opinion

The end of neoliberalism
and the economic crisis
by Marco A. Gandásegui, hijo

The crisis of capitalism is not the same as the crisis of neoliberalism. Neoliberalism was a political strategy used to mitigate the crisis of capitalism which, beginning in the decade of the 1970s, stopped generating the profits needed to reproduce the system. Neoliberalism attempted to mitigate the crisis by way of three concrete actions: globalization, deregulation and "flexibilization" of the remaining controls.

Neoliberal policies failed in their attempt to hinder the collapse of capitalism as a system capable of generating surpluses. Neoliberalism --- during the last quarter of the 20th century --- scored various triumphs which created false expectations among its defenders. In the first place, it obtained resounding successes on the political plane, knocking out labor organizations and appropriating a greater share of their members' incomes. Reagan and Thatcher opened the road to a new style of generating profits. Some called this new model of accumulation "financialization" of the global economy.

The crisis of the capitalist system in the 70s shook the foundations of the world's market economies. Even more spectacular, and interpreted as another grand political triumph of capitalism, was the collapse of the "real socialist" economies at the end of the 80s.

Neoliberal policies, promoted by international financial institutions and the great powers, transferred wealth on a global scale by way of rapine and "accumulation by dispossession," as David Harvey called it. It started, by way of deregulation, with the workers in the so-called public enterprises, with the privatization of many things, including even the water supply. Similarly, flexibilization reduced the participation of the working class in the distribution of the wealth that was being generated by their labor.

Despite the neoliberal policies that were transferring ever more wealth from the working sectors to the capitalist class, the system went on without the ability to generate profits. Between 1975 and 2005, instead of investing in productive activities (which couldn't make a profit), the speculators invested in the financial sectors which were creating artificial mechanisms still capable of mobilizing accumulated capital. The mechanisms, which created the so-called bubbles, were able to generate profits for a time but without creating any new wealth.

The financial crisis based on the collapse of the real estate bubble on the New York stock market is one of the --- but not the principal --- causes of the crisis that has been dragging down the capitalist system for the past quarter-century or so. When the sub-prime mortgage bubble popped, billions of dollars in paper wealth disappeared and the imperialist states rushed to save their financial mechanisms. But the real economy sank and continues in a state of recession without prospects of a future recovery.

The injection of more than one trillion dollars into the financial system didn't have as its objective the salvation of the real economy. Its purpose was to save the banking system and the interests of the dominant class. In the finest imperialist tradition, each country took recourse to its own strategies without concern for the fate of the others. The G-8 and G-20 summits were showcases to tranquilize the world's capitalists. In both settings, the members' declarations reflected but one reality: 'Capitalism is bankrupt and we don't know what to do!'

The author is a University of Panama professor and a research associate at the Justo Arosemena Center for Latin American Studies (CELA). Visit his blog at http://marcoagandasegui.blogspot.com.