Neo-liberal Policies and Their Rationale

excerpted from the book

Globalization
and the Decline of Social Reform

by Gary Teeple

Garamond Press / Humanity Books, 2000, paper

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Neo-liberal Policies and Their Rationale

Neoliberal policies, variously labelled as Thatcherism, Reaganism, neo-conservatism, and the New Right Agenda, were discernible by the mid-1970s and had become formal government policy in many countries by the end of that decade. They are the policy side of the "new reality;" they represent the political requirements of capital internationalized, highly centralized, and global in perspective. They also represent the last national policies to be promulgated, the final act of the independent nation-state, because with their acceptance the economic and political barriers to production and distribution around the world will have been minimized. With their adoption they will have in effect harmonized the national with the global economy.

The possibility of national management of national economies will increasingly be abridged, and national forms of the welfare state will be more and more difficult to maintain. All the industrial nations and almost all of the developing nations are in the process of legislating these neo-liberal policies, and their promulgation will transform social reform as we have known it. Social democracy will rapidly lose its meaning and purpose, if it has not already, as all political parties find themselves increasingly obliged, with greater or lesser resistance, to carry out this ''agenda."

In the postwar period capital completed its conquest of domestic markets (commodifying almost every aspect of life within the nation state) and the international markets (opening up the world for business). In the 1970s, with the coming of a self-generating system on the global level, it began to confront the last terrain into which it could expand, namely, the formidable state sector - the legacy of postwar reconstruction and expansion. While GATT (now the World Trade Organization - WTO), the World Bank, the IMF, and other UN agencies and representatives of capital apply pressure from "without," national governments legislate neo-liberal policies intended to privatize state property, to "free" capital from social forms in which it is under or open to political control and thereby turn those forms into corporate private property. In the end the demands of capital will have few if any official or authoritative national restraints.

Promotion of the Primacy of Private Property Rights

Underlying all the items on this agenda is the principle of private property and the policy of advancing private property rights. At issue here is the very basis of inequity and class definition in capitalist society. The rights of private property are the foundation of differences in material wealth and associated differential power. Their promotion in the political sphere since the 1970s has simply been the open advocacy of the principle on which the attack on all other forms of property rests.

Private property in this sense does not refer to tangible objects. Rather, it is a relationship that members of a social unit have towards each other in regard to the use and disposal of socially necessary objects. To put it another way, property consists of socially defined rights, that is, enforceable claims or entitlements to the goods and services produced or used in a society. This definition of property as rights, as forms of ownership, points to the fact that property is an expression of control or regulation. It implies the exercise of power over things produced, and even over the means of producing things. Such power attached to private property is hardly benign or in the interests of society as a whole. Even at the dawn of industrialization Adam Smith could write that merchants and manufacturers were "an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."

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The Privatization of Public Corporations

"Privatization" - or the "transfer" of state assets and production of goods and services to the private sector - has been carried out in a number of ways. The most obvious is an outright sale to a private corporation, or the offering of stock market shares to the "public." But state assets can also be leased or liquidated and government services can be contracted out or simply terminated. Where the process is politically problematic the preferred route has been "privatization by attrition," the gradual reduction of services.

During the 1980s such "selling off" took place in every industrial country and in many "lesser developed" nations, and the rapid worldwide application of this policy shows little sign of abatement. It is not, however, a popular movement but rather a policy promoted by government elites; that is, the motives come from outside the nation-state. The political hue of the governments enacting these policies seems, on the whole, to be unimportant; from a military dictatorship in Chile, to right-wing conservatives in Britain, to social democrats in New Zealand, Spain, and France, to "communists" in China and Cuba, the policy and practice of privatization have been remarkably similar. Where governments have not promoted the policy, as in a few Third World countries, privatization has been forced upon them in the terms of international loans.

Such a "reform" movement is a curious thing given that public corporations were for the most part created in the first place to aid in capital accumulation. One of the more important reasons for their creation was the need to reduce costs to the private sector by means of government provision of infrastructure. State-financed construction and ownership of canals, harbours, power-generating plants, water-supply systems, and railways and airports have been - and in some cases remain - of enormous benefit to capital. They eliminate the need for a market-related profit, they spread the costs of infrastructure for commercial use over the whole of society, and they allow for an ongoing subsidy for business users from state coffers and/or other users.

