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Víctor Manuel Isidro Luna

From Neoliberalism to Possible Alternatives

by Víctor Manuel Isidro Luna

4 December 2016

From Neoliberalism to Possible Alternatives
1. Introduction
The objective of this article is to outline possible alternatives to capitalism in its neoliberal phase. In 2007, the deepest world crisis since the Great Depression started and has continued with neither a theoretical nor a practical solution to date. It has exacerbated economic stagnation, inequality, poverty, and environmental destruction. As a response to the crisis, countries have applied keynesian but mostly neoliberal policies (Cahill 2011). However, such policies have not produced economic growth or any human development. We think that a progressive solution to this last phase of capitalism has to have both a departure and an arrival point. The departure point is neoliberal capitalism: what it is now, what it has been during its performance in the last 40 years, and how neoliberals have seized power. The arrival point consists in the kind of development we want for our future and the means we use to achieve it. Of course, there must be a correspondence between the ends and the means. Currently, there are at least three possible progressive options to neoliberalism: (1) return to keynesianism, (2) return to real socialism, and (3) encourage new development experiences such as Mondragon, Kerala, and the so-called socialism of the 21st century. The first two options have historically failed worldwide; the last option is only now being implemented. Whatever option is chosen—the option that can possibly supersede neoliberalism—must, in our opinion, fulfill the following requirements: (1) define the concept of development and (2) define how progressive options are going to seize power.
This paper proceeds as follows after this introduction. In section 2, we outline the main theoretical characteristics of neoliberalism; in section 3, we describe the economic and social performance of neoliberalism; in section 4, we take into account how neoliberals have seized power on a global scale; in section 5, we highlight the progressive alternatives to neoliberalism; and in section 6, we present some requirements that any progressive option must fulfill. Our conclusion is that neoliberal economic and social performance has been poor but that any progressive alternative to neoliberalism must show economic superiority to neoliberalism and establish the means of how to achieve its goal0

2. Neoliberalism from a theoretical point of view

Capitalism is a profit-making system based on the exploitation of labor. Whether exploitation of labor or a competitive market is the most salient characteristic of capitalism is a discussion that has been carried out elsewhere (Hilton 1976; Wallerstein 2000; Hobsbawm 2011). For our part, we recognize that the market is a very important institution that shapes human behavior (Mill 1879; Polanyi 2001; Campbell 2005) (see below). Whereas, from a theoretical standpoint, only one form of capitalism has existed, historically and throughout the world, capitalism has existed in many concrete forms that differ greatly: keynesianism, neoliberalism, US capitalism, German capitalism, Mexican capitalism, and so on. In order to consider a possibly more egalitarian economic system in the world, we must study the principles in which, today, the latest phase of capitalism is rooted: neoliberalism.
It is erroneous to claim that as schools of economic thought, neoclassicals and neoliberals are alike. Like neoclassicals, neoliberals highlight the paramount superiority of markets over any other kind of social organization, but unlike the view of neoclassicals, for neoliberals markets are a human institution, not a natural mechanism. Then, markets are a social creation, for they can be modified. As a school of economic thought, neoliberalism emerged after WWII, with a group of intellectuals, including Friedrich von Hayek, Ludwig von Misses, Milton Friedman, Karl Popper and Lionel Robins, who gathered in the mountains of Switzerland to discuss how to counteract keynesianism and socialism . These intellectuals promoted competitive markets, individualism, and private property. They were opposed, primarily, to three principles: (1) planned economies, (2) keynesian policies, and (3) policies that could promote social justice. This last principle is the main difference between keynesian and neoliberal capitalism since both rely strongly on the state (Krippner 2011). Freedom and markets are the main bases of neoliberal capitalism as Hayek (2001, 37) points out:

The liberal argument does not advocate leaving things just as they are; it favours making the best possible use of the forces of competition as a means of coordinating human efforts. It is based on the conviction that, where effective competition can be created, it is a better way of guiding individual efforts than any other. It emphasizes that in order to make competition work beneficially a carefully thought-out legal framework is required, and that neither the past nor the existing legal rules are free from grave defects.

