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GDS Chapter Two

CHAPTER 2: The Neoliberal State’s Origins and the Rise of the Right: Wars, Revolutions and Insurgencies

About the reading notes: These are not intended as a substitute for reading the book itself. If you read only the reading notes and not the book you will miss a great deal. The reading notes also do not attempt to discuss all of the important points. The notes approach selected major points from slightly different angles of approach than the book does, thus providing another way of looking at the material. Generally speaking, the notes approach the chapter material from a meta-level, that is, one step up from the text, commenting on its significance and providing some supplementary commentary and material to that of the book.

The book itself is written in a highly accessible manner so that anyone can read it and learn a great deal, but the content is quite complex and very sophisticated. A lot is going on within any given sentence and paragraph and there are many layers of meanings and inter-connections being made, so readers will find it helpful to use these notes in getting more from the book. To get the most out of this book, pay especial attention to the way that Loo uses theory as a means of illuminating what is beneath the surface appearance of things and how seemingly disparate developments are in fact part of a larger pattern.

These notes were compiled by a writing team of students who have read and discussed the book. Their notes were reviewed and added to by Dennis Loo.

Most accounts of politics, economics, and history overplay either the role of individuals or the role of structural factors, without showing how individuals, groups, and structural elements are dynamically linked. As can be seen by the title to Chapter Two, Loo treats structural factors and human conscious activity as interconnected.

His approach to these questions both sheds new light on historical events and opens the door to the possibility for radical and revolutionary changes to be successful. In his examination of well-known historical events he uncovers how the dominant interpretation of those events - why, who, what, and how - has frequently been at best misleading and at worst an outright fabrication, with real consequences for how people broadly understand why things are the way that they are and what the public imagines it is capable of. The book's preceding chapters' discussion of social dynamics and the relationship between individuals and the group, leaders and those they lead, freedom and necessity, and the impact of philosophy, values, and material interests on the political landscape all lay a foundation for Chapter Two's further discussion of these factors.

This chapter analyzes the essence of capitalism. It also traces and accounts for capitalism’s evolution to its highest stage – monopoly capitalism, aka imperialism.

That discussion is linked to the

  • current financial crisis gripping the world’s economies,
  • political balance of forces and its relationship to economic and military factors, and
  • historical canvas for this in three pivotal periods:

The 1930s-1950s:

Free market capitalism existed in the mid-1800s in Europe and the U.S. but within fifty years had become monopoly capitalism. This occurred not as a distortion of capitalism but as an inevitable product of capitalism’s drive for profits. Monopoly happens, in other words, because of competition. Put simply, if you can limit or eliminate your competitors, you will make more money.

Monopoly, contrary to most people’s expectations, however, does not eliminate competition overall but intensifies it among a smaller number of players and projects that struggle onto the world stage. The carving up of the world by the various First World nations and their rivalries over nations, labor, resources, and markets in the Third World (aka colonies or the periphery) led to the onset of the extremely bloody World Wars I and II: wars over who will have the biggest colonial empires. These wars are not choices in the sense that the nations embroiled in them could have opted out of it. World wars (and regional wars) were and are instead a natural outcome of the working out of capitalist rivalry on a global scale.

The great intensification of suffering and heartless destruction that wars and economic crises, and the exposure of the warped priorities of capitalist systems in these crises, resulted in socialist revolutions and, for several decades in the 20th century, a socialist camp in the world.

The 1960s:

The resultant capitalist v. socialist division in the world (best known as the Cold War) from WW II - in which there was an actual alternative to the capitalist world - had profound repercussions for international and domestic affairs. It set the stage, for example, and led directly to, the famous Brown v. Board of Education U.S. Supreme Court decision. Brown v. Board in turn played a key role in helping to trigger the civil rights and black power movements of the 1950/60s.