Many public corporations were and still are created to protect capitalists from themselves or from the business cycle. In cases of poor management, corruption, or fraud, none of them uncommon in the business sector, or when a recession or depression threatens bankruptcy, the state sometimes steps in with financing to save the corporation by way of bailout or buy-out. Generally this happens only when the possible failure would have economic ramifications too great to permit. Other situations include financially risky exploratory or experimental development, when the state accepts the risk instead of the private sector; legacies of war production, when the state finances production in areas not developed by private corporations; the provision of financial services with the backing of the state, when the risk for the private sector is too great; and the creation or maintenance of a "national" presence in some sectors.

If, in general, the state introduces nationalization in the interests of capital, why then the current wave of privatization? If the motive for nationalization was largely to further the interests of the corporate sector, it is indeed paradoxical that the same motive would appear to underlie the "denationalization" or privatization of public corporations. The answer is that what may have been useful or necessary for capital at one time is not necessarily useful all the time.

The qualitative changes in the world economy since the 1970s are largely responsible for this shift. Massive technological changes in the mode of production have made it possible for ever fewer productive units to supply a single world market. At the same time the possibilities for further increasing capital accumulation are narrowing with the indebtedness of the Third World, rising unemployment in the industrial nations, intensified international competition, and the destruction of nature. Growth in the private sector began to slow down, but growth in the public sector, while varying across nations, generally showed a relative increase by the early 1980s - mainly to counter the recessions and meet increased needs on the side of the reproduction of capital and labour. By that time most industrial countries were spending more than a third of their Gross National Expenditures in the public sector.

Given the internationalization of capital and increasing productivity, however, the corporate sector pursues all possibilities for increasing private accumulation. It sees in state ownership and control the diversion of a large part of the national product away from the "productive" economy; for capital, public ownership represents industries or services that are "unproductive," that is, outside the realm of private exploitation. Worse, it knows them to be paid for by revenues from wages and profits, the "social surplus" uncapitalized. The state sector also provides the means for maintaining national aspects of the nation-state. From these reasons come the motivation for privatizing the public sector.

While the main public justifications for privatization tend to be the increase in efficiency, productivity, or competition, the elimination of sources of state deficit, or less government intervention in the economy, it has not been shown that privatization has effectively contributed to any of these factors. On the contrary, in many cases it has done just the opposite. It can lead to increased government expenditures because private operations in health care, welfare agencies, highway maintenance, or prisons must produce a profit, whereas public corporations generally do not unless profit is specifically required. Moreover, because competition is far from desirable for capital, privatization might well simply substitute a private monopoly for a public one without producing any of the benefits that supposedly come from the "rigour" of competition. Privatization can also increase the need for government regulation to oversee private corporations operating in their self-interest, whereas public corporations with a mandate to operate in the public interest do not increase this need.

Rationalizations for political policies do not necessarily reflect the reality of their consequences. If the stated reasons for privatization do not match the results, it is because the real reasons may simply not be understood, or, more likely, they may be part of hidden agendas.

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Transformation of the Tax Structure

The tax system is being restructured in all the industrial nations. Tax regimes vary considerably from country to country, but at least two trends are common to all nations in the West. One is the shift to an increasingly larger percentage of total tax revenue being drawn from individual rather than corporate income. The other is the growing regressiveness of taxes on the side of wages and salaries, in the form of two sub-trends: the lowering of higher rates on high income and the reduction of the number of tax bands; and the increased reliance on indirect taxes, including consumption taxes, social security levies, lotteries, and state-run gambling. How to understand what is happening and what these changes mean?

Taxes are the "economic expression of the state"; wherever the state has existed, so too have taxes. But the state arises only in class-divided societies, in which the interests of one class prevail and those of other classes are subordinate. The central role of the state as the embodiment of these conflicts has been to perpetuate these relations. In the name of "society" the state ensures subordination and advances domination by means of reform, coercion, "bread and circuses," and other means at its disposal. All its functions are financed principally by taxes.

In capitalist societies the state similarly perpetuates the unequal relations between the owners and managers of capital and subordinate classes, and it also finances its activities mainly by taxes. But here, several factors such as an organized working class, the possibility of alternating political access to state power, and a long period of national economic expansion have produced a certain limited "sharing" of the tax burden between corporations and individuals. After World War II this sharing began to decline as taxes on individuals increased and taxes on profits fell relatively, especially with the coming of the 1980s.

The trend closely follows the rise of transnational corporations, or the progressive denationalization of capital. As long as capital remained distinctly national, it had an interest in allowing a part of its revenue to be collected as taxes for the purposes of maintaining the national state or, more precisely, the general conditions of production. When capital began to lose its character as a national existence, it began to find fewer advantages in contributing tax revenues to the "nation" and to perceive state ownership and production as restrictions to its own private accumulation. Their enormous size, economic power, and increased mobility have allowed companies to reduce taxation by playing nations off against nations. Everywhere the result has been the restructuring of tax regimes in which the working class bears the larger and rising share of tax with capital responsible for a smaller and declining share.