The competitive market is an empirical reality that moves under two polarized concepts, equilibrium and chaos, both of which are just theoretical constructs. According to neoliberals, it is through the markets that we can reach economic equilibrium. The assumption that makes equilibrium possible is perfect knowledge. As we cannot obtain this perfect knowledge in society because social phenomena are “complex” (Hayek 1945, 1), we can approximate equilibrium by means of private property and free contracts (Hinkenlammert 1990). Perfect knowledge is impossible because access to information is limited, and, therefore, economic equilibrium does not exist. Concerning an unemployment example, Hayek (1979, 4) comments:

We possess a fairly good "qualitative" knowledge of the forces by which a correspondence between demand and supply in the different sectors of the economic system is brought about, of the conditions under which it will be achieved, and of the factors likely to prevent such an adjustment. The separate steps in the account of this process rely on facts of everyday experience, and few who take the trouble to follow the argument will question the validity of the factual assumptions, or the logical correctness of the conclusions drawn from them.
But when we are asked for quantitative evidence for the particular structure of prices and wages that would be required in order to assure a smooth continuous sale of the products and services offered, we must admit that we have no such information.

What capitalism can achieve is a trend towards equilibrium or towards an ‘Extended Society,’ which is based on two pillars: private property and free contracts. Later on competitive markets emerged through evolution (spontaneous order). Societies learned through experience that based on these principles they could be richer and human survival could be easier. Therefore, the market is the best mean of allocating resources for humans. According to Hayek (1966), the ‘Extended Society’ existed and grew long before humans were aware of its existence or were able to understand the mechanisms of its operation.

Hayek (1981) claims that in an Extended Society, human beings do not know each other, and, therefore, there are no common goals. However, there is a principle that leads a society to obtain greater production and productivity. This principle is a self-regulating process, where people devote most of their lives to serve other people they do not know. [1] In an ‘Extended Society’ people do not like to help one another, but they live better off through time compared to other systems. Achieving an ‘Extended Society’ requires a process of selective evolution in which individuals who adhere to specific rules survive and those who do not face extinction.
This evolution began in a ‘Small Society’ (see Figure 1), in which there are two salient features, altruism and solidarity. Ancient communities used to be small; people knew each other and worked to achieve common objectives and trade was restricted because the members of a community shared the surplus. Then, there came a time when people were ‘individualized’ and focused on goals other than those of the community. Business and competitive markets expanded. Consequently, the ‘Small Society’ started to evolve into a one in which freedom and private property were the most important characteristics and both altruism and solidarity disappeared. Therefore, as can be neatly seen, in neoliberalism, markets are a social institution. They are not natural; we discovered them. [2]

Figure 1. From the Small Society to the ‘Extended Society.’

3. Neoliberal economic performance

We have just seen the main theoretical principles in which neoliberal capitalism are rooted. Social and economic performance of the capitalist neoliberal era is discussed elsewhere (Franke and Chasin 2000; Mészáros 2005; Duménil and Lévy 2005; Duménil and Lévy 2006; McNally 2011; Maass 2010; Isidro Luna 2013). We highlight only two aspects of the economic and social conditions in this section: (1) a downturn in growth rates from 1973/74 onwards and (2) an increase in global inequality, among countries and within countries. We stress these variables because according to neoliberals, inequality will spur economic growth. However, as demonstrated below, neoliberalism has produced blatant economic inequality without producing any economic growth.
Growth rates during the neoliberal period lagged far behind those of the Golden Age. From 1950-72, average growth rates were 4.7 percent, but during the neoliberal era (1973-2008) growth rates were 3.4 percent (see Figure 2). During the former period, growth rates occurred not only in developed countries but also in underdeveloped countries in a process of convergence with the US. During neoliberalism, the main characteristic of the global economy has been stagnation (Magdoff and Sweezy 1987). From 1999 to 2008, the world economy rebounded to 4.1 percent. However, this rebound is the manifestation of just two economies in the world: China and India.
There is debate among economists whether a 3.4 percent growth rate means stagnation or not. Schumpeter (1971) claims that even with a 1 percent growth rate in the long run, capitalism will eliminate unemployment and poverty. McNally (2011, 38) asserts that the Golden Age was a unique event in history— “an exceptional set of social-historical circumstances that triggered an unprecedented way of expansion. But prolonged expansion with rising levels of output, wages and employment in the core economies is not the capitalist norm.” Neoliberalism claims that free markets are superior to any other systems in the organization of production, which clearly is totally false because neoliberal performance has been poor. Neoliberalism’s assumption is that productivity will grow higher and higher through the time. This assertion has not occurred (see Duménil and Lévy 2006)

Source: Author’s elaboration with data from Maddison (2014)
Figure 2. Breakpoints in world growth rate

Concomitant to lower growth rates during the neoliberal era, inequality has increased around the world. Rich countries and the upper classes have benefited the most.
Years contain all the countries for which Maddison’s database presents information. Compact boxes indicate equality among countries, spread boxes represent inequality, and thick lines in each box represent the median. Poor countries have not caught up with the leading countries. Boxes are quite compact from 1820 to 1980; there were no outliers. From 1980s onwards, the dispersion in boxes has increased as well as the presence of outliers. It is too easy to see that inequality has increased among countries because (1) the standard deviation increased over time, and (2) the mean of the GDP per capita was 8066 (horizontal dotted line) dollars, but 50 percent of all countries had a GPP per capita lower than 4464 dollars in 2008 (see Table 1).

