Introduction (Economic Transitions to Neoliberalism in Middle-Income Countries)

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Introduction
Alfredo Saad-Filho and Galip L. Yalman
The chapters in this collection address three key issues for middle-income coun-
tries. First, how can neoliberalism be dened and distinguished from other
phases, stages or congurations of capitalism. This includes the relationship
between neoliberalism, markets, society and the state, neoliberalism and eco-
nomic policy, and neoliberalism and globalisation. Second, how to interpret the
transition to neoliberalism and the transformative processes that have ensued
from it, as well as the resistance against it in eight middle-income countries
(Brazil, China, India, Mexico, South Africa, South Korea, Turkey and Vene-
zuela).1 Third, what are the prospects for the neoliberal order and for resistance
in these countries, given the ongoing crisis of global capitalism.
It would have been impossible to impose a narrow interpretative framework
across all chapters included in this book because the transition to neoliberalism,
the performance of the neoliberal regimes and the resistance against neoliberal-
ism are context-specic. Nevertheless, the contributors to this volume depart
from a set of common perspectives which facilitates cross-country comparisons.
Neoliberalism is the contemporary form of capitalism, and it is based on the sys-
tematic use of state power to impose, under the veil of ‘non-intervention’, a
hegemonic project of recomposition of the rule of capital in most areas of social
life. This project emerged gradually after the partial disintegration of post-war
Keynesianism and developmentalism in the 1970s and 1980s, and it has led to
the reconstitution of economic and social relations of subordination in those
countries where neoliberalism has been imposed. The tensions and displace-
ments embedded within global neoliberalism are nowhere more evident than in
the middle-income countries.
At the domestic level, the neoliberal transitions have transformed the material
basis of social reproduction in these countries. These changes include shifts in
economic and social policy, property rights, the country’s insertion into the inter-
national economy, and the modalities of exploitation and social domination. The
political counterpart of these processes is the incremental limitation of the
domestic political sphere through the insulation of ‘markets’ and investors from
democratic and social accountability, and the imposition of a stronger imperative
of labour control allegedly to promote international competitiveness. These eco-
nomic and political shifts have reduced the scope for universal welfare provision
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2 A. Saad-Filho and G.L. Yalman
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and led to regressive distributive shifts and higher unemployment and job inse-
curity in most countries. They have also created an income-concentrating
dynamics of accumulation that is largely immune to (marginal) Keynesian and
reformist interventions.
The inability of the neoliberal reforms to support higher levels of investment,
growth and welfare provision for the majority of the population is well known.
However, this is not sufcient to demonstrate the ‘failure’ of neoliberalism. For
the primary purpose of the neoliberal reforms, although presented otherwise, is
not to promote faster growth, reduce ination or even to increase the portfolio
choices of the nancial institutions. It is to subordinate local working classes and
domestic accumulation to international imperatives, promote the microeconomic
integration between competing capitals, and expand the scope for nancial
system intermediation of the three key sources of capital in the economy: the
state budget, the banking system and the balance of payments.
Resistance against neoliberalism has taken a plurality of forms, including
mass revolt and the development and implementation of alternative institutions
and frameworks for economic and social policy. This book examines these chal-
lenges both analytically and empirically in specic contexts. Correspondingly,
the chapters are grouped into two parts, ‘Neoliberalism and globalisation’ and
‘Country experiences’.
In the rst chapter in Part I, ‘Neoliberalism as nancialisation’, Ben Fine
offers a broad-ranging review of neoliberalism and the current crisis. He argues
that the current nancial crisis has exposed the contradictions of neoliberalism,
not simply as a dysfunctional economic system but equally as a hegemonic ideo-
logical project. Paradoxically, the state intervention to rescue nance appears
both to conform and to break with neoliberalism in terms of its breach with the
market, and the priority of support offered to the most parasitic forms of capital.
This paradox is resolved through the prism of three separate perspectives. First,
the scholarship, rhetoric and policies of neoliberalism are not necessarily con-
sistent with one another and have a shifting relation to one another. Second, neo-
liberalism has gone through two phases, both actively promoting the ‘market’,
but the later and current phase witnessing explicit calls upon the state to under-
pin the process and moderate its effects. Third, that the duration of neoliberalism
across its two phases and its articulation of scholarship, rhetoric and policy are
underpinned by the process of nancialisation.