The accompanying trend, the growing regressiveness of taxation on wages and salaries, is forcing a greater tax burden on middle and lower incomes and producing a decreasing burden on upper incomes. In the 1980s the rationale for this tax policy - the "trickle-down" theory - may well have drawn its content from an earlier work by Hayek, in which he made several points that regularly appeared in print as standard arguments against a progressive income tax. His recommended alternative was a single tax rate of 25 per cent for all. But arguments against a progressive income tax generally overlook a key point: that the existing possibilities for tax avoidance (legal, illegal, and "creative") for the rich have always been numerous and have generally gone a long way to minimize the limited progressiveness. The move towards less progressive taxation in a capitalist society means that the subordinate classes will increasingly be the source of revenue for maintaining the state, which in turn maintains the continuing domination of the economically powerful.

These trends have several implications. For one thing, they mean that the expansion or simply maintenance of the public sector is being disproportionately financed as a tax burden on the working classes rather than on the corporate sector or the rich. If a portion of state revenue, moreover, goes to corporations in the form of grants, loans, guarantees, tax expenditures, and allowances, the trends also mean that some of the "disposable" part of wages and salaries that goes into taxes is benefiting the business sector. This amounts to a state-mediated shift in income from the working class to the capitalist class. In short, the changes in tax structure are obliging the working class to finance increasingly all the functions of a state that in the final analysis acts mainly in the interests of another class.

As the tax burden on the working class grows, the trend reinforces certain negative ideological views about the state: that government is too "big," wasteful, unnecessary; that excessive taxes are a contributing cause to a recessionary economy; and that the social reforms representing a large portion of the state's expenditures are "unaffordable." That there are elements of truth to these views makes them all the more compelling, even though the immediate burden of taxation is far from being the source of these problems.

An increasing tax burden can be used, then, as a rationale to build pressure for the dismantling of the welfare state and for the reduction in the size of the state. The trends allow the capitalist classes and the party in power to promote a social consensus around a negative view of the state, to exploit a disenchantment over high taxes by advancing explanations that point to the inefficiencies of government, to welfare or unemployment insurance abuse, or to the high cost of public health care, and contrast these supposed problems to the "efficiencies" of the market and a minimal state. These pressures can be used to turn around the widespread sentiments in favour of a certain "distributive justice" and work to justify more easily the attacks on the welfare state.

The increasing tax burden also means a reduction of the purchasing power of the working class, which can help generate economic crises and also lead to pressure for wage increases as labour struggles to maintain its accustomed standard of living. Attempts to place a cap on or roll back increasing personal taxes can create additional pressure to decrease the size of the state and its services (because of falling revenue), as well as reduce pressure for wage and salary increases, temporarily easing the secular drop in real income.

The trends are in part a product of the worldwide harmonization of national tax regimes. They comprise an approaching conformity of tax policy around the world to accommodate the needs of internationalized capital. The point is more obvious within free-trade areas or customs unions, where "the maintenance of fiscal frontiers among members . . . is regarded as inconsistent" with an "integrated market, and the more integrated the world market becomes the more there must be a harmonization of tax policy at the global level. For one reason, transnational corporations are able to demand from national or local governments not only tax concessions but also a variety of other incentives to invest. For another, national "tax wedges" out of step with other nation-states constitute disincentives to invest or reasons for the reallocation of internationalized capital.

The trends not only result in a growing tax burden on the working population and particularly its middle and lower strata, but also create an "empirical" rationale for the dismantling of the welfare state and the minimization of the nation-state itself They show the fiscal limits to reformism; that is, when the redistribution implied in reforms rests on tax revenue, fiscal crises or changes in tax policy intensify the contradiction between corporate profitability and market incentives and the tax-assisted reproduction of the working class.

In the neo-liberal agenda, tax revenues must be at least sufficient to provide for the maintenance of infrastructure, "local" assistance to capitalist accumulation, and security, that is, the protection of private property. Beyond these functions, they represent a diversion of revenue from capital accumulation.

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The Downsizing of Government

The definition of government used here includes the functions of the state and the bureaucracy - the salaried workers in the public sector at all levels employed to carry out these manifold functions. Although the reduction of both of these elements has been an important aspect of neo-liberal policy, there are several other reasons for the declining need for government administration.