Source: Author’s elaboration with data from Maddison (2014)
Figure 3 shows boxplots from 1820 to 2008 over GDP per capita at PPP, 1990 prices

Table1. Statistics on GDP per capita at PPP, 1990 prices. Dollars.


Source: Author’s elaboration with data from Maddison (2014)

Inequality has also increased within countries, an example of which is the US. Figure 3 plots shares of the income (including capital gains) that the top 1 percent of the society held throughout the 20th century. Roughly from the 1940s through the 1970s inequality declined sharply. Of course, these were the years after WWII and the Korean War when the volume of employment and wages rose. The 1910s and the 1920s were periods of increased inequality as was the time period from the 1980s onwards. Nowadays, the level of inequality is even higher than in the first years of the 20th century.

Source: Saez (2014)
Figure 3. One percent top fractiles income shares (including capital gains) in the United States

A further example of how inequality has increased within countries is the rise in the numbers of billionaires in underdeveloped countries after the implementation of neoliberalism. The fortune of billionaires has increased, as in the case of the Latin American countries (Brazil and Mexico), or the number of billionaires has increased, as in the case of Russia, China, and India. Discussing inequality, in The Road to Serfdom, Hayek (2001, 45) points out that:

Who can seriously doubt that the power which a millionaire, who may be my employer, has over me is very much less than that which the smallest bureaucrat possesses who wields the coercive power of the state and on whose discretion it depends how I am allowed to live and work?

Aristotle (2001) thought that money was not an end itself; rather its accumulation was a response to political considerations. With time, the society in which Aristotle lived changed, and money became a mean and end itself. What Hayek ignores is that in capitalism, money is not just vaulted, but millionaires can buy bureaucrats in order to maintain and increase the power of that money. Using no economic means to achieve power in the majority of the governments of the world has been a neoliberal characteristic. This means of seizing power is what we proceed to examine.

Table 2. Billionaires in some underdeveloped countries. First top 423 millionaires. (People and billions of dollars).


Source: Forbes (2014)