Loo’s case study of the 1960s crime issue (which is conventionally seen as the genesis of the Right) shows that the conventional and scholarly view of the alleged pro-law and order and more conservative turn among the American public is based on falsified and misleading polling data.

The 1970s and 1980s:

The rise of neoliberalism in the context of the end of the Cold War and the absence since the late 1980s of any rivals to capitalism/imperialism. 

Part of neoliberals’ mantra is that the government is the cause of all problems, or as Ronald Reagan once declared: “[G]overnment is not the solution to our problem; government is the problem.” Reagan did not mean that government should no longer exist; rather, he meant that government should only exist to the extent that it backs up private interests by allowing “free market” policies to follow their course unfettered (i.e., let the big fish be unmolested in their feasting on the littler fish) and to extend the military might necessary to advance and defend an imperialist empire, all at the expense of the public interest and public goods, here and worldwide. 

Loo uses the 2008 housing market crash to illustrate how neoliberal policies have been destroying the public sector while upholding the interests of private institutions and interests. Bush and Obama both bailed out the major financial institutions on the stated grounds that those institutions were “too big to fail.” Under both administrations those institutions were given huge bailouts from U.S. taxpayers money to fix the mess (to the tune of $16 Trillion). However, a lot of that money was allowed to go straight to the pockets of the executives who were responsible for the mess in the first place in ever rising bonuses while they had presided over their businesses going to the brink of bankruptcy, only saved by massive governmental intervention. Meanwhile, many Americans were losing their homes, jobs, and retirement funds at rates unprecedented since the 1929 Great Depression. In the end, all this has done is perpetuate a lopsided society where the richest people and corporations can exploit everyone else for their own gain.

Loo asks how capitalism, which is “supposed to be the cure of all ills,” has led to such disasters. Structural flaws as a result of “internal contradictions” are essentially the reason why, he asserts. One of the flaws, Loo points out, pertains to the logic of economies of scale. The principle of economies of scales is inherent to the logic of “free market” enterprises, and yet it also undermines it. Loo summarizes the paradox as follows:

The drive for profits impels businesses to seek competitive advantages, to expand their market shares, and to eliminate their competition, either through buying out competitors or by driving them out of business. […] It is in the nature of free markets to cease being free markets. […] Small may be beautiful, but big is cheaper and more powerful. Small businesses can, and always will, emerge just as small saplings spring up amongst the towering pines, but the economy’s key players will continue to be big businesses. Some of the big businesses will be supplanted […] but the companies that superseded their previous competitors will then assume the monopolist position themselves. The players may change, in other words, but the disparities of position between big and small remain structurally and fundamentally the same (p. 77)

The second contradiction entails the fact that “capital seeks profit making opportunities everywhere” (p. 77). Capitalism is about indefinite and unbounded profit making. In order to yield ever more profit, large corporations must go abroad to find ever cheaper labor and resources. Loo defines this practice as imperialism in the economic sense. This drive for relentless profit-making has translated into a shift in how, when, and why things are produced. For instance, Loo argues, under feudalism (the economic system prior to capitalism) the purpose of production was to create “‘use values’ – i.e., goods and services [that] are being created and exchanged primarily for their use. […] Under capitalism, by contrast, production exists for the principal purpose of exchanging commodities for profit – for their ‘exchange value’ – not for their use value.” (p. 78). Loo describes the main difference between those two economic/value systems as follows:

Feudal economies do not experience depressions: depressions are creatures of capitalism. Depressions occur when the capital accumulation process is interrupted because the amount of profit to be made no longer suffices. No matter how useful those goods or services may be (and they could spell the difference between life and death for millions of people), if they cannot be exchanged for enough profit, then their production will cease until such time as profitability can once more resume. Moreover, if these commodities are profitable but not as profitable as some other economic activity, then the latter will win out over the former. (p. 79)

