The Agony of Neo-Liberalism or the End of Civilization?

The defeat of neo-liberalism is no longer a question for debate. The triumph of neo-liberalism never occurred, the economic model of the free market is disintegrating before our eyes, and in the countries of Eastern Europe the words and expressions making up the liberal lexicon have taken on the force of obscenities.

It would seem that the time for alternatives has now come. But where are these alternatives?

When the American philosopher Francis Fukuyama declared that with the triumph of neo-liberalism the end of history had arrived, people first argued with him, then began laughing at him, and finally forgot about him. This, however, was a mistake. When Fukuyama declared the end of history, he did not by any means base his thesis on the economic or social successes of capitalism. In practice, he measured the success of the victorious ideology by a single criterion: the ability of the world ruling class to destroy, suffocate, corrupt or discredit any constructive alternative to itself. If there were no alternatives to capitalism, everything would stay the same whether capitalism was good or bad.

In this sense, we are now even closer to the end of history than in 1989.

The economic failure of neo-liberalism has not led and will not lead automatically to the collapse of its ideological hegemony. The elites of contemporary capitalism cannot resolve the system's objective contradictions, and cannot and do not want to solve its growing problems, but they are capable of paralyzing any attempts to solve these problems on the basis of alternative approaches.

Technological development is not paralyzed by social structures that are clearly outdated and increasingly absurd. This development continues; the only difference is that it ceases to improve people's lives. Indeed, technological development becomes a negative factor. With every turn in the spiral of technological revolution, more and more new contradictions and disproportions accumulate. Relationships become confused, the structures and systems of rule grow steadily more complex, and the processes become less and less predictable.

The "repressive tolerance" of the 1960s has been replaced by repressive or coercive hegemony. The official ideologies no longer convince anyone, but this scarcely troubles the authorities, since they do not allow alternative ideologies to be propagated. Or else, such ideologies are disseminated in fragmentary form, and in this way simply demonstrate their inadequacy as genuine alternatives.

The new information technologies, which in theory have the potential to undermine the dominance of the mass media that are monopolized by the elites, themselves retain an elitist character. Even the "massive" spread of computers has not made them available to the slumdwellers of Rio de Janeiro or the miners of Prokopyevsk in Central Siberia. In short, the new technologies serve not only to unite people, but also to divide them.

Paraphrasing Lenin, one could say that despite the obvious crisis, those on top do not want change, and those underneath cannot achieve it.

The lack of a revolutionary perspective has led to a profound crisis of reformism. Nowhere have the forces of the left been prepared for the new situation. Moreover, the left is itself undergoing a deep moral crisis. Instead of an indispensable reevaluation of values following the events of 1989, there has been massive ideological desertion. Serious discussion on how to interpret the traditions and values of the workers' movement under present day circumstances has been replaced by agitated chatter about what should replace these values.

The traditional program of the left is not only a real alternative, but quite simply the only alternative. The system now is in such a tangle that the only way to deal with its Gordian knot of contradictions is to slice through it. Partial reforms and gradual improvements are becoming possible only as the consequences of radical shifts in the whole structure of society and the economy. Without a broad nationalization of private capital ("the expropriation of the expropriators"), without overcoming the "free market", it is impossible to carry out even a minimal reform of the health care system or to improve social welfare.

Most left parties, however, are not afraid of anything as much as of their own traditions. Instead of discussing what nationalization means today, they are wasting their time trying to prove to the ruling elites that there will not be any nationalizations. The ruling classes, meanwhile, have less than complete trust in these promises, and prefer not to allow leftists to gain access to the levers of real power unless these leftists have given proof of their complete political impotence.

The lack of alternatives is leading to the erosion of all forms of representative democracy. Despite this in this case the crisis of democracy, unlike the case in Europe in the 1920s or in Latin America during the 1970s, is not leading to the rapid collapse of democratic institutions. Instead, these institutions are slowly degenerating and dying out. They are increasingly being by-passed not only by economic decision-making, but even by the political process itself.

The rebirth of fascism in Europe is an important symptom of the crisis. But what is involved is not just the rise of extreme right-wing organizations. The organizations of the political establishment itself are increasingly becoming infected with authoritarian populism. And this is only natural in circumstances where trust in the institutions of representative democracy has been undermined.

A crisis without an alternative is a sign of imminent shocks. In this sense the catastrophe in Rwanda provides humanity with a warning. The West should not comfort itself with the hope that the hunger, bloodshed and economic collapse on the periphery will not touch the centre.