4. How neoliberalism seizes power

If neoliberalism is inefficient in allocating resources and living conditions of people are worsening, why is it in power? Neoliberalism has been not only a theoretical construction but also a political project of the top classes in the world. Its objective has been the increase of the rate of profit that had decreased in the 1970s (Duménil and Lévy 2002, 2005; Harvey 2005). This ruling class has at least three components: a conservative capitalist sector that is concerned with both profits and rules of conduct (involving racism and fanatic religions), a liberal sector that cares only about profits, and a managerial sector that receives stratospheric wages.
To increase the rate of profit, neoliberals have used the competitive market but mostly the state in six ways: (1) to defeat unions and inhibit their organization; (2) to privatize profitable State Owned Enterprises (SOEs) that require low capital (so the investment is low and the profit high); (3) to protect the now private enterprises of competition; (4) to ensure internal security through the police and army; (5) to maintain low inflation, high interest rates, and free mobility of capital in order to provide a good environment for financial activities; and (6) to transfer resources from the poor people to the wealthy people. Of courses, the application of some measures has depended upon the historical conditions of each country. Now we proceed to describe how neoliberalism seizes power around the world.
Neoliberalism was imposed for the first time in Chile (1973) with the overthrow of Salvador Allende. Later, at the end of the 1970s and early 1980s, it reached England (1979) and the US (1980). Neoliberalism was incorporated by Latin American countries throughout the 1980s and, finally, the countries of Eastern Europe at the beginning of the 1990s.
The strategy followed in Chile was a broad political agenda, since the socialist president, as Harnacker (1999) says, had won the government but not the power, so he had to face this agenda: (1) a clear strategy of the right to divide the left-wing political parties, (3) the attack carried out by the mass media, (3) the lack of loyalty of the armed forces, (4) the intent of the capitalist sector to stifle the national economy, (5) a campaign promoting freedom and private property, and (6) the shaping of thought in important universities and centers of knowledge and of Chilean students by more important universities in the United States, such as the University of Chicago.
In England, the following steps were taken: (1) neoliberals benefited from the crisis of the 1970s and the failure of keynesian policies to solve it— the situation was summarized in the phrase “There is no alternative” (the famous TINA); (2) there was built an exacerbated individualism summarized in the idea that society does not exist but only individuals; (3) an aggressive program of privatization of basic industries such as steel and services such as water and education was established; (4) the big unions were defeated, the most symbolic case of which was in the mining sector; (5) there also was “…a [...] reassertion of nationalism, expressed in the Falklands War ... "(Britton 2002, 79); and (6) finally, a restrictive fiscal and monetary policy was implemented.
In the US, neoliberalism was established by means of a clear strategy followed by the National Association of Manufacturers (NAM) and the National Chamber of Commerce that took over universities (Harvey 2005), which in turn created campaigns to promote freedom in the mass media and founded neoliberal think tanks (Crotty 2000). In addition, neoliberals used the fiscal crisis of the states as proof that the public sector was inefficient, and they also took over the Republican Party and later in the 1990s partially took control over the Democratic Party. [3] Neoliberals also instituted a campaign against unions, which were defeated in the 1980s. Finally, once the power was gained, there was a concomitant increase in military spending, a tax policy in favor of the wealthy (see section 3), a rise in interest rates, and the deregulation of the financial system to promote free mobility of capital.
In Latin America, the set of neoliberal policies was prepared by the debt crisis of 1982. These countries had to accept Structural Adjustment Lendings (SALs). These SALs consisted of a stabilization program (reductions in public spending or exchange rate alignments) and economic restructuring (trade and financial liberalization and the reduction in the size of the public sector). The implementation of these programs was the charge of the World Bank (WB) and the International Monetary Fund (IMF). Later, the policies imposed in Latin America would be a model summarized in what is known as the Washington Consensus.
In the countries of Eastern Europe, neoliberals channeled the discontent of the middle classes, after which they utilized the debt problems for each country through the assistance of the IMF (as in Poland) (Toporovsky 2002). Then, later, with the collapse of the real socialist societies, a program with the wildest privatization of public enterprises was established.

5. Alternatives to neoliberalism

The current economic crisis has exacerbated stagnation, inequality, and poverty. To solve the crisis, neoliberals propose to go deeper in institutions such as individualism, private property, and competitive markets, with no pretension of social justice. Ultimately, this crisis can be solved in a progressive way or in a negative way (Harvey 2005). The last option could be carried out by a conservative capitalist sector that not only cares for profits but also for rules of conduct (involved with racism and fanatic religious groups). This option can organize production and distribution of commodities easier, and also take care of the environment. Unfortunately, such a solution would not have any democracy component, and the majority of the population would be excluded. Then, there are three possible progressive options to neoliberalism: (1) return to keynesianism, (2) return to real socialism, and (3) embrace new socialist development experiences based on Mondragon, Kerala, and the so-called socialism of the 21st century.
As was stated above, capitalism is a world system based on the exploitation of labor; its objective is to obtain the largest profit possible in the short run. Therefore, a progressive option to capitalism has to strengthen the power of workers and peasants and diminish the power of capitalists. In doing so, socialism is not the only option, but also a keynesian capitalism or a “mixed economy” similar to Swedish capitalism. The prosperity that characterized the Golden Age has never been repeated in capitalist countries from the 19th century to the present day. From the 1940s to the 1970s, there was economic growth in the majority of the countries in the world; there was exploitation in a Marxian sense but wages and the volume of employment increased. The business cycle was smoothed (Solomou 1998). Then, keynesians will propose a reindustrialization of countries, capital controls, rise in public spending, and an end to neoliberal austerity programs.
However, neither keynesianism nor a mixed economy escapes the definition of a capitalist economy where profits are much more important than people’s needs. Besides, even in keynesianism or capitalism of the Swedish style, economic performance is at the expense of the swings of global and national economies: “When there is no prospect of a profit, then the wheels of industry stop turning and men are idle” (Huberman 1961, 1).
A further progressive option is real socialism. During the 20th century, socialism was a model of development that competed with keynesianism and development economics. Today, for scholars such as Li (2013, 11 and 12), real socialism is the only option to the current economic crisis:

The 20th century socialist economies were essentially models of national development within the general historical framework of the capitalist world system. Instead, as capitalism ceases to be a viable historical system, socialism may prove to be the only viable solution to the fundamental crisis confronting humanity in the 21st century.