In Chapter 2, ‘The continuing ecological dominance of neoliberalism in the
crisis’, Bob Jessop distinguishes four main forms of neoliberalism and relates
them to the logic of capital accumulation and the territorial logic of imperialism
within the world market and the interstate system. Although the high-point of
neoliberalism occurred in 1985–97, neoliberalism continues to exercise ‘ecolo-
gical dominance’ over the world market through its crisis-tendencies and path-
dependent policy effects. This chapter denes ecological dominance, and shows
how nancial capital can be interpreted as ecologically dominant in this context.
It also suggests how the logic of the neoliberal regime shift in the United States
has been shaped by the ecological dominance of nance and how this, in turn,
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Introduction 3
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has the most signicant impact on the unfolding crisis. The chapter concludes
with remarks on the contradictions and limits of US domination.
Ergin Yıldızoğlu examines ‘Globalisation as a crisis form’ in Chapter 3. This
chapter claims that globalisation is a manifestation of the recurring crises of the
capitalist mode of production, and that neoliberal globalisation emerged, origin-
ally, as a mode of crisis management. It eventually exhausted itself after trans-
ferring enormous wealth and power to the top echelons of society. With the
arrival of the current nancial crisis, the credit crunch and the post-bubble
depression economy, this era is ending, and a new period of uncertainty is
unfolding.
In Chapter 4, Ngai-Ling Sum reviews the ‘Cultural political economy of neo-
liberalism’. This chapter applies cultural political economy to the recent emer-
gence of competitiveness as a transnational constellation of hegemonic
discourses and practices. This approach takes a cultural-discursive turn analys-
ing the processes and mechanisms whereby hegemony is constituted and negoti-
ated in and across (trans-)national institutional orders and civil society. It then
turns to the role of economic imaginaries about competitiveness in constituting
objects of economic calculation, management, governance, and so on. The
Harvard Business School variant of competitiveness analysis provides a case
study. This has moved from a theoretical paradigm to a policy paradigm and,
most recently, a knowledge brand with signicant effects in the neoliberal (re-)
making of social relations. The chapter explores how this knowledge brand has
been extended globally via knowledge apparatuses and other technologies of
power, especially in East Asia. It then describes how this hegemonic logic of
competitiveness is being challenged and negotiated.
Susanne Soederberg analyses, in Chapter 5, ‘Socially responsible investment
and neoliberal discipline in emerging markets’. Since the early 1990s, private
investment ows have dominated global development nance. Alongside foreign
direct investment, equity nance has become an important source of capital for
corporations in the middle-income countries. Western institutional investors, pri-
marily US-based pension funds, dominate this new geography of equity nancing.
The US-based public pension fund, California Public Employees Retirement
System (CalPERS) is one of the largest pension funds in the world, but also the
rst institutional investor to employ a benchmarking strategy based on both nan-
cial and non-nancial (social) criteria. This chapter contextualises CalPERS’
benchmarking strategy, or the ‘Permissible Country Index’ (PCI), within the of-
cial development agenda. It is argued that the PCI mirrors neoliberal-led discourses
and policies. It aims not only to encourage a greater involvement of the private
sector in development, but also to legitimate deepening forms of dependency on,
and discipline of, foreign capital in emerging markets.
In the sixth chapter, ‘Global unions and global capitalism’, Seyhan Erdoğdu
examines the international unionism as represented by the ICFTU/ICTU and the
global union federations. In the early 1980s, these organisations tried to develop
a global Keynesianism to confront the emerging neoliberal globalisation. This
short-lived project was replaced by a liberal reformist approach in the 1990s,
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which conceived globalisation as an irreversible challenge with potential bene-
ts, and tried to reform its negative aspects by adding a social dimension without
altering its basic structure. Since the turn of the century, as it became increas-
ingly evident that neoliberal globalisation generates unemployment, poverty and
social exclusion, changes have emerged in the discourse of the global union
movement. However, the practical implications of this social reformism remain
to be seen.
In the nal chapter of Part I, Filiz Zabçı examines ‘Neoliberalism and the pol-
itics of war’. This chapter argues that the occupation of Iraq offers a striking
example of the relationship between war and politics, because it demonstrates
that war has become a key mechanism for the expansion of neoliberal policies
and nancialisation. US strategy aims not only to control energy sources but,
more broadly, to support the expansion of corporate capitalism to regions where
neoliberal policies have yet to be implemented. In the case of Iraq, the invasion
was an instrument of toppling Saddam Hussein’s interventionist state and imple-
menting neoliberal economic policies. The new economic agenda and new eco-
nomic laws imposed in the country paved the way for the privatisation of Iraqi
oil, and opened the market for foreign oil companies.