The fall of the civilizations of antiquity also began with collapse on the periphery. In this respect, the past has a terrible lesson to teach us. The "end of history" is not a foolish joke by a person who has read too much Hegel, but a real possibility. Of course, what is at stake is only our own history and our own present-day society. Humanity as a biological species has survived the fall of a series of civilizations. It will also survive the collapse of the "global" bourgeois civilization of our time.

Nevertheless, there is a basis for optimism in the often-demonstrated ability of various societies to find a solution even where organized political forces, traditional institutions and generally recognized elites have shown their total bankruptcy. In such a situation the spontaneous resolving of contradictions "from below" is accompanied by the collapse of all these institutions and elites. What this signifies is shocks on no less a scale than during the ill-fated epoch from 1914 to 1945.

Twenty years ago not even the most hardened pessimist could have imagined an "optimistic" scenario such as this. But it is precisely this scenario that represents the global-historical result of the "success" of neo-liberal reforms. It seems that for the majority of the earth's population, social cataclysms are the only hope left for the future.

The 1980s were bad years for the Left. European socialist parties were already in crisis, but this crisis had become incomparably more acute by the mid 1990s, following the collapse of the communist movement. The presidency of Mitterrand in France began with fine hopes, but is now ending in universal disappointment. The failure of the most serious reformist project in post-war Western history makes it imperative to rethink the question of the possibilities and prospects of reformism. No less striking was the collapse of Soviet perestroika, which can also be described as a type of reformist project, and which had a very strong though also short-lived influence on the entirety of global left wing culture.

The French socialists not only lost their parliamentary majority to the right-wing parties, but even before the rightists returned to power, they had in practice rejected their own reformist project. They prepared the ground for the triumph of the rightists, who not only abolished most of the innovations of the first years of the socialist administration, but also annulled many of the social gains of previous decades. Perestroika in the Soviet Union culminated in the collapse of the Soviet state itself, and in the coming to power of the most decadent section of the old nomenclature. The regime that arose on this basis is best described by the word "kleptocracy" - the rule of thieves. The pillage of the country went ahead in close association with the restoration of capitalist property relations and the subordination of Russia to the interests of the West. This does not at all signify that a genuine capitalism has arisen in the republics of the former Soviet Union, or that it can arise in the near future. Rather, what is involved is a peculiar symbiosis of the traditional corporative-bureaucratic order with the power of comprador and usurer capital.

As a result of the victory of the West in the Cold War, Russia has been transformed into a peripheral within the capitalist world, but there are no grounds for speaking of the birth of Russian capitalism. The neoliberal reforms have led to a massive destruction of productive capacity and to the plunder of resources, but have not served to set in place any kind of serious national capital. The bankruptcy of capitalist modernization is even more obvious in Russia today than it was eighty years ago. This means that new battles and new shocks lie ahead.

The reaction that set in after 1989 differed from all previous reactions in that it succeeded in presenting itself as "progress" and "modernization". This semblance of "progress" was due to the fact that the period of social reaction on the world scale has also been a time of technological renewal. This in itself is nothing new; something similar occurred in the first half of the nineteenth century during the initial stages of the industrial revolution. Only later, and with hindsight, was it to become clear that new technologies do not strengthen the positions of triumphant reactionary elites, but undermine them. At the beginning of the century the introduction of new machines was accompanied directly by the defeat of bourgeois republicanism, by a sharp weakening of the social position of hired workers, and by the installing of a "new world order" within the framework of the Holy Alliance, the first precursor of the United Nations.

It was only later, after the workers' movement had grown in strength thanks to the rise of modern trade unionism and the appearance of the first socialist parties, that reaction gave way to a new revolutionary upsurge. The experience of the century that followed has become fixed in a peculiar piece of labour movement mythology. Here I have in mind two extremely dangerous errors. In the first place, workers and their ideologists became convinced that any technological and industrial development strengthened their position. In the second place all these people, whether socialists or communists, reformists or revolutionaries, viewed history as a rectilinear process of constant movement toward more "advanced" forms of social organization. The forces of reaction could, no doubt, retard or even halt this process, but they could not encroach upon the "irreversible" gains of the workers.

The groundlessness of both these theses has been shown during the 1990s. In this sense the defeats suffered by the forces of the left during this period have been far more serious and demoralizing than all the previous blows of the twentieth century. It was revealed that history does not move in a straight line. The collapse of the historical illusions of the left and labour movement has been accompanied by an unprecedented crisis of values and loss of self-confidence, though the only strategies that were really defeated were the rectilinear ones based on a mechanistic vision of social progress.