For Li, neoclassical criticisms of socialism do not represent any hindrance to the establishment of it. First of all, capitalism is inefficient as is socialism. Information and incentive problems can be solved only partially in socialism because decisions are taken based on wrong information (as well as it is in capitalist, see section 2). Incentive problems can be solved via a gradual transformation of the consciousness of people. However, Li does not further explain the last issue. For him, the great advantage of socialism over capitalism is that the former outscores the latter in fulfilling social needs.
In our opinion, the idea of planning does not involve whether socialism is as good or as bad as capitalism. Social production and consumption as well as planning were key for Marx, as expressed in the Grundrisse (Marx 1973, 108 and 109):

On the basis of communal production, the determination of time remains, of course, essential. The less time the society requires to produce wheat, cattle, etc., the more time it wins for other production, material or mental. Just as in the case of an individual, the multiplicity of its development, its enjoyment and its activity depends on economization of time. Economy of time, to this all economy ultimately reduces itself. Society likewise has to distribute its time in a purposeful way, in order to achieve a production adequate to its overall needs; just as the individual has to distribute his time correctly in order to achieve knowledge in proper proportions or in order to satisfy the various demands on his activity. Thus, economy of time, along with the planned distribution of labour time among the various branches of production, remains the first economic law on the basis of communal production. It becomes law, there, to an even higher degree.

So, in a socialist economy planning must be possible and its performance must be better than in a capitalist society. It is better not because it responds to social needs but because of productivity. More used values for people have to be produced with less labor time (Marx 1981). “Socialism will show itself to be superior to capitalism only if it proves better at husbanding time,” point out Cockshott and Cottrell (2005, 47).
Leaving aside planning, regarding the incentive problem, capitalism has money as a reward for working, whereas socialism has the “general willingness and desire on the part of working people to work for the social interest” (Li 2013, 18), which presupposes “the establishment and consolidation of a well-functioning socialist democracy and requires the gradual transformation of people’s consciousness” (Ibid., 18). Unfortunately, this process has not occurred in real socialism and we do not know how it could be done today. People’s consciousness is hard to change. People can be conscious of something without being able to modify their situation. For example, people may believe that God does not exist, but the belief helps to make life tolerable. We are not rebuking here the overall performance of the Soviet Union; in fact, it had great achievements. In 1917, Russia was a backward country. Most of its population was rural and a comparison with Western countries was meaningless. After a 70-year period, the Soviet Union entered a period of significant industrialization, during which heavy industries were developed. The country became literate and enjoyed universal access to a health system (Hobsbawm 2003; Maddison 1992; Chandra 1996). However, in the 1970s, not only were economic indicators deteriorating, such as a stagnating GDP per capita, but the increases of food imports and foreign debt (Maddison 1992; Nikolic 1995; Hobsbawn 2003) were worsening social indicators (Hobsbawm 1991; Nove 1993; Rothemberg 2013; Blackburn 1991).
Up to this point, we have described two alternatives to neoliberalism. Both of them outscored neoliberalism in economic performance and social indicators. However, they also had several drawbacks, including:

  • (1) The inability of solving the world crisis in the 1970s. This situation gave rise to the famous Tatcher’s phrase “there is no alternative.”
  • (2) The absence of democracy in the case of socialism and the low political participation in the case of capitalism.
  • (3) The destruction of the environment.
  • (4) The presence of exploitation in both systems. In the case of capitalism, capitalists exploited workers and peasants. In socialism, the state exploited workers and peasants (Dussel 2014).
  • (5) The resilience of old institutions in both modern systems, for example, the distribution of water in some Soviet republics during the period of the Soviet Union (see Kapuscinski 1994).