In the rst chapter in Part II, ‘State, class and the discourse’, Pınar Bedirhanoğlu
and Galip L. Yalman identify the processes and strategies that have put an end to
class-based politics in the neoliberal period in Turkey. They focus on the implica-
tions of the 1980 coup d’état, 1989 capital account liberalisation, the rise of ethnic,
religious and nationalist conicts, and the anti-statist hegemonic discourse. This
chapter argues that the neoliberal authoritarian form which the state acquired in the
1980s has persisted through the powerful articulation of economic, political and
cultural processes. It is also claimed that the AKP promises to reproduce neoliberal
authoritarianism in Turkey in a liberal-Islamist-cum-conservative form, suggesting
that it represents continuity in terms of state–class relations whilst claiming to ini-
tiate radical changes in state–society relations.
In Chapter 9, Alessandra Mezzadri examines ‘Neoliberalism, industrial
restructuring and labour’. The rise of globalisation has triggered a process of
economic restructuring which profoundly impacted the industrial trajectories of
the middle-income countries. The shift to export-oriented industrialisation, in
particular, meant that several countries became production nodes within global
manufacturing chains, mainly competing according to their comparative advant-
age in cheap labour. Examining the Delhi garment industry, this chapter shows
the complexities behind the provision of cheap labour for neoliberal global pro-
duction. Indian exporters reproduce their comparative advantage through a wide
variety of social institutions and structural differences, ranging across mobility,
gender, age and geographical provenance. On the one hand, exporters’ strategies
to minimise labour costs trigger a process of commodication of labour power
which exploits the social prole of the workers even before they enter the labour
market. On the other hand, in the context of such strategies, Indian social institu-
tions and structures are transnationalised and acquire broader regulatory mean-
ings in the context of neoliberal global production.
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Introduction 5
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Hae-Yung Song, in Chapter 10, offers an innovative interpretation of ‘The
developmental state and the neoliberal transition in South Korea’. This chapter
assesses the Korean developmental state and its post-1997 neoliberal transforma-
tion beyond statism, or the notion that the state is separate and independent from
society and the economy. This chapter critically appraises the established literat-
ure on the Korean state, and highlights how pervasive statist assumptions are in
this literature, and how the statist framework connes the way in which the trans-
formation of the Korean state is understood in terms of a pendulum oscillating
between the state and the market and between the state and the global economy.
This chapter proposes an alternative framework based on the form analysis of the
state, and offers a novel reading of the Korean developmental state and its neolib-
eral transformation. It is argued that the neoliberal transition of Korea can be
understood as the rise of a new modality of social domination rather than a
reversal of the domination of the ‘state’ over ‘capital’ (or ‘the economy’).
Subsequently, in Chapter 11, Seongjin Jeong examines the ‘Korean left
debates on alternatives to neoliberalism’. These debates have ourished because
of the decade-long period of low growth and deepening social polarisation in the
country since 1997. This chapter evaluates these left alternatives from a Marxist
standpoint. First, it criticises the thesis that the neoliberalism has established a
‘nance-led accumulation regime’ in Korea. Instead, neoliberalism has deepened
the low growth trajectory of the economy, increasing social inequalities and pro-
moting denationalisation. This chapter also claims that the economic policy of the
current Lee Myung-bak administration combines an outdated version of Park
Chung-Hee’s model of state capitalism with the neoliberal ‘big bang’. Other pro-
gressive alternatives, including Ha-Joon Chang’s ‘Democratic Welfare State
Model’ and the Keynesian ‘Strategy for Social Solidarity’ are contrasting variants
of national reformism, and they are far from being anti-capitalist. This chapter
concludes by conrming the relevance of Marxian socialist alternatives in Korea.
Chapter 12, by Dic Lo and Yu Zhang, examines ‘China and the quest for
alternatives to neoliberalism’. China’s sustained rapid economic growth during
the last three decades has been achieved mainly through a process of ‘governing
the market’ by a set of structural-institutional factors that are China-specic, but
can be of general importance for late development worldwide. This chapter
claims that the Chinese experience offers important lessons for the quest of
alternative models of economic development deviating from neoliberalism.
In Chapter 13, Henry Bernstein examines ‘Globalisation, neoliberalism,
labour, with reference to South Africa’. This chapter rst revisits Marx’s concept
of the reserve army of labour, and then seeks to elaborate its utility for under-
standing processes affecting the classes of labour today, with special reference to
the informalisation of employment and internal fragmentations of classes of
labour. Those fragmentations reect how the contours of social difference like
gender, ethnicity and caste intersect with those of class to structure specic divi-
sions of labour and labour regimes, with implications for class politics and resist-
ance. This is illustrated in relation to the fortunes of the classes of labour in
South Africa since the end of apartheid in 1994.
