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Neo- Liberalism is considered the intellectual compass of the
international and local policies of the Right that were imposed on
the world's peoples in the last years. Such policies resulted in
huge disasters and increasing poverty that still raise a lot of
arguments. Yet in the meantime, these policies are still a source of
ambiguity to many segments of public opinion especially when
confused with Liberalism in its classic sense. This article focuses
on removing this ambiguity, determining the meaning of Liberalism
from the conceptual and economic perspectives, the relationship
between classic Liberalism and Neo - Liberalism and the differences
between them, as well as the impact of Neo- Liberalism and the
repercussions of its policies on the Third and Arab world.
First: Neo- Liberalism - Origins- Policies - Ascension
In the first half of last century (the
Twentieth century), the traditional Liberalism faced main political
challenges that announced its decline from the world conceptual
hegemony. The Socialist Russian revolution that burst under the
flare up of armed conflict between the major imperialistic powers in
the First World war was the first challenge. The second challenge
that accompanied the big recession in 1929 was the escalation of the
intellectual power of the Keynesianism in the main capitalist
countries which formulated the intellectual base of what was called
"the Welfare State" that formed the ideal example to capitalist
countries in the West during The post second world war period. As a
result of the reaction between the two previously mentioned trends
with the conditions of third world countries that obtained their
independence, a wide trend of development theories to deal with
conditions of economic and social backwardness, has emerged .These
theories were far from the traditional liberalism theory that
overpowered during the imperialistic period. Traditional liberalism
proved its failure to offer a solution for the development problem,
or overcome the imperialistic subordination. It as well, failed to
understand the new social powers springing from and connected to the
natural product of some ongoing industrialization processes at that
time, nor the urbanization and the population momentum in addition
to the expansion in modern education systems.
Under such circumstances, liberalism at the end of the second world
war was not but a marginal economic trend that tries to gather its
powers, and reformulate thesis by adapting to the changing economic
and social reality of the mid- twentieth century world. While this
process of reformulation and which was called Neo-liberalism,was
applied, liberalism had to wait for thirty years to dress in its new
outfit and jump once more to conceptual hegemony. It took advantage
of the conditions of the general crises of the international
capitalism system, represented in the fall down of Bretton Woods
system in mid seventies.
Classic liberalism that goes back to
Physiocrats and Adam Smith and extends to Bentham and Say, then the
Austrian school of Individualism is that intellectual trend emerging
from the necessity to avoid the interfering of the state in economy,
advocating the free transactions, looking at the spontaneous
capitalist market as being the only active organizer of economic
transactions and the rational use of resources. The state should
keep only the role of the protecting state.
The general methodological basis of
different liberal trends is that of individualism. All different
forms of social relationships of the individual are but a means to
achieve his/her personal objectives. Hence, liberalism advocates the
concept of the natural freedom of the individual and views the
social phenomena as being an outcome of a strong independent
individuality. Liberalism highlights that achieving the individual
economic welfare will lead at the end to achieving the social
welfare. These concepts were materialized in the well- known
principle "let it work, let it pass". If the progressive role of
liberal theories can not be denied during the formulation of the
capitalist system as being an important tool in the conflict with
the old feudal classes, one can say that liberalism is the best
expression of the free competition capitalism. It witnessed a
subsequent transformation towards identity at the hand of the new
school that carried out psychological analysis of the consumers
apart from the objective classic basis of the Value according to
work theory.
Neo- liberalism was then introduced
where it was expressed through what were known as London School and
Chicago Monetary school. Neo- liberalism was spread on a larger
scale in West Germany after the Second World War as the concept of
the social market Economy introducing amendments to the classic
liberal concepts. It tried to consider the growing monopolization
aspects opposed to the capitalism of the free competitiveness period
with the emergence of economy deficiencies. By this, neo- liberalism
permitted the government interference in economy, but only in order
to provide enabling environment for capitalist competitiveness and
free prices. Contrary to socialism and even Keynesianism that formed
the basis of "the welfare state" in the West, neo- liberalism
remained opposing the direct interference of the state or cartel. It
allowed only the interference through credit and tax policies. It
harshly criticised Keynesianism policies which considered
inflationary and for targeting full employment.
