Neoliberal ideology has dominated world discourse for the first fifteen years of the twenty-first century. The mantra has been that the only viable policy for governments and social movements was to give priority to something called the market. Resistance to this belief became minimal, as even parties and movements that called themselves left or at least left-of-center abandoned their traditional emphasis on welfare-state measures and accepted the validity of this market-oriented position. They argued that at most one could soften its impact by retaining some small part of the historic safety nets that states had built over more than 150 years.
The resulting policy was one that reduced the level of taxation radically on the wealthiest sectors of the population and thereby increased the income gap between this wealthiest sector and the rest of the population. Firms, especially large firms, were able to increase their profit levels by reducing and/or outsourcing jobs.
The justification offered by its proponents was that this policy would in time recreate the jobs that had been lost and that there would be some trickle-down effect of the increased value that would be created by allowing the "market" to prevail. Of course, allowing the market to prevail in fact necessitated political action at the level of the states. The so-called market was never a force independent of politics. But this elementary truth was sedulously unnoticed or, if ever discussed, ferociously denied.
Is that day over? Is there what a recent article in Le Monde called a "timid" return by Establishment institutions to concern about sustaining demand? There are at least two signs of this, both of considerable weight. The International Monetary Fund (IMF) had long been the strongest pillar of neoliberal ideology, imposing its requirements on all governments that sought loans from it. However, in a memo released on Feb. 24, 2016, the IMF worried openly about how anemic world demand had become. It urged that finance ministers of the G-20 move beyond monetary policies to encourage investments rather than savings in order to sustain demand by creating jobs. This was quite a turn-around for the IMF.
At about the very same time (February 18), the Organization of Economic Cooperation and Development (OECD), a second major pillar of neoliberal ideology, released a memo that announced a similar turn-around. It said that it was urgent to engage "collectively" in actions that would sustain world demand.
So, my question, is reality creeping in? Well, yes, if only timidly. The fact is that, worldwide, the promised "growth" in value-added production has failed to occur. Of course, the decline is uneven. China is still "growing," if at a much reduced pace, one that threatens to decline even further. The United States still seems to be "growing," largely because the dollar still seems the relatively safest place for governments and the wealthy to park their money. But deflation seems to have become the dominant reality of most of Europe and most of the so-called emerging economies of the global South.
We are all now in a waiting game. Will the timid moves recommended by the IMF and the OECD stanch the reality of declining world demand? Will the dollar be able to resist a further loss of confidence in its ability to be a stable repository of value? Or are we moving toward a further, much more severe, wild swing in the so-called market, with all the political consequences this will undoubtedly entail?
Declining world demand is the direct consequence of declining world employment. In the past 200, even 500 years, every time there has been some technological change that did away with jobs in some productive sector, this was resisted by the workers who were losing out. The resistants engaged in so-called Luddite demands to maintain the previous technology.
Politically, Luddite resistance has always proved to be unsuccessful. Establishment forces always said that new jobs would be created to replace those lost, and growth would be renewed. They were right. New jobs were indeed created — but not among so-called blue-collar workers. Rather the new jobs were in so-called white-collar jobs. As a result, over the longer run, the world-economy saw a reduction of worldwide blue-collar jobs and a significant rise in the percentage of white-collar workers.
It was always assumed that white-collar jobs were exempt from elimination. These jobs presumably required a human interacting with other humans. It was thought that there were no machines that could replace the human worker. Well, this is no longer so.
There has been a great technological advance that permits machines to engage in calculations of enormous amounts of data hitherto the domain of lower-level financial advisors. Indeed, these machines can calculate data that it would take many lifetimes of an individual to calculate. The result is that these machines are in the process of eliminating the job positions of such lower-level "white-collar" jobs. To be sure, this has not yet affected what might be called the higher-level or supervisory positions. But one can see where the wind is blowing.
When "white-collar" positions were eliminated or reduced in number, they were indeed replaced by new "white-collar" positions. When, however, today, "white-collar" positions disappear, where is the container of new jobs to be created? And if they cannot be located, the overall effect is to diminish severely effective demand.
Effective demand however is the sine qua non of capitalism as an historical system. Without effective demand, there can be no capital accumulation. This is the reality that seems to be creeping in. There is no surprise then that concern is being expressed. It is not likely however that the "timid" attempts to deal with this new reality can in fact make a difference. The structural crisis of our system is in full bloom. The big question is not how to repair the system but with what to replace it.
Immanuel Wallerstein, Senior Research Scholar at Yale University, is the author of The Decline of American Power: The U.S. in a Chaotic World (New Press).