Does the defeat of reformism in Western Europe and Russia mean the end of socialist ideology or of class struggle, as liberal ideologues have argued? It is no longer necessary now to be a Marxist in order to maintain the contrary. Left parties are returning to power on the crest of a massive wave of dissatisfaction with neo-liberal policies, and hard-fought strikes in many parts of the world bear witness to the fact that workers have again begun to feel their strength and do not intend to retreat any further. The new technologies have not only given birth to new labour relations, but also to new forms of class consciousness and to new forms of self-organization among the scientific-technical proletariat and white-collar workers.

The neo-liberal myth has shown its bankruptcy, but the hopes of the radicals are not being borne out either. The crisis of neo-liberalism has not sparked revolutionary outbursts. There are instances in which left parties again enjoy mass support and even hold the political initiative, but these parties are now often lacking not only revolutionary strategies, but even reformist ones. The fact that leftists are coming to power signifies that the elites are in crisis. But are the forces of the left ready to present an alternative?

Here we are once again forced to return to the problem of radical reformism. Where does the border lie between radical reformism and elementary opportunism on the one side, and between radical reforms and revolution on the other?

In my view, an obvious and rigid dividing line does not exist. However, there are differences of principle. These differences need to be clearly formulated, especially now, when in many countries revolutionary organizations are proclaiming the slogan of a "turn to reformism" while in fact rejecting serious reforms.

The reason for the failure of the majority of reformist projects during recent years has been their "top-down" character. In this sense Mitterrand as the bearer of the ideas of the technocratic elite and Gorbachev, resting on the "enlightened" section of the Soviet bureaucracy, were equally remote from the people they promised to make happy.

Among the reactions to the failures of reformist and revolutionary parties were calls for replacing them with new mass movements, and for substituting alternatives from below for policies from above At the Budapest conference of left theoreticians in 1994 speakers even raised the concept of "delinking from below" as an economic alternative to neo-liberal globalization.

It can easily be seen that all this is no more than a mirror image of previous illusions. The state is hierarchical, and the world system is vertically integrated. These structures were specially created in order to resist pressures from below. Any effective mass movement gives birth to its own hierarchical structure - in the final analysis, to its own "counter-elite ". It is not hard to see that under certain conditions this "counter-elite" can become integrated into the "establishment", but this does not by any means signify that it is possible to do without it entirely.

The radical-reformist answer to these appeals can only be to try to unite the "movement from below" with the "transformations from above". Leftists must not reject the traditional strategy of seeking to win control of state institutions. But success here only makes sense if the state institutions are themselves under constant pressure from below - that is, if there are mass organizations capable of controlling their own leaders, and if necessary of forcing them to do what they would otherwise be too unwilling or irresolute to do.

If leftists, on coming to power, do not begin promptly to democratize the institutions of the state, this can only end in the degeneration and ignominious collapse of the left government. The democratization of power and the participation of the masses in decision making cannot in themselves guarantee that the reforms will be successful. But if these steps are not taken, failure is inevitable.

In general, it should be noted that among left ideologues a healthy scepticism with regard to the possibilities of state action has very quickly been replaced by completely absurd theories of a kind of "stateless socialism". In the 1950s, when socialists posed the question of nationalization, liberal ideologues stressed that property itself was not as important as the mechanism of control. In the 1980s, however, massive privatization began, leading to the destruction of the state sector on a world scale.

Meanwhile, a significant sector of the left has not only failed to resist privatization, but has in practice become reconciled to its results.

The unwillingness of the African National Congress to encroach upon South Africa's own large corporations is a clear sign of weakness. This is how it will be perceived by corporate capital; seeing the weakness of the new leadership, the large firms will demand endless new concessions. The central question in the struggle for reforms is that of who secures concessions from whom. Only where the left forces are persistent and aggressive can they win a social compromise that is at least favourable to workers.

Everyone who goes to the market-place knows the first rule of trade: if you want a reasonable deal, ask for more than you expect to get. But leftist politicians, hypnotized by their own words about "responsible management" have totally forgotten that their class enemy (excuse me, "social partner") lives according to the laws of the market, and is incapable by nature of respecting any other laws. There is no need to suppose that capital can reconcile itself to radical reforms in the sphere of property. In a country where unique resources are present (and South Africa has such resources), and where regional business interests are concentrated, even large transnational corporations will prefer to make concessions to the state sector rather than to place at risk the very possibility of their participating in this market.

