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Neoliberalism – A Not So New Idea

By Markar Melkonian

For years, farmers, villagers, and environmental activists have been protesting the pollution of rivers, topsoil, and aquifers by mining operations in Lori, Syunik, and other regions.  Readers of Hetq are aware that the protests have been building.  Mining is one of several flashpoints of environmental activism in Armenia, and the environment is one of several flashpoints in the escalating struggle against the consequences of capitalist rule in Armenia.  (For a nice run-down of developments and a list of further sources, see:  Dr. Armine Ishkanian, “Civil Society, Development, and Environmental Activism in Armenia,” 2013, http://eprints.lse.ac.uk.)

Ever since 1999, when a previous administration in Yerevan began privatizing the mining sector, the industry has been characterized by low taxation, lax regulation, few restrictions on capital transfer, and the “externalization” of environmental and social costs of production.  These are all familiar themes associated with the word neoliberalism.  Let us take a closer look at that prominent word. 

What Is Neoliberalism?

Twenty-five years ago, orators in Yerevan’s Opera Square loudly proclaimed the failure of socialism—or as they put it, “communism”--as a social experiment.  Folk singers, philologists, self-described human rights activists, and other recipients of free higher education under “communism” grabbed up the bullhorns.  They declared that everyone was tired, sick to the stomach really, of being treated like laboratory animals in a grand historical experiment.  They demanded that Armenia join the community of “normal civilized countries”--countries with Free Market economies, individual freedom, and consumer goods galore, thanks to an economic system that acknowledges that humans are competitive and greedy by nature.

Soon enough, demonstrators in Opera Square were waving placards emblazoned with Ronald Reagan’s inspiring image.  Armenia would follow Reagan’s path, which one of the orators described as “the path leading to happiness.”  New Thinking was in the air, and a large part of that New Thinking included what people today call neoliberalism.

Meanwhile, the same American agencies that were promoting New Thinking in cities like Yerevan were promoting Wahhabi Islam in cities like Peshawar.  Readers might have seen the YouTube clip of long-time U.S. National Security Advisor Zbigniew Brzezinski in Pakistan in 1979, index finger pointing to heaven, exhorting Afghan Jihadists to victory “because your cause is right and God is on your side” (www.youtube.com/watch?v=hrBuBAaXpSM).  This was a slightly different message for a slightly different audience than the one in Yerevan, but it served the same purpose, namely, winning hearts and minds for imperialism.

Neoliberalism.  Like so many other buzzwords reverberating around the conference halls and websites of the big NGO’s, this one, too, has been attached to various and sometimes-inconsistent meanings.  At the turn of the twentieth century, for example, self-described neoliberals endorsed a “strong and impartial state” to facilitate the market, and during the 1930’s some self-described neoliberals supported what they believed was a sort of middle way between classical liberalism and socialist planning.  By contrast, neoliberals these days typically insist on minimal state spending (on everything except corporate welfare and the military) and “small government.”

According to The Handbook of Neoliberalism (2016), quoted in the Wikipedia entry, the word refers to “the new political, economic and social arrangements within society that emphasize market relations, re-tasking the role of the state, and individual responsibility.”  It is “the extension of competitive markets into all areas of life, including the economy, politics, and society.”  We have been told that the private sphere is primeval, that citizens are consumers, that democracy is the aggregation of pre-given individual preferences, that public policy consists of compromises among these private interests, and that the common good is an illusion. 

But what are we to make of the claim that neoliberalism describes new political, economic, and social arrangements?  Sorting through the various meanings attached to the word, one will encounter such ideas as privatization, deregulation, fiscal austerity, free trade, the priority of the price mechanism and the system of competition, “small government,” and opposition to labor union influence as a market distortion.  All of these are policy prescriptions associated with 19th century laissez-faire economic liberalism.  So neither the word neoliberalism nor the main ideas associated with the word today are new.

What, then, is neoliberalism?  Whatever it may be, it is not a new “bad kind” of capitalism that we can contrast to a good old kind.  Rather, it appears to be a vague and shifting ideology or rhetorical strategy to extend and intensify capitalist rule.  This latter point should become clearer as we consider a benchmark case of neoliberal experimentation. 

The Chilean Experiment

The Great Depression of the 1930s blew a hole in neoliberal credibility, but only temporarily.  The term made a comeback after September 11, 1973 and the bloody overthrow of the democratically elected President of the Republic of Chile in a CIA-backed coup.  In the first days of the coup, the plotters put an end to 4000 “private” lives.  Thousands more followed in the years to come, and an estimated 40,000 were tortured (LA Times, 12 Sept. 2013).

March 2017 in Chile, hundreds of thousands of protesters take to the streets to demand an end to privatized pensions

Not long after the coup, the new dictator, General Augusto Pinochet, embraced the celebrated University of Chicago economist and Nobel laureate Milton Friedman.  Friedman’s little book Capitalism and Freedom had been translated into dozens of languages and widely distributed--by agencies of the very states that, according to Friedman’s theory, were supposed to keep their noses out of such things.  Suddenly, Chilean workers were “Free to Chose” (to quote the title of another of Friedman’s best-selling books at the time):  they could either try to escape their country into exile, die in a torture chamber, or live in poverty and fear under Milton Friedman’s Free Market.

Under the rule of Pinochet and the neoliberal economists, Chile was undertaking what the conservative American magazine Business Week described as a “laboratory experiment” for taming inflation through monetary control.  Like Armenia, much of Chile’s export earnings depended on mining.  By 1982, after years of ballooning trade deficits, plummeting copper prices accelerated Chile’s balance of trade deficit.  GDP plunged fifteen percent, while industrial production rapidly contracted.  Bankruptcies tripled and unemployment, which averaged seventeen percent during Pinochet’s rule, hit thirty percent.  Pinochet devalued the currency, further devastating poor Chileans.  The Central Bank lost forty-five percent of its reserves, while the private banking system collapsed, too.  In the midst of this massive impoverishment, Pinochet turned to the IMF for a bailout and extended a public guarantee to repay foreign creditors and banks.