As Mr. Perry Anderson highlights, the
neo- liberals attack on the state interference, which they
considered a dangerous threat to economic and political freedom, did
not prove to be successful in the post Second World war years. This
period during which the world capitalism witnessed a long term
ongoing expansion. The liberals formed later on a group called Mon
Belliran (the name of the Swiss resort in which they held their
meeting in 1947, the meeting was attended by their leaders among
whom were Maurice Allais, Milton Friedman, Walter Leapman, Wihelm
Ropke, Ludwig Von Mises)
As Anderson clarifies, everything has
changed with the great crise of the economic model during post war
period in 1974. All capitalist countries entered a deep state of
recession. For the first time a low growth rate coincides with a
high inflation rate (stagflation). It was then when the liberal
ideas were accepted. F.A. Von Hayek and his comrades emphasized that
the roots of the crise lie in the excessive and harmful power of
trade unions in general. They confirmed that trade unions destroyed
the basis of private accumulation (of investment) through their
continuous demanding of raising wages, and the ongoing lobby of
government to increase the expenditure on parasite social services.
Such pressure led to a decrease in profit margin of corporations. It
led as well to inflating directions (raising prices)which
necessarily resulted in a general crise in market economies.
Consequently, the solution according to the neo- liberals
prescription is clear as Anderson says: (consolidate the State
authority to be able to break the thorn of trade unions and fully
control the growth of monetary lump i.e. a strict financial policy).
On the other hand, such state should economize its expenditure of
social characteristic, and refrain from interfering in the economy
affairs. Financial equilibrium should be the ultimate goal of all
governments. That is why the budget should be controlled with
reducing social expenditure, returning back to what is called the
normal rate of unemployment that is to say, creating a stand- by
army of labour (i.e. an army of unemployed labour) which help in
weakening the trade unions. Moreover, tax reforms should be
introduced to encourage the economic players to saving and
investment, or in other words, reduce the income taxes on the
highest individual incomes as well as on corporations profits. One
can see that those same policies are recommended or ordered to third
world governments today through international institutions and
western governments. This was after neo- liberalism reached the
position of actual power in the west since the eighties with the
advent of conservative Right governments to authority of which
Thatcher and Regan are the most famous examples, and with the
increasing acceptance and indulgence from European Socialistic
democratic parties to new liberalism ideas.
Generally, neo- Liberalism succeeded
in achieving some of the main objectives in Western countries as
represented in reducing inflation, labour, and wages, as well as
increasing profit rates. However, they failed to achieve the basic
objective that is to encourage investment and economic growth
correspondent to the poid expensive price which is prevailing
inequality and increasing the number of the unemployed.
When comparing neo- Liberalism to
classic liberalism, on can find the neo- liberalism is characterized
by the following:
- It is an expression of capitalism under crises on the contrary to
classic liberalism that expresses the rising capitalism. This truth
is not altered by coinciding with the fall of the Soviet Union and
the bureaucratic socialist model crises.
- Definitely the severe campaign of neo - liberalism against what it
called the evil empire contributed to achieve a spiritual hegemony
of neo- liberalism for a period of time. Yet, this will not change
the truth of the previous conclusion.
- Neo- Liberalism, contrary to the classic in its expression of the
rising burgeois class, tends more explicitly to express its hostile
attitude towards the labouring class and its trade unions.
- This overlaps with strengthening the State's authority in
developed capitalist countries with all reflections on the decline
of the concept of democracy at the hands of the world new Right.
- The influence of neo- liberalism extends to re- draft the
international economic relations system, as well as re-direct the
economic policies in other countries of the world of which are the
South countries . It goes on in its expansion as we can see in the
Arab states to the direct interference including military action.
