and dormant
until capitalists possessed of liquidity choose to seize upon them and breathe new
life into them. The danger, however, is that crises can spin out of control and
become generalized, or that revolts will arise against the system that creates
them. One ofthe prime functions of state interventions and of international insti
tutions is to orchestrate crises and devaluations in ways that permit accumulation
by dispossession to occur without sparking a general collapse or popular revolt.
The structural adjustment program administered by the Wall Street/Treasury/
IMF complex takes care of the first function. It is the job of the comprador
neoliberal state apparatus (backed by military assistance from the imperial pow
ers) to ensure that insurrections do not occur in whichever country has been
raided. Yet signs of popular revolt have emerged, first with the Zapatista uprising
in Mexico in 1994 and later in the generalized discontent that informed antiglob
alization movements such as the one that culminated in Seattle in 1999.
4. State redistributions
The state, once transformed into a neoliberal set of institutions, becomes a
prime agent of redistributive policies, reversing the flow from upper to lower
classes that had been implemented during the preceding social democratic era.
It does this in the first instance through privatization schemes and cutbacks in
government expenditures meant to support the social wage. Even when privati
zation appears as beneficial to the lower classes, the long-term effects can be neg
ative. At first blush, for example, Thatcher's program for the privatization of
social housing in Britain appeared as a gift to the lower classes whose members
could now convert from rental to ownership at a relatively low cost, gain control
over a valuable asset, and augment their wealth. But once the transfer was
accomplished, housing speculation took over particularly in prime central loca
tions, eventually bribing or forcing low-income populations out to the periphery
in cities like London and turning erstwhile working-class housing estates into
centers of intense gentrification. The loss of affordable housing in central areas
produced homelessness for many and extraordinarily long commutes for those
who did have low-paying service jobs. The privatization ofthe ejidos (indigenous
common property rights in land under the Mexican constitution) in Mexico,
which became a central component of the neoliberal program set up during the
1990s, has had analogous effects on the Mexican peasantry, forcing many rural
dwellers into the cities in search of employment. The Chinese state has taken a
whole series of draconian measures through which assets have been conferred
upon a small elite to the detriment ofthe masses.
The neoliberal state also seeks redistributions through a variety of other means
such as revisions in the tax code to benefit returns on investment rather than
incomes and wages, promotion of regressive elements in the tax code (such as
sales taxes), displacement of state expenditures and free access to all by user fees
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NEOLIBERALISM AS CREATIVE DESTRUCTION 39
(e.g., on higher education), and the provision of a vast array of subsidies and tax
breaks to corporations. The welfare programs that now exist in the United States
at federal, state, and local levels amount to a vast redirection of public moneys for
corporate benefit (directly as in the case of subsidies to agribusiness and indi
rectly as in the case of the military-industrial sector), in much the same way that
the mortgage interest rate tax deduction operates in the United States as a mas
sive subsidy to upper-income home owners and the construction of industry.
Heightened surveillance and policing and, in the case of the United States, the
incarceration of recalcitrant elements in the population indicate a more sinister
role of intense social control. In developing countries, where opposition to
neoliberalism and accumulation by dispossession can be stronger, the role of the
neoliberal state quickly assumes that of active repression even to the point of low
level warfare against oppositional movements (many of which can now conve
niently be designated as terrorist to garner U.S. military assistance and support)
such as the Zapatistas in Mexico or landless peasants in Brazil.
In effect, reported Roy, "India's rural economy, which supports seven hundred
million people, is being garroted. Farmers who produce too much are in distress,
farmers who produce too little are in distress, and landless agricultural laborers
are out of work as big estates and farms lay off their workers. They're all flocking
to the cities in search of employment."19 In China, the estimate is that at least half
a billion people will have to be absorbed by urbanization over the next ten years
if rural mayhem and revolt is to be avoided. What those migrants will do in the
cities remains unclear, though the vast physical infrastructural plans now in the
works will go some way to absorbing the labor surpluses released by primitive
accumulation.
The redistributive tactics of neoliberalism are wide-ranging, sophisticated, fre
quently masked by ideological gambits, but devastating for the dignity and social
well-being of vulnerable populations and territories. The wave of creative
destruction neoliberalization has visited across the globe is unparalleled in the
history of capitalism. Understandably, it has spawned resistance and a search for
viable alternatives.