By 1990, when the country returned to democracy, 44.4% of Chileans were living in poverty, compared with 20% in 1970.  Western commentators declared the resounding success of the Chilean Miracle.  Thanks to considerable publicly funded support from “big government” in Washington DC and London, neoliberalism was on the march across the planet.

The Bell Tolls for Armenia

At this point, some of our more inwardly directed readers might have become impatient:  What does Chile forty years ago have to do with Armenia today?  The short answer is that both were transformed into laboratories for social engineering in the name of neoliberalism.  In the case of Chile, the experiment was forced on the majority population, in the face of active, organized resistance.  In the case of Armenia, by contrast, anti-Soviet demagogues lead a confused and gullible generation down the primrose path to ruin.

As soon as the counterrevolutionaries won their victory in Yerevan, the IMF, the World Bank, and the U.S. Treasury Department descended on the country with their Shock Therapy, their Structural Adjustment, their conditionalities, and all the rest of it.  The orators, folk singers, and philologists who had fulminated against social experimentation during the Soviet period suddenly embraced social experimentation under capitalist rule.  Armenia became yet another laboratory for Free Market experimentation, and the population that remained in the country was transformed into so many docile human guinea pigs. 

Capitalist rule in Armenia has a record that we may compare to the record of the soviet years:  rampant unemployment, emigration, and suicide rates; plummeting life expectancies, birth rates, and access to basic healthcare; soaring infant mortality rates, abortion, alcoholism, domestic abuse, street crime, occupational injuries, poisoned rivers, and so on.

Let us narrow our view for a moment to the neoliberal imperative for privatization.  How has that worked out for Armenia?  If one wishes, one may even ignore the calamitous shock therapy privatization of the early 1990’s, and focus instead on subsequent, less dramatic privatization efforts.  How have these efforts worked out when it comes to the electrical grid?  Pensions?  Public transport?  Healthcare?   

Consider privatization of pensions.  Even as hundreds of thousands of Chileans were taking to the streets to demand an end to Pinochet’s disastrous privatization of their pensions, Armenia’s National Assembly invited a champion of the Friedman-Pinochet pension privatization program to Yerevan.  As the economist Ara Khanjian observed, Armenia was one of only a few countries that adopted “the extreme model of Chile,” which required compulsory payroll contributions to private individual accounts (“Chile’s Private Pension Crisis and Armenia,” 7 Oct. 2016, Asbarez.com).  True to form, the leaders of Free Independent Armenia acted without bothering with the formality of public debate or democracy. 

As readers know, the pension privatization plan provoked the Dem.am mass protests in March 2014.  Faced with strong public opposition, the government in Yerevan announced that it would postpone complete implementation to July 2018.  Despite the protests, though, the privatization scheme remains in place.           

*      *      *

Neoliberalism is the name of an ideology and a policy orientation that capitalist rulers have resorted to when working class opposition is at low ebb.  This happened in Chile after the 1973 coup, and elsewhere in Latin America during the dictatorships and the dirty wars.  It happened after Margaret Thatcher’s victory in England in 1979, and in the USA at the time of Reagan’s election a year later.  And it has been happening in Armenia ever since the counterrevolution in the early 1990’s.

As it turns out, the Great Recession of 2007 blew another hole in neoliberalism.   It even shook the faith of none other than Alan Greenspan, a disciple of Friedman and Chairman of the Federal Reserve of the United States from 1987 to 2006.  During a U.S. Congressional hearing, Greenspan reportedly had the following exchange with Representative Henry A. Waxman: 

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

                                (New York Times, 23 Oct. 2008)

Greenspan’s faith has been shaken, and these days many people do not like the sound of the word neoliberalism.  But the policies remain in place, and we can be sure that the ideology will make a comeback, too, by that name or by a shiny new name, just as soon as our capitalist rulers and their economist priests think that they can get away with it. 

Top Photo - April 2014 in Yerevan: thousands of protesters take to the streets to oppose privatization of pensions / Photolur

Markar Melkonian is a teacher and an author. His books include Richard Rorty’s Politics:  Liberalism at the End of the American Century (1999), Marxism: A Post-Cold War Primer (Westview Press, 1996), and My Brother’s Road (2005)

Comments (2)

Mher
Sadly, many apologists of liberal economics would argue that if only the capitalists now holding sway in Armenia weren't corrupt and better technicians, things would be much better.
Hagop
Markar, in one of your other articles, you stated we don't need 'Zionist' support. I would say, you are contradicting yourself by next engaging in pro-Communist propaganda. Marxism, Bolshevism, Communism and Zionism are ALL of the same spirit, and also of the same source, and for the benefit of the same people despite that some would claim that Zionism and Communism are opposites. In recent history these two were only opposed to one another as a show for the dupes that believed it. For the past century, we Armenians were and are the victims of this movement and we are still dupes. All of the above ideas starting with Marx are contrary and antithetical to us Armenians, both in the way of our values, culture, and future. And please do not make it look like there is no difference between Socialism and Communism. Unlike Communism, Socialism never capitulated under its own weight. The last line of defense of this absurd ideology of Communism is China, and even here China had to turn to Capitalism to sustain itself and move forward, and it has been that way for many decades. I would even question if China is even Communist any more. Bottom line, all of this talk about Communism vs Capitalism is useless. No nation has, nor has ever had, a singular pure form of these ideas as its political system.

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