Second: Neo- Liberalism And Developing Countries
Transformation In Development Concepts
Traditional development economies,
that were predominant during the national liberation period,
correlated with two basic groups of hypothesis: first, guarantee
development as a structural transformation process resting on
industry, supported and strengthened by the flow of resources from
developed countries. Second, markets in developing countries, and
those in between developing and developed countries , had more
tendency to failure and inconsistence. The government actions to
strengthen protection, or protective procedures for the emerging
industries was an inevitable necessity.
These ideas were liable to
transformation to the opposite since mid eighties with the rising of
neo - liberalism to political and theoretical hegemony worldwide,
where the emphasis on the market importance, and he need to limit
the government interference and central planning appear. As well as
considering price incentives capable of performing actively in
developing countries, new liberals took advantage of the success
that the countries of south east Asia have achieved in boosting
economic growth to prove their theory. They believed such successes
were achieved by virtue of limited government interference, low
level of price distortions and a strategy of increasing exports.
Yet, the mentioned conclusions of new liberals always confronted
strong opposition from other tends' economic aspect, on top of which
were Structuralists and Marxists Who considered the previous reading
of the Asia experience a wrong reading. They pointed out for
instance that the Korean model givens for development proved the
opposite of what had been mentioned. The Korean model dependence on
foreign capital was weak. (less than 2% of the total investment). It
was also characterized by a continuous relatively high level of
protection of local industries if compared to other countries . the
Korean success was achieved under the previously mentioned points in
addition to other elements of which is that the Korean model was
more interested in human resources development than other models in
other developing countries. It was able to achieve a deeper
agricultural reform and spent money on scientific research and
development (1.1% of the national product). The model was
characterized by a higher level of state independence regarding its
relations with authorities and social classes. Finally, the Korean
model benefited from geopolitical elements that relate to American
and Western concern, taking advantage of war conditions.
A Failure Agenda And Catastrophic Results:
The neo- Liberalism agenda in
developing countries included financial ascetical policies, fighting
inflation through controlling monetary circulation, applying
privatization on large scales, freeing trade, importation and
creating free capital market. It is noticed that the liberal
transformation in the nineties as witnessed in Latin America was
accompanied by the callapse of military and authoritarian systems
and a transformation to representative democracy. While the
masses,topped by the labouring class, were the main actors in
toppling these systems, the first beneficent was the liberal powers
that turned Latin America to a trial field for applying neo-
liberalism policies in the world. Latin America has offered an
important lesson clarifying that transformation to democracy does
not necessarily mean solving social and economic problems, yet under
new liberal policies, these problems might be aggravated. The Latin
American experience proved that the positive outcome of liberal
governments was limited and very short- termed. Such governments
were able in the first half of the nineties to restore rates of
economic growth after an epoch of lost development resulting from
the debt crises in the eighties. They were also able to reduce
inflation rates, increase exportation and restore foreign capital
flow. Yet, the economic conditions were still characterized by
instability and fragility.
Privatization transferred many
concessions of privatized projects to the new investors, thus
nothing has changed but the ownership model. Although exportation
has increased, importation increased in high percentages. Thus, the
everlasting problem of payments deficit remained with the enormous
foreign capitals flow, which proved to be not a result of the
stability of economic conditions , but a benefit from the interest
price differential. Hence, the Mexican crises unveiled the danger of
weak financial control and speculative capitals in stock exchange.
As a result of all mechanisms related
to the financial and monetary liberation, the national public debt
problem turned into a time bomb. This is what was clearly
demonstrated in Brazil and reminds us of the status quo of Egypt
with all the resulting consequences of economic unrest and burden
the low income section with the consequences of this crise. All this
added to the increasing rates of outside exposure, the sensitivity
towards the deteriorating international economic structure and the
successive shocks (the Mexican debt crise, the Asian crises, then
the Russian crise) led at the end to the rapid regression of
economic growth rates for a second time.