Also, neither system was worried about meaningful jobs for people. We therefore agree with Amin (2008, 32), who asserts that:
The question is not whether the neoliberal project is or is not absurd. It is absurd and not viable. But it exists. The question is why it has asserted with such force. The success... was possible only because the systems that managed the world’s societies in the preceding historical stage exhausted their potential. I am referring here to the three postwar social models (the Welfare State, the Soviet System, and national-populism). The collapse of these three models has produced the opportunity for a total submission of society to unilateral demands of capital and given rise to confusion in the victims of the new order, since their reference point has lost credibility and legitimacy.
Thus, in our opinion, other experiences of development have to be taken into account, three of which include Mondragon, Kerala, and the so-called socialism of the 21st century.
Mondragon Cooperacion Cooperativa (MCC) is a corporate group that emerged after WWII, founded by a Catholic priest working with a group of five engineers with the objective of raising the volume of employment and encouraging growth in the Basque region (Spain). The paramount characteristic of Mondragon is the self-management abilities it tries to enhance in the workers (as the personal participation in making management decision (Campbell 2011, 1)) and the necessary institutions to accomplish this, such as the General Assembly, the Governing Council, and the Social Council. Today, Mondragon has 289 companies not only in the Basque region but also throughout the world. In addition, it furnishes employment to 80 321 people worldwide. [4] Some scholars question whether MCC has responded adequately to the challenges of globalization, being able to face international competition successfully (Clamp 2000; Azevedo and Gitaby 2010).
Kerala in India is an experience of development with high people participation and administration through the state (see Parayil 2000; Franke and Chasin 2000). It has been a successful case of “public action to democratic means” (Parayil 2000, 10). In spite of historically poor economic performance, Kerala has obtained good social indicators. In some indicators, Kerala has achieved the same level of development as advanced countries. Kerala has a long history of social movements combined with political participation dating back to the end of the 19th century when an intermediate caste organized against social “exclusion practiced by the upper-caste Hindus” (Kannan 2000, 58). Subsequently, some upper castes, Catholics, Muslims, and above all lower castes organized to build new educational institutions in the first quarter of the 20th century with “their aim of casteless society” (Ibid., 58). In the mid-1950s, several communist organizations in Kerala encouraged new ways of education. Currently, Kerala promotes education and presents a paramount rate of unionization (see Heller 2000; Dreze and Sen 2002).
Mondragon and Kerala have achieved the means to provide a better quality of life for people. They have shown two important ingredients to a better society: (1) something can be done with scarce resources, and (2) organization of people produces good results in a society. In addition to this, according to Allen (2011), Marx´s idea of the transition from capitalism to socialism has to follow this pattern: first of all a revolution has to occur led by the workers. The peasants will then embrace the revolution, followed by the intermediate classes, and so on. Kerala´s struggle seems to fit this pattern. Thus, important lessons can be learned from it. However, MCC and Kerala experiences have not been carried out in a national-state level, and specifically Kerala has undergone very low rates of economic growth. Some orthodox scholars points out that this fact is because the Kerala’s high political participation that discourage investment. Be that as it may, whatever socialist alternative to neoliberalism must show high productivity in the long run.
The last option is 21st century socialism. On one hand, this new option must fulfill certain theoretical requirements (Laibman 2006, 306):

We need to use every drop of our intellect and moral sensibility to promote a vision of a society in which people are fulfilled, spiritually enriched, able to explore the challenge of their own personal development in relation to others; in which work and leisure, productive contribution and consumption, are increasingly inseparable; in which, truly, in Marx’s memorable phrase, the “free development of each is the condition for the free development of all.”

On the other hand, the option refers to the experiences of some Latin American countries, especially Venezuela, after 2004 (Harnecker 2010). Accounts of the Latin American kind of socialism can be found in Lebowitz (2006) and Harnecker (2010); we are following the former because he shows a broader landscape for this alternative. According to Lebowitz (2006, 89), this brand of socialism must encourage a new kind of knowledge:

Here, too, was a vision of the new Bolivarian subjects producing themselves - both in the political sphere ("the participation of the people in forming, carrying out and controlling the management of public affairs is the necessary way of achieving the involvement to ensure their complete development, both individual and collective"), and in the economic sphere (" self - management, co-management, cooperatives of all forms, including those of a financial nature, savings funds, community enterprises and other forms of associations guided by the values of mutual cooperation and solidarity "). This is a constitution that demands a "democratic, participatory and protagonist" society, a constitution whose principle is the full development of human beings as subjects is based upon their “active, conscious and joint participation in the processes of social transformation embodied in the values which are part of the national identity.”

Then, 21stcentury socialism must be based on a communal system of production and consumption. In the Venezuelan case, both are represented in the Enterprises of Social Production (EPS) and the Commune Councils. [5]
Lebowitz also outlines some theoretical ideas about how socialism can be established and some problems to consider: (1) to gain control of the state through democratic means, (2) to gradually modify the consciousness of the people, (3) to build new men and women through their own process of organization of production, (4) to change the meaning of producing— not the production of commodities but rather the full development of human beings, and (5) to build socialism in each country attended by particular characteristics, i.e., different correlations of forces.
All the experiences so far seen have shown the importance of people participation and education. However, they do not shed light about how a new progressive option can be established in the long run along with a high rate of growth.
6. Means to achieve ends

The progressive option that supplants neoliberalism must fulfill the following requirements: (1) stating a concept of development, and (2) defining how progressive options are able to seize power (if possible).