Some of these reasons have already been touched upon. The policies of deregulation and corporate self-regulation, for instance, can translate into fewer regulations and fewer people required to oversee them; increased monopolies and oligopolies or fewer corporations mean less intercorporate competition and so fewer commissions and agencies to manage associated problems; the computerization of administrative tasks directly limits the number of administrative personnel required to process information; the coming of world standards and agencies progressively reduces the need to create or enforce national standards; and a growing tax burden on wages and salaries creates political limits to the expansion of tax revenues; all of these make it increasingly difficult to maintain the existing size of bureaucracy.

Perhaps the most important reason for the pressure to reduce the functions and size of government is that the modern bureaucratic model of government was the product of a particular mode of production, namely, industrial capitalism, but more particularly, the advanced Fordism of the post-World War II period. The present era of capitalism, characterized by global markets and computer applications, demands a different structure of government; the growing global economy is fettered by the enormous size and inertia of anachronistic national bureaucracies.

Insofar as the "downsizing" of government refers to a reduction in the functions of government, it embodies a political rationale that is somewhat involved but can be laid out briefly and schematically as follows. The functions include all state interventions in the economy and social life of the nation that have grown with the development of capital. Many of them are reforms won, after years of struggle, suffering, and loss of life, by the working class for its own protection and advancement in the face of capital. Gradually, but especially after World War II, conditions made more reforms necessary and possible. One of the conditions from an earlier era was a political system allowing for a change of government at more or less regular intervals, a system that developed in an age of competitive capital and reflected this competition by providing for alternations in control over the public purse. The rationale of modern politics became the contest over which party, representing a sector or sectors of civil society, would possess state power to enact its policies, to dispense public funds in accordance with its policies. In an age dominated by transnational conglomerates and consortiums, however, a national political system allowing for alternations in power of party and policy is no longer needed and, more to the point, forms a potential problem. What internationalized capital needs is either the removal of the possibility that state power can be won by a party opposed to neo-liberal policies, or the redefinition of the role of the state (its interventions) so that the state cannot be used in the future in the way it was in the past. Here lies the political motive for downsizing the functions of government.

Downsizing in this sense means the abrogation of government responsibilities for the social and economic well-being of society; it means the redefinition of public duties by the state or the reshaping of the boundaries between civil society and the state so that intervention by the state in the affairs of civil society are hereafter constitutionally or legally restricted. Hence the importance of the constitutional enshrinement of the rights of private property. Social and economic reforms are to be reduced to a minimum and the state prevented from re-establishing them. The objective is the minimal state on the one side and the mythical market on the other - the "market" being simply another name for the unrestrained power of corporate private property. The autocracy of private property is the utopia of the neo-liberal.

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Dismantling the Welfare State

The dismantling of the welfare state or, to put it euphemistically, "unburdening the state of the social agenda," began in many nations in the late 1970s and early 1980s, but is now taking place in every industrial nation. There is everywhere a shift to privatize as many aspects as possible of the health, educational, and social security systems.

Because the private sector now cannot possibly meet the demand for social services provided by the welfare state, and because of the obvious political difficulties, much of this dismantling has taken the form of a "blurring of boundaries," a process that gradually introduces the private sector into arenas that previously seemed to be the sole preserve of the state. In the eyes of the Friedmans, this partial but expanding privatization is a "second-best alternative" to outright private-sector ownership.

Privatization of the welfare state can take several avenues. One route, for instance, involves government attempts to transfer the production of a service or a good from the public to the private sector while maintaining public financing. Examples of such transfers include the contracting-out of services such as cleaning, maintenance, laundry, or catering; the shift in social care of the elderly, handicapped, or mentally ill to private, voluntary, or non-profit organizations; and the selling of prisons or reformatories to "security" firms. These transfers create the illusion of a developing market, but because the transferred production usually remains dependent on state financing its viability continues to rest on the vicissitudes of government policy and revenue generation. Contrary to the rhetoric, moreover, private provision has often proven to be more expensive than public provision of the same services and benefits; but this, of course, is beside the point.

Another avenue of privatization takes the route of state-regulated services and benefits that are mandatorily provided by the private sector. Privatization here amounts to legislation obliging employees or individuals to have certain kinds of insurance or pensions, available only or partially through the corporate sector. Automobile insurance is the most easily recognized and common example, but the principle can and has been applied to unemployment and industrial accident insurance, sick pay, maternity leave, pensions, and even a range of health services.

The least visible and yet a widely taken route of privatization is the policy of incremental degradation of benefits and services. By increasingly restricting public services through rising eligibility criteria or declining quