Joseph Choonara spoke to Socialist Worker UK about the breaks and continuities of neoliberalism as Trump’s trade war escalates
Do today’s trade wars signal the end of the neoliberal era?
The issue here is what you mean by neoliberalism. No two writers agree on what the term means.
What’s true is that there were a series of policies and strategies adopted by sections of the ruling class in the 1980s, often badged as neoliberalism. These included policies such as the outsourcing and privatisation of public services.
After that initial implementation, you have a period in the 1990s characterised by what you could call “neoliberal imperialism”.
You saw parts of the ruling class, including United States president Bill Clinton and British prime minister Tony Blair, trying by force or persuasion, to extend the supposed benefits of neoliberalism abroad.
They wanted to construct a global economy in which market forces would have enormous power and firms could trade and invest freely across borders.
Back then, trade tariffs tended to fall year after year. That seems to have been brought to a halt.
To what extent did neoliberalism make life under capitalism worse?
We must be careful about nostalgia for the pre-neoliberal era, which the left falls into quite a lot. You often hear left-wing commentators saying the enemy is neoliberalism, when, more fundamentally, the enemy is a capitalist system built around profits, exploitation, oppression and imperialism.
The “Keynesian consensus”, policies that managed capitalism predominantly in the West in the post-war period, really began to break down amid the crisis of the 1970s.
There were two things happening in this period. First, there was a growing integration of capital across borders. Powerful corporations found national economies too restrictive and wanted to spread their operations.
Second, the global economy entered a series of crises that the old Keynesian policies of state intervention were unable to solve.
Accompanying this, from the late 1960s and into the 1970s, there was a huge wave of workers’ struggles internationally.
The ruling class looked for ideological support to give policies and practices more coherence.
This included reviving ideologies centred on free-market mechanisms that first emerged in the 1930s and 1940s.
However, rulers also responded to the crisis pragmatically. So, neoliberal theory said the state should withdraw from the economy. But that’s not what happened. In major capitalist economies, state spending still makes up approximately 40 per cent of GDP.
So, it’s not true that the state disappears in this neoliberal shift. But you do get shifts in government policies—and sharp attacks on the working class.
What has brought the neoliberal period to an end?
The ruling class have continued to enrich themselves, but neoliberalism’s problem was that it did not unleash a new period of capitalist dynamism.
There were occasional bursts of growth. But not a restoration of levels of the kind of sustained expansion witnessed in the immediate post-war decades.
The crisis of the 1970s was rooted in a long-term decline in profitability, something that Karl Marx talked about a century before. He argued this came because more investment builds up across the system relative to the amount of profit it can squeeze out of workers.
So, Marx argues that to restore profitability, capitalism needs a thoroughgoing crisis that can destroy or devalue large chunks of that investment and pave the way for a new boom.
That didn’t happen under neoliberalism. The units of capital had become so huge, so intertwined with the state, that allowing giant firms to go under risked a wider slump.
Instead, we had escalating state intervention to bail out big sections of capital, and to stop the crisis fully taking hold.
The consequence of that is that profit rates remain low.
Was it over reliance on the financial markets that broke neoliberalism?
Growing debt and financial innovation were important elements of neoliberalism, helping to drive the economy forward and give the impression of dynamism.
But in the 2008-9 financial crisis we began to see the limits of this credit generated growth.
Two other things were also happening by then.
First, there was the dramatic rise of China, accompanying the long-term decline of the US’s economic dominance.
In 1960, the US controlled 40 per cent of global GDP. Today, it’s down to 25 per cent.
If we go back to the high point of neoliberalism—to 2001 when China joined the World Trade Organisation—there was a notion that China was going to become more like the US. Commentators expected that as China joined global markets, there would be political liberalisation, and it would then be welcomed into the Western camp.
Instead, by deploying the state extremely powerfully to direct capital, China forced the West to think about how it deploys its own states to compete.
Second, the multiple crises that rocked the system generated huge antipathy towards neoliberalism. Politicians, from both the centre left and centre right, had earlier converged around neoliberal policies. But now more radical politicians, both those of the left and right-wingers such as Donald Trump, have capitalised on that antipathy.
The pandemic saw the return of the state as an economic player in the West. Is that something socialists should welcome?
We’re entering a new phase, which will contain elements of previous periods, but also, big differences. To navigate this we must break the association of statism with socialism.
The state remains a capitalist state. It has evolved over a long period to help to manage and protect capitalist accumulation.
Even in the most extreme cases of statisation, if it’s still an economy that’s competing with other units of capital on a global scale, it’s not socialism.
That’s why our political tradition always rejected the idea that the Soviet Union was a socialist society. We argued it was a form of state capitalism.
The return of the state to the centre of economic life is a shift within capitalism, one that can be associated with deepening authoritarianism.
We also must understand that the kinds of policies enacted by Trump, though in some ways different from neoliberalism, remain heavily pro-market, de-regulationist, and tax-cutting.
We are not seeing a clean break with neoliberalism and the embrace of some Keynesian agenda.
If neoliberalism is over, what policies will shape the world in the future?
There will be a lot of pragmatic experimentation from ruling classes as they move towards a new approach. And they still face constraints.
US President Joe Biden tried to use government investment and industry policy to promote US manufacturing in new technologies such as semiconductor chips, electric cars and batteries.
This was driven by the fear that China is going to dominate these new sectors.
In Australia, Anthony Albanese has sought to develop his own version of this with his “Future Made in Australia” policies.
This will see billions of dollars of investment to establish manufacturing of solar panels, hydrogen, as well as the mining of critical minerals and rare earth metals that are vital for technologies including batteries, electric vehicles and electronics.
Alongside this is a massive expansion in the domestic arms industry, producing everything from missiles to nuclear submarines, as part of the military build-up against China.
These state investments, however, are small in comparison to those in the US and manufacturing in China. Albanese has pledged $22.7 billion, and over ten years, compared to the $2.4 trillion Biden announced.
And whether they will work to establish new industries is uncertain. The decision to hand over $2.4 billion to keep open and upgrade the Whyalla steelworks shows the difficulties for domestic manufacturing.
Labor here is constrained not just by the size of the Australian economy, but by pressure from big business to limit government spending and avoid any need to raise taxes.
The internationalisation of capital reinforces that problem.
The government is constrained by the globally integrated financial markets that would punish any move to seriously increase government spending and debt.
However, a feature of the return of the state to the centre of economic life is that it becomes a political question for workers and the left.
A lot of working class people looked at the response to the financial crash of 2008-9, when there were huge bank bailouts, and then looked at the furlough scheme and the measures to protect capitalism during the pandemic. And they say, if you can bail out the system, why can’t you intervene to make my life better?
That opens terrain where the left should make demands of the state. And, critically, we have to talk about struggle, and how we might enforce those demands.