In Lithuania, Poland and South Africa, we now see leftist governments with the same fear of undertaking radical measures in the interests of the people who elected them. Ultimately, the desire to reassure their adversaries proves stronger than their readiness to do anything for their own supporters.

Veterans of the Communist Party nomenclature in Lithuania, Poland and Hungary are acting in line with their experience and traditions. It would be hard to expect that two or three years in opposition would transform them from miserable functionaries into ardent revolutionaries or even into competent reformers. But South African leftists are another matter entirely. The victory of the ANC and the success of the Communist Party and other left groups were ensured by the struggle of the masses. The people are still organized and politically active. This means that one is entitled to hope that the changes will proceed according to another scenario.

If the state sector, even in the bureaucratized form in which it existed in both East and West by the 1980s, had not represented a potential threat to the interests of the bourgeois elites, they would not have set about destroying it so frenziedly at the first possible opportunity. During the Cold War the ruling elites of the West were forced to reconcile themselves to certain "elements of socialism" as a sort of pay-off for social stability and steady growth. It was this which created the objective preconditions for the success of social-democracy. After the "collapse of communism", such tactical concessions became unnecessary. A series of attacks on the "social-democratic model" ensued. The dissolution of the state sector began, making it absolutely inevitable that other structures of the Welfare State would be liquidated as well. The rejection of nationalization signifies in practice the rejection of serious efforts to transform society. Unquestionably, the existence of state property on its own does not yet constitute socialism. It does not automatically ensure either a more just distribution of national income or a more harmonious development. But without a strong state sector, resolving all these problems is impossible in principle.

Trotsky in his time provided a good metaphor to illustrate this point. In The Revolution Betrayed he compared state ownership of the means of production with the cocoon through which the caterpillar has to pass in order to become a butterfly. The cocoon is not the butterfly. Millions of larvae in their cocoons perish without becoming butterflies, but skipping the cocoon phase is impossible. While fully recognizing the limitations of "state socialism", we cannot fail to see its necessity.

The numerous plans for establishing co-operatives and other collective enterprises, and also for flexible social regulation of the economy, seem very attractive. Hut without a strong state sector all this simply will not work. Unless the state sector acts as the core of the productive system, "self-managed enterprises" will be starved of investments, and ultimately, will be enslaved by finance capital.

The only way to break the economic power of large finance capital is through nationalization. Alternative strategies for modernization and restructuring then become possible. Only with the emergence of a state sector is it possible to speak of serious social control over the investment process.

During the 1980s the myth of the inefficiency of state enterprises gained increasing currency among leftists. No-one provided theoretical proof for the notion that state-owned industries were economic failures. No one could cite statistical data showing that OTHER FACTORS BEING EQUAL, state-owned enterprises functioned worse than private ones. On the contrary, during privatization a great deal of information was accumulated showing the opposite. In Britain, studies of successful instances of privatization showed that the main increases in efficiency occurred not with privatization, but in the process of preparing for it, at a time when the enterprises were still state property. After they were transferred to private hands, the new owners were not able to change or improve anything substantially. The experience of Eastern Europe and Russia has been even more striking. Privatization has been accompanied by catastrophic declines in productivity, labour discipline and managerial responsibility, together with a lowering of the technological level and a catastrophic fall in productivity and general efficiency. The majority of the enterprises that were providing profits for the state began making losses after privatization.

From the point of view of efficiency, the results recorded by various group-owned enterprises are not especially impressive. The claims made by ideologues of collective property for the managerial democracy which is supposed to be organic to this model are no less doubtful. Studies show that oligarchic structures quickly form in such enterprises, while the workers themselves finish up dependent both on the managers of their own enterprises and on "outside" capital (credits, investments from outside and so forth). It can of course be argued that all these problems can be solved if the model of collective ownership is changed, but the same can also be said about the nationalized sector.

It would be quite wrong to suggest that nationalized enterprises are always impeccably managed. The record of nationalization in various countries is decidedly mixed. The results of nationalization depend in the first place on the condition of the state, on its structures and on its social character. The effectiveness of nationalization, its ability to resolve social problems and speed development, the structure of the state sector, the position of the workers within it, and the degree of democracy in management all depend on the relationship of forces in the country.

It is clear that the model of the state enterprise, like the model of the state, needs to be dramatically altered. But this is the essential task of radical reformism, the feature which distinguishes it from dogmatic currents of a communist or social-democratic stripe. If the former are prepared to reproduce old institutions under the banners of "workers' power" and "people's property", the latter, referring to the failure of the former, will increasingly reject any attempt at change.