Alternatives
Neoliberalism has spawned a swath of oppositional movements both within
and outside of its compass, many of which are radically different from the worker
based movements that dominated before 1980.1 say many but not all. Traditional
worker-based movements are by no means dead even in the advanced capitalist
countries where they have been much weakened by the neoliberal onslaught. In
South Korea and South Africa, vigorous labor movements arose during the 1980s,
and in much of Latin America working-class parties are flourishing. In Indonesia,
a putative labor movement of great potential importance is struggling to be
heard. The potential for labor unrest in China is immense though unpredictable.
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40 THE ANNALS OF THE AMERICAN ACADEMY
And it is not clear either that the mass of the working class in the United States,
which has over this past generation consistently voted against its own material
interests for reasons of cultural nationalism, religion, and opposition to multiple
social movements, will forever stay locked into such a politics by the machina
tions of Republicans and Democrats alike. There is no reason to rule out the
resurgence of worker-based politics with a strongly antineoliberal agenda in
future years.
But struggles against accumulation by dispossession are fomenting quite dif
ferent lines of social and political struggle. Partly because of the distinctive con
ditions that give rise to such movements, their political orientation and modes of
organization depart markedly from those typical in social democratic politics. The
Zapatista rebellion, for example, did not seek to take over state power or accom
plish a political revolution. It sought instead a more inclusive politics to work
through the whole of civil society in an open and fluid search for alternatives that
would consider the specific needs of different social groups and allow them to
improve their lot. Organizationally, it tended to avoid avant-gardism and refused
to take on the form of a political party. It preferred instead to remain a social
movement within the state, attempting to form a political power bloc in which
indigenous cultures would be central rather than peripheral. It sought thereby to
accomplish something akin to a passive revolution within the territorial logic of
state power.
The effect of such movements has been to shift the terrain of political organi
zation away from traditional political parties and labor organizing into a less
focused political dynamic of social action across the whole spectrum of civil soci
ety. But what they lost in focus they gained in relevance. They drew their
strengths from embeddedness in the nitty-gritty of daily life and struggle but in
so doing often found it hard to extract themselves from the local and the partic
ular to understand the macro-politics of what neoliberal accumulation by dispos
session was and is all about. The variety of such struggles was and is simply
stunning. It is hard to even imagine connections between them. They were and
are all part of a volatile mix of protest movements that swept the world and
increasingly grabbed the headlines during and after the 1980s.20 Those move
ments and revolts were sometimes crushed with ferocious violence, for the most
part by state powers acting in the name of order and stability. Elsewhere they
produced interethnic violence and civil wars as accumulation by dispossession
produced intense social and political rivalries in a world dominated by divide and
rule tactics on the part of capitalist forces. Client states supported militarily or in
some instances with special forces trained by major military powers (led by the
United States with Britain and France playing a minor role) took the lead in a sys
tem of repressions and liquidations to ruthlessly check activist movements chal
lenging accumulation by dispossession.
The movements themselves have produced an abundance of ideas regarding
alternatives. Some seek to de-link wholly or partially from the overwhelming
powers of neoliberalism and neoconservatism. Others seek global social and envi
ronmental justice by reform or dissolution of powerful institutions such as the
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NEOLIBERALISM AS CREATIVE DESTRUCTION 41
IMF, the WTO, and the World Bank. Still others emphasize a reclaiming of the
commons, thereby signaling deep continuities with struggles of long ago as well
as with struggles waged throughout the bitter history of colonialism and imperi
alism. Some envisage a multitude in motion, or a movement within global civil
society, to confront the dispersed and de-centered powers ofthe neoliberal order,
while others more modestly look to local experiments with new production and
consumption systems animated by different kinds of social relations and ecologi
cal practices. There are also those who put their faith in more conventional polit
ical party structures with the aim of gaining state power as one step toward global
reform ofthe economic order. Many of these diverse currents now come together
at the World Social Forum in an attempt to define their shared mission and build
an organizational structure capable of confronting the many variants of neoliber
alism and of neoconservatism. There is much here to admire and to inspire.21
Though it has been effectively disguised, we
have lived through a whole generation of
sophisticated class struggle on the part ofthe
upper strata to restore or, as in China and
Russia, construct class dominance.