6.1 The concept of development

Even though there are many books about development, defining the concept is still challenging. Simply, development must include null growth rates or higher than zero and the improvement of some social indicator. In a broader sense, development must include the full development of all human potential (Marx 2001; Lebowitz 2007). This kind of abstract concept must involve meaningful production and consumption. In both processes, a human being is reproduced as a human being not as an object, and with no room for exploitation. The common middle-ground between these two views of development can be found in Sen (1999, 3 and 6), who states: “a process of expanding the real freedoms that people enjoy [among these freedoms] ...freedom of exchange and transaction is itself part and parcel of the basic liberties that people have reason to value.”
Even though all three kinds of development involved in the three concepts are difficult to achieve, choosing one is very important because it provides the standard that society considers worthy and the set of institutions we can use to accomplish it. For example, taking the middle-ground concept, markets may produce growth and increase productivity (Mill 1867; Smith 1997). However, markets also produce the following:

  • (1) A commodification of human beings. To live, a human being has to work. Without means of productions, people have to sell their labor force to capitalists. In that process, human beings have disappeared. Human beings can be considered a factor of production that can be defined according to a modern concept: human capital. “Human capital” means a human who has to work without feelings or any weaknesses. Furthermore, in a crisis, people will experience layoffs without taking into account if they can eat or not, pay the mortgage or not.
  • (2) An enhancement of values such as individualism and competition. I will here enter into an extended discussion of the effects of markets on people. For Mill (1867, 49), markets have some advantages but he also recognizes the claims of some socialists:

It is the principle of individualism and competition, each one for himself and against all the rest. It is grounded on opposition of interests, not harmony of interests, and under it every one is required to find his place by struggle, by pushing others back or being pushed back by them. Socialists consider this system of private war (as it may be termed) between every one and every one,especially fatal in an economical point of view and in a moral. Morally considered, its evils are obvious. It is the parent of envy, hatred, and all uncharitableness; it makes every one the natural enemy of all others who cross his path, and every one’s path is constantly liable to be crossed.

In capitalism, according to Hayek’s ideas (see Section 2), egoism or indifference in individuals can lead to a wealthy society. On the contrary, in socialism institutions such as solidarity, cooperation, and altruism are the only means that can lead to a wealthy society. A wealthier society has to be understood in two senses, either in productivity or in humanity. For example, markets damp some values such as cooperation and solidarity. Campbell (2005, 3), quoting Owen, refers to this point:

I have often reflected on how unjust such proceedings competitive contests to determine who was best at something, in this case between children - A.C. are in principal, and how injurious in practice. One instance of this made a deep impression on my mind. Some party bet that I could write better than my next eldest brother, John, who was two years older; and upon a formal trial, at which judges were appointed, it was decided that my writing was better, although so far as I could then form an opinion I thought my brother’s was as good as my own. From that day I don’t think my brother had as strong an affection for me as he had before this unwise competition.

Therefore, more important than technical problems, such as planning from the transition to capitalism to another alternative such as socialism, is the modification of some institutions that are rooted in our society.

6.2 How progressive movements are going to seize power

In seizing power, neoliberals used violence as well peaceful means (see section 4). Does the same option exist for progressive options to neoliberalism? If the option chosen is keynesianism, this will be the alternative that would present fewer problems than other options. For this reason, some postkeynesians think that the current crisis can be solved with some political movement, and others think that the crisis was caused by Obama’s betrayal of his democratic principles. However, Huberban’s words remain true— if neoliberals fought fiercely to take power, they would not cede now to another capitalist path with more social justice.

If an American capitalist government could spend $20 billions and if necessary $30 billions or $40 billions- for peaceful, constructive purposes, then the keynesians would doubtless be right. But the point is precisely that the ruling capitalist class, the very class whose enormous wealth and powers is assured by the structure of capitalism itself, will never approve or permit spending on this scale (or anything even approaching this scale) for a peaceful, constructive end (1961, 16 and 17).