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Armando Boito, in Chapter 14, reviews ‘Social class and politics in Brazil’.
This chapter argues that the Lula administration represents a new political phase
of neoliberal capitalism in Brazil. At the level of political power, national and
transnational nancial capital was constrained to share their hegemony with the
domestic industrial bourgeoisie. Among the working class, the new unionist elite
has established an alliance with the domestic bourgeoisie against nancial
capital, while the poor and unorganised workers are linked to the Lula adminis-
tration as a passive base for ‘lulismo’, a political phenomenon separate from the
president’s Workers Party (PT). ‘Lulismo’ expresses a paradoxical alliance
between the richest and the poorest, bringing together the two extremes of Bra-
zilian society in such a way that the bourgeoisie ultimately wins.
Alejandro Valle Baeza offers a broader analysis of neoliberalism in Latin
America in Chapter 15, ‘Is there an acceptable future for workers in capital-
ism?’. This chapter suggests that there is no decent future in sight for the
workers, especially in the poor and middle-income countries. This is largely
because of the growth of unemployment and precarious employment relations,
connected to the ongoing ‘race to the bottom’ by workers trying to keep their
jobs. This process has been going on for several years, but it is likely to intensify
further with the current crisis of global capitalism. Socialism or barbarism is the
dilemma that we will have to face in the not-too-distant future.
In Chapter 16, Al Campbell and Hasan Cömert examine ‘Progressive Third
World Central Banking and the case of Venezuela’. While neoliberalism was
broadly adopted by capitalism around the world during the 1980s, it did not
clearly articulate its own Central Bank policy until the 1990s, when it was
declared that ination targeting was the optimal Central Bank policy. The social,
political and economic reaction against neoliberalism has included the develop-
ment of a progressive exible alternative Central Bank policy. While the goal of
the former is to promote the development and prots of nancial capital, the goal
of the latter is broad economic, social and human development. Having con-
sidered these two opposing approaches, this chapter turns to consider the Central
Bank of Venezuela (BCV). Despite the anti-neoliberal revolution that began in
Venezuela in 1999, the BCV rather surprisingly remained largely neoliberal until
2005. As documented by both its declarations and its actions, that year the BCV
consciously switched to a progressive orientation. While its specic policies and
practices are, and will remain, in a state of constant modication and augmenta-
tion, the BCV today provides an interesting and important case study of both
possible successes and problems linked to implementing a progressive Central
Bank policy in a capitalist economy.
Aylin Topal, in Chapter 17, reviews the ‘Transition to neoliberalism and
decentralisation policies in Mexico’. The main purpose of this chapter is to
explain why decentralisation policies were implemented together with the neo-
liberal transition in Mexico. This chapter suggests that this was because of the
development of inter- and intra-class relations in Mexico, in the context of the
crisis of hegemony of the post-war model of development. This crisis involved a
shift in the economic development policies, and an institutional restructuring
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Introduction 7
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which reformed the ties between classes and political parties. In Mexico, collect-
ive pressures and struggles placed decentralisation policies at the juncture of
these processes. While certain fractions of capital demanded a reorganisation
of the state to allow market forces to operate at the local level, the working
classes stepped up their demand for more participatory and democratic local
politics. When the debt crisis hit the country in 1982, the international nancial
institutions steered the government’s policy reforms, which took the form of the
decentralisation policies.
We are deeply indebted to the contributors for being always prepared to
return to their chapters over and over again to satisfy our demands and those of
the referees and the publishers. We would also wish to thank the Scientic and
Technological Research Council of Turkey (TÜBİTAK), Middle East Technical
University, Faculty of Economics and Administrative Sciences (METU-FEAS),
the British Council, the International Sociological Association (ISA) and
Friedrich Ebert Stiftung for their generous support to the conference, organised
by the Turkish Social Sciences Association (TSSA) to commemorate its fortieth
anniversary in Ankara, where most of the papers included in this volume were
initially presented. Funda Hülagü, Susan Haji-Javad and Ali Riza Güngen pro-
vided considerable support towards the preparation of this book. Bethany Lewis
and Thomas Sutton from Routledge and their colleagues were extremely sup-
portive throughout the life of this project.
Note
1 In this book, the category ‘middle-income country’ is dened, selectively, in terms of
both GDP per capita and absolute levels of GDP. This includes countries with rela-
tively high GDP per capita, for example Mexico and South Korea, as well as large and
dynamic economies with low GDP per capita, especially China and India.
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