In a number of countries, nationalization helped to solve or mitigate the problem of a shortage of investment under the conditions of modernization, to alter the relationship of social forces, to redistribute power and incomes, and to make possible a restructuring that was impossible in an organically conservative market economy. The degree of readiness to nationalize strategically important sectors of the economy or monopoly enterprises can be taken as a measure of the seriousness of a reformist government. Both ruling elites and left-wing politicians know very well that even successful nationalization does not mean the destruction of capitalist relations in society. But it does create the possibility that qualitatively new institutions and a new relationship of social forces may appear.

The constant references which left-wing politicians who are in power or on the brink of it make to the weakness of their positions and to the impossibility of resisting the International Monetary Fund are no more than excuses. The strength of the IMF and of other international financial institutions consists above all in the fact that they co-ordinate their actions on an international scale, while their opponents are isolated. Consequently, the answer to the policy of financial blackmail should not be the renouncing of reform, but the search for allies in the international arena, combining this with a clear policy of change and with reliance on the mass movement within the given country.

A theoretical argument which is more and more often invoked in order to justify inaction holds that the national state as a central element in the strategy of leftists (whether Marxists or social-democrats) is now losing its significance. The weakening of the role of the national state in the context of the "global market" is an incontestable fact. But it is equally indisputable that despite this weakening, the state remains a critically important tool of political and economic development. It is no accident that transnational corporations constantly make use of the national state as an instrument of their policies. And is it really true that the International Monetary Fund is something other than an international institution? The dominant forces here are not private banks, but creditor states. In this sense the global role of the IMF bears witness not to the strengthened role of basically market factors, but on the contrary, to the strengthened global economic role of the states of the centre in relation to the countries of the periphery.

It is clear that leftists need to have their own international economic strategy, and to act in a co-ordinated way on a regional scale, but the instrument and starting point of this new co-operation can only be a national state.

Nationalization limits the possibilities of international financial capital. It is precisely the threat of property losses that forces the elites to make serious concessions. In other words, until the question of property is posed, smaller, "individual" problems will not be solved.

The policy of nationalization pursued by the British Labour Party from 1945 to 1951 was extremely limited, but it created a favourable setting for a whole complex of social reforms. Meanwhile, the privatization which by the early 1990s had become transformed into a global process made all attempts to preserve the welfare state in East or West quite pointless.

In this sense, the problem of contemporary social-democracy does not lie in its attachment to reformism or even in the moderation of its approach, but in its rejection of any reformist project whatever. The erosion of the reformist potential of social-democracy leads to the systematic weakening of its influence in society, which also explains its consistent failures in Western Europe throughout the 1980s and the first half of the 1990s.

The situation in South Africa today provides grounds for apprehension not only because the African National Congress government might suffer a setback. Setbacks in themselves are not so terrible. Far more dangerous is the inability of the left forces to respond correctly to these reverses. When in The Dialectic of Change I wrote that leftists have to learn to retreat, my observation aroused furious indignation among radical authors. This position is reminiscent of the famous episode during the Second World War when in the Soviet Army all plans for retreat were kept secret. As a result, the army was incapable of retreating in organized fashion. Any tactical reverse turned into a catastrophe, and withdrawal was swiftly turned into panic-stricken flight.

In politics, knowing how to retreat means knowing how to sacrifice tactical positions for the sake of strategic goals, and understanding that it may be necessary to reject power in order to preserve the movement. Not least, it means remaining true to one's goals and principles in a period of setbacks. There is now a good deal of evidence to suggest that this period is nearing its end. One can cite the results of elections in Eastern Europe, which have returned leftists to power; the fall of apartheid in South Africa; the gains by the Party of Democratic Socialism in Germany; and the dissension and confusion in international financial centres. But if left-wing politicians, demoralized by their own misfortunes and lacking confidence in their strength, do not muster the resolve to present society with a serious program of structural reforms, they will be routed very easily.

The new generation of leftists has to draw the unavoidable conclusions from the lessons of the 1980s. This new generation is taking shape today. Fearless of defeats, able to keep their feet on the ground in the case of victory, refusing to waste time on fruitless dogmatic wrangles, and equally ready for action on the streets, in the factories, in the parliamentary chambers or in the offices of state ministries, the members of this new generation will sooner or later make their presence felt.

And the sooner this happens, the better.