Selection of the socialism alternative would lead us to the following conundrum suggested by Hayek (2001): Can socialism be achieved by non-socialist means? This question prompts two additional questions: (1) Is it possible to achieve socialism by peaceful means? and (2) Is it possible to achieve socialism without taking the power of the state? Regarding the first question, historically, socialist alternatives implemented by means of an armed revolution or a democratic means have occurred. Russia is an example of the first case; Chile is an example of the second. The Chilean experience has been the fundamental reason to argue that socialism by pacific ways is not possible because if you do not destroy your enemy when you have the opportunity, he will destroy you when he grasps the power. Politically, this assertion can be true, but it contradicts the principles of socialism based on the full development of the capabilities of all individuals (solidarity, cooperation, and altruism). Regarding the second question, it poses the same problem, how something that is not socialism can produce socialism in the long run. “You cannot build a society of non-power relations by conquering the state. Once the logic of power is adopted the fight is lost,” states Holloway (Author’s translation 2002, 35). In his rebuttal to Bakunin’s Statism and Anarquism (2010), Marx singles out that confrontations and a certain type of state can exist as long as the remnants of the old society have not disappeared. However, this assertion leads to the following question: How long will it take for these old remnants to disappear? Of course, it depends on class struggle but the answer may be centuries. The state is a capitalist institution, and some of the progressive option experiences (including those of Kerala or Venezuela) rest on the state as well as on the former real socialism. Can the state build a new socialist society?
7. Conclusions

In any historical moment, the future is unknown and social change is possible. Some scholars (Harnecker 2010) believe that with the current economic crisis we are seeing the dismissal of neoliberalism. The mobilization of people all around the world but especially in Latin America has been put forth as an example of this view. Similar feelings have been expressed regarding previous failures. After the Great Depression, Polanyi (2001) thought that free markets would never again dominate the ideas of policy-makers. Also, Blackburn (1991) thought that with the downfall of real socialism, this system would never again be an alternative to capitalism.
Neoliberalism is a failure because it has produced lower growth rates than keynesianism and real socialism. Furthermore, it has not satisfied people’s basic needs. However, its failure does not mean that these options are an alternative to capitalism for two principal reasons: (1) society has changed—keynesianism and real socialism did very good things, but that was in the past (the institutional frame where keynesianism and real socialism were embedded no longer exists), and (2) both systems failed in facing the challenges of this evolving society.
New development experiences are based more on people’s freedom and self-management. These experiences have proven that something can be done with limited resources using democratic means. However, a plan is needed to establish in the short run as well in the long run the necessary institutions to achieve the plan. How will the alternative address the following problems: (1) civil wars, (2) outflow of capital, (3) economic backwardness, (4) counter revolutions, (5) the remnants of old institutions, (6) political dissent, and (7) material poverty?


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[1Hayek’s argument here is an extension of Adam Smith’s ‘Invisible hand’. Foley (2006, 10) captures neatly the meaning of this idea: “Smith asserts the apparently self-contradictory notion that capitalism transforms selfishness into its opposite: regard and service for other.”

[2This assertion is in contrast to what some left-wing people claim. For example, Saad Filho (2005, 114) states, “However, in spite of these advantages the post – Washington consensus suffers from weakness similar to those of the Washington consensus. In particular they share the same methodological foundations, including reductionism, methodological individualism, utilitarianism and the dogmatic presumption that the exchange is part of human nature rather than being an aspect of society … Consequently, for the post – Washington consensus the market is a ‘natural’ rather than a social a social created institution.”

[3The argument that the right took control partially over Democrats is based on Pollin (2003, 21 – 47). Pollin comments that during the Clinton Administration, there was not any major break with the set of policies undertaken by the Republicans in the previous administration. He uses four points to support his contention: (1) people who ran big corporations were set to work in important positions. An example of this is Robert Rubin, who first was co-chair of Goldman Sachs, after which he became Secretary of the Treasury, and finally, he was one of the most influential executives in Citigroup. (2) The trade policy, set by the Clinton Administration, took an orthodox point of view about free trade. To illustrate this, Pollin uses the case of NAFTA (North American Free Trade Agreement). (3) Policies concerning workers were addressed to “…the dismantling [of other] …welfare assistance programs…” (Ibid. 29), and the fiscal policy was oriented to gain a surplus. (4) The financial policy was set up to develop financial markets. An example of this is the dismantling of the Glass-Steagall Act through the Financial Services Modernization Act.

[4Unfortunately, it is estimated that 20 percent of employees are part time or temporary workers (Allen 2011).

[5Commune Councils are groups of people older than 15 years that can decide the public policies that the state can implement. The main mechanism of participation and decision is the Citizen Assembly.

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