Loo further argues that capitalism is an uneven system by nature because it perpetuates disparities, not only among individuals but also among nations, as the system advantages those who started first. Such disparities among nations is manifest if we look at how the economies of so-called “underdeveloped” nations are being shaped and subordinated based on the interests of corporations, aka multinationals and transnational corporations. Those “underdeveloped” nations are for the most part old colonies of western countries which have been, and continue to be, a source of tremendous profit for capitalist countries, generally more profitable than the profit extracted from the workforce in advanced/capitalist countries. Maintaining control over those colonies is essential to capitalist countries. Loo describes the perceived stakes as follows:

The share of international profits for US companies has grown steadily since the 1960s, when they accounted for about five percent, and now accounts for about a quarter of all corporate profits. In the era of globalization, production is increasingly being carried out abroad. Colonies are prized for their natural resources and for their “cheap” labor. They are such gigantic prizes that wars that cost immense amounts of money involve mind-boggling levels of destruction, require the spectacular sacrifice of tens of millions of lives, and put the very systems that wage them at risk for upheaval and revolution, are not too much for imperialist powers to carry out. (p. 82)

Such foreign policy considerations continue to shape domestic political decisions. Those decisions have on many occasions led to unintended and undesirable consequences for the capitalist countries. Loo provides several examples of that, particularly during the 1960s when the socialism/capitalism ideological opposition was at its pinnacle. A surprising example is the one given about how the Brown v. Board of Education came to be. Loo argues that the main motivation behind the case was not a concern about racial discrimination's unfairness in the U.S. Rather it was a concern that the Soviet Union and China were exploiting the existence of racial discrimination in the U.S. to win allies among non-white nations, such as nations in Asia and Africa. The threat that those nations would adhere to the socialist ideology rather than the capitalist ideology was so daunting to U.S. leaders that they had to respond by making a case against something that did not otherwise bother them: savage racial oppression. Ironically, this case also gave rise to other unintended and undesirable events from their perspective such as the civil rights movement.

In his case study of the 1960s' crime issue Loo shows through a comprehensive assessment of that period's polls that the conventional and scholarly view that the American public was aroused about street crime is not what the polls show and that most of the polling data were fabricated, selectively and deceptively presented, and/or distorted. His analysis shows that the social insurgencies of the time were successful for a period of several years in making "social injustice" the dominant frame in the society rather than elites' frame of "law and order" and "crime in the streets."

Loo posits that “crime as a national political issue” dates from the 1960s. Insurgent groups were protesting in the streets to demand change. Ruling elites fought back because it was not in their interest for change to happen. However, Loo points out, they had to fight back in a covert way. They did so, Loo argues, by developing a new discourse that equated protest and crime. Today’s “War On Terror” is the subsequent corollary of this logic and a means to instill fear among the public. Such logic, according to Loo, has facilitated the justification for and popular basis for the rise of neoliberal politics.

The most efficient tactic that has allowed for this shift to happen has been a successful framing of social problems to influence public policy that would benefit the most reactionary politics as embodied most of obviously in Republicans, and a vast media empire to promote this lopsided framing of public policy issues. Loo provides many examples of how the framing of a particular public issue and policy-making coalesce. Loo illustrates this point with several examples such as crime. Loo writes:

[I]f we frame crime as due to evil individuals, then the solution to crime is to do whatever is necessary to isolate the evil ones from the rest of the society through incarceration, sterilization, or execution. If instead we frame crime as due to the lack of legitimate opportunities, then the solution to crime would be to expand educational and job opportunities and training. If, finally, we frame crime as the inevitable outcome of a profit-drive and highly unequal society in which resources are structurally lopsided in their distribution and where material wealth is celebrated as the goal, then addressing crime would have to involve altering the structural characteristics of the society and economy and the corresponding ideology of profit making and self-centeredness. (p. 99)

No matter what the facts are, Loo argues, what is paramount in the policy arena is how people perceive what they are told is reality. Such manipulative and scare tactics continue to be used today, even more extensively and pervasively than ever.