But what sorts of conclusions can be derived from an analysis of the sort here
constructed? To begin with, the whole history of the social democratic compro
mise and the subsequent turn to neoliberalism indicates the crucial role played
by class struggle in either checking or restoring class power. Though it has been
effectively disguised, we have lived through a whole generation of sophisticated
class struggle on the part of the upper strata to restore or, as in China and Russia,
construct class dominance. This occurred in decades when many progressives
were theoretically persuaded that class was a meaningless category and when
those institutions from which struggle had hitherto been waged on behalf of the
working classes were under fierce assault. The first lesson we must learn, there
fore, is that if it looks like class struggle and acts like class struggle, then we have
to name it for what it is. The mass ofthe population has either to resign itself to
the historical and geographical trajectory defined by this overwhelming class
power or respond to it in class terms.
To put it this way is not to wax nostalgic for some lost golden age when the pro
letariat was in motion. Nor does it necessarily mean (if it ever should have) that
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42 THE ANNALS OF THE AMERICAN ACADEMY
we can appeal to some simple conception of the proletariat as the primary (let
alone exclusive) agent of historical transformation. There is no proletarian field
of Utopian Marxian fantasy to which we can call. To point to the necessity and
inevitability of class struggle is not to say that the way class is constituted is deter
mined or even determinable in advance. Class movements make themselves, though
not under conditions of their own choosing. And analysis shows that those condi
tions are currently bifurcated into movements around expanded reproduction?in
which the exploitation of wage labor and conditions defining the social wage are
central issues?and movements around accumulation by dispossession?in
which everything from classic forms of primitive accumulation through practices
destructive of cultures, histories, and environments to the depredations wrought
by the contemporary forms of finance capital are the focus of resistance. Finding
the organic link between these different class currents is an urgent theoretical
and practical task. Analysis also shows that this has to occur in an historical
geographical trajectory of capital accumulation that is based in increasing con
nectivity across space and time but marked by deepening uneven geographical
developments. This unevenness must be understood as something actively pro
duced and sustained by processes of capital accumulation, no matter how impor
tant the signs may be of residuals of past configurations set up in the cultural
landscape and the social world.
Analysis also points up exploitable contradictions within the neoliberal agenda.
The gap between rhetoric (for the benefit of all) and realization (for the benefit
of a small ruling class) increases over space and time, and social movements have
done much to focus on that gap. The idea that the market is about fair competi
tion is increasingly negated by the facts of extraordinary monopoly, centralization,
and internationalization on the part of corporate and financial powers. The star
tling increase in class and regional inequalities both within states (such as China,
Russia, India, Mexico, and in Southern Africa) as well as internationally poses a
serious political problem that can no longer be swept under the rug as something
transitional on the way to a perfected neoliberal world. The neoliberal emphasis
upon individual rights and the increasingly authoritarian use of state power to
sustain the system become a flashpoint of contentiousness. The more neoliberal
ism is recognized as a failed if not disingenuous and Utopian project masking the
restoration of class power, the more it lays the basis for a resurgence of mass
movements voicing egalitarian political demands, seeking economic justice, fair
trade, and greater economic security and democratization.
But it is the profoundly antidemocratic nature of neoliberalism that should
surely be the main focus of political struggle. Institutions with enormous lever
age, like the Federal Reserve, are outside any democratic control. Internationally,
the lack of elementary accountability let alone democratic control over institu
tions such as the IMF, the WTO, and the World Bank, to say nothing ofthe great
private power of financial institutions, makes a mockery of any credible concern
about democratization. To bring back demands for democratic governance and
for economic, political, and cultural equality and justice is not to suggest some
return to a golden past since the meanings in each instance have to be reinvented
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NEOLIBERALISM AS CREATIVE DESTRUCTION 43
to deal with contemporary conditions and potentialities. The meaning of democ
racy in ancient Athens has little to do with the meanings we must invest it with
today in circumstances as diverse as Sao Paulo, Johannesburg, Shanghai, Manila,
San Francisco, Leeds, Stockholm, and Lagos. But right across the globe, from
China, Brazil, Argentina, Taiwan, and Korea to South Africa, Iran, India, and
Egypt, and beyond the struggling nations of Eastern Europe into the heartlands
of contemporary capitalism, groups and social movements are rallying to reforms
expressive of democratic values. That is a key point of many ofthe struggles now
emerging.
The more clearly oppositional movements recognize that their central objec
tive must be to confront the class power that has been so effectively restored
under neoliberalization, the more they will be likely to cohere. Tearing aside the
neoliberal mask and exposing its seductive rhetoric, used so aptly to justify and
legitimate the restoration of that power, has a significant role to play in contem
porary struggles. It took neoliberals many years to set up and accomplish their
march through the institutions of contemporary capitalism. We can expect no less
of a struggle when pushing in the opposite direction.
Notes
1. See the Web site http://www.montpelerin.org/mpsabout.cfm.
2. G. W. Bush, "Securing Freedoms Triumph," New York Times, September 11, 2002, p. A33. The
National Security Strategy ofthe United State of America can be found on the Web site www.whitehouse.gov
nsc/nss. See also G. W. Bush, "President Addresses the Nation in Prime Time Press Conference," April 13,
2004, http://www.whitehouse.gov/news/releases/2004/0420040413-20.html.
3. Matthew Arnold is cited in Robin Williams, Culture and Society, 1780-1850 (London: Chatto and
Windus, 1958), 118.
4. Antonia Juhasz, "Ambitions of Empire: The Bush Administration Economic Plan for Iraq (and
Beyond)," Left Turn Magazine 12 (February/March 2004): 27-32.
5. Thomas Crampton, "Iraqi Official Urges Caution on Imposing Free Market," New York Times,
October 14, 2003, p. C5.
6. Juan Gabriel Valdez, Pinochet's Economists: The Chicago School in Chile (New York: Cambridge
University Press, 1995).
7. Philip Armstrong, Andre Glynn, and John Harrison, Capitalism since World War II: The Making
and Breaking ofthe Long Boom (Oxford, UK: Basil Blackwell, 1991).
8. Gerard Dumenil and Dominique Levy, "Neoliberal Dynamics: A New Phase?" (Manuscript, 2004), 4.
See also Task Force on Inequality and American Democracy, American Democracy in an Age of Rising
Inequality (Washington, DC: American Political Science Association, 2004), 3.
9. Daniel Yergin and Joseph Stanislaw, The Commanding Heights: The Battle between Government
and Marketplace That Is Remaking the Modern World (New York: Simon & Schuster, 1998).
10. Thomas Byrne Edsall, The New Politics of Inequality (New York: Norton, 1984); Jamie Court,
Corporateering: How Corporate Power Steals Your Personal Freedom (New York: Tarcher Putnam, 2003);
and Thomas Frank, What's the Matter with Kansas: How Conservatives Won the Heart of America (New
York, Metropolitan Books, 2004).
11. William K. Tabb, The Long Default: New York City and the Urban Fiscal Crisis (New York,
Monthly Review Press, 1982); and Roger E. Alcaly and David Mermelstein, The Fiscal Crisis of American
Cities (New York, Vintage, 1977).
12. Joseph Stiglitz, Globalization and Its Discontents (New York: Norton, 2002).
13. David Harvey, The New Imperialism (Oxford, Oxford University Press, 2003).
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44 THE ANNALS OF THE AMERICAN ACADEMY
14. World Commission on the Social Dimension of Globalization, A Fair Globalization: Creating
Opportunities for All (Geneva, Switzerland: International Labor Office, 2004).
15. Harvey, The New Imperialism, chap. 4.
16. Arundhati Roy, Power Politics (Cambridge, MA: South End Press, 2001).
17. Peter Dicken, Global Shift: Reshaping the Global Economic Map in the 21st Century, 4th ed.
(New York: Guilford, 2003), chap. 13.
18. Robert Wade and Frank Veneroso, "The Asian Crisis: The High Debt Model versus the Wall Street
Treasury-IMF Complex," New Left Review 228 (1998): 3-23.
19. Roy, Power Politics.
20. Barry K. Gills, ed., Globalization and the Politics of Resistance (New York: Palgrave, 2001); Ton
Mertes, ed., A Movement of Movements (London: Verso, 2004); Walden Bello, Deglobalization: Ideas for a
New World Economy (London: Zed Books, 2002); Ponna Wignaraja, ed., New Social Movements in the
South: Empowering the People (London: Zed Books, 1993); and Jeremy Brecher, Tim Costello, and Brendan
Smith, Globalization from Below: The Power of Solidarity (Cambridge, MA: South End Press, 2000).
21. Mertes, A Movement of Movements; and Walden Bello, Deglobalization: Ideas for a New World
Economy (London, Zed Books, 2002).
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