These results, beside the aggravated
social problems like polarization, marginalization , unemployment,
poverty, and social deterioration as well as other old social
problems, led to basic intellectual revisions, based on which a new
Latin American consistency was formed opposing the new liberal one
of Washington. The social and institutional agendas of the region
were emphasized along with the necessity of addressing inequality
and observing social justice. The whole image was completed during
last years with significant political transformations with the
defeat of liberal governments in a number of the countries and the
success of leftist governments in some of the continent's countries
at the backyard of the United States of America.
Third: The Status quo And Lessons For Arabs
The status quo on the world level is
characterized by an increasing exposureof delusions of neo-
liberalism and the springing of what we might call "the age of post
neo- liberalism". It is an age whose features are still under
formulation and is crystallized by the contribution of branched
striving powers. These are the powers that revealed the delusions
spread all over the world, including what the World Trade
Organization says of free trade according to the relative privileges
theory, and the illusions of development depending on the flow of
fluctuating foreign capitals. On the other hand the situation on the
Arab and Egyptian levels seem different.
Probably, the Arab countries lagged
behind regarding the required economic liberalization processes and
the integration in the world capitalist economy to the necessary
limit. Yet, this process is being carried out nowadays. It is a
process that is strongly urged.
Egypt has witnessed a slow process of
micro- economic liberalization since mid- seventies. This process
was performed in deeper levels since 1991 after the agreement
concluded with the International Monetary Fund. The first phase of
the process witnessed a focus on monetary and financial aspect. The
second generation witnesses the focus on privitization and
liberalization of other economic sectors including the services,
with the privitization of the social services sector.
In general, the results were
disppointing. Since entering in this process , the rates of economic
growth decreased and the country could not restore the previously
achieved growth rates during the sixities and seventies. Inequality
spread over in a serious manner, while the income contribution to
national product decreased from 50% in the early seventies to reach
less than 30%. The population percentage below poverty line reached
48% with the increase in the unemployed numbers. The problem of
national debt emerged. The debt reached 521 billion pounds that is
to say 97% of the growth national product. In addition to social
marginalization due to unemployment and early pension, the
continuous discrimination among peasants and their inability to
obtain lands monopolized by big investors and the decline of the
middle class. This was accompanied by the break up of industry and
Egypt lag in this field as well as scientifiic, technological and
human resources indicators.
Recently, what is called economic and
political reform, is put forth befor Egypt and the Arab countries to
implement. That is to say, more procedures for economic
liberalization regardless their economic or social results. It is
important to note some observations regarding this issue:
The requirements of the mentioned
reform come with clear American instructions in the first place and
Western ones in general. Such requirements are are according to reo-liberals
is amixture of democratizing the political system, liberalizing
economy, and freeing trade. They are related to a general plan to
restructure the region economically and politically by the direct
use of military force (Iraq and Palestine), sectarian fragmentation
and different pressures (Sudan- Syria- Lebanon)
From the governing Arab Systems side,
a trade- off is done to linger the required political reforms with
introducing a direct concession of economic liberalization, that
sometimes takes the form of national concessions in the context of
Western Middle Eastern Plan (Q.I.Z agreement- the agreement to
supply natural gas to Israel)
As for the opposition powers, the
rightist powers either civil (al Wafd or Al Ghad Parties) or
religious (the Muslim Brothers) go for the plans of liberalization
and privitization and integration in world economy, though they
criticize some related aspects like corruption accompaning
privitization process.
In a sector of Arab intellectuals,
there is a mix up between liberalism in its classic humane sense, to
emphasize the values of individual freedom, and neo- liberalism with
its previously mentioned economic and social content. Consequently,
the lessons of humane experience require Arab popular social powers
to make their own way toward democratic transformation benefiting
from other countries' experience. Such powers should avoid the mix
up that the American media machinery and local neo-liberalism
succeeded to propagating it between democarcy and new liberal
policies. What is required is to begin from where others ended not
where they started, and search for a new Arab National project.
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*Assistant Secretary-General of Political Affairs-El Tagmaa Party
(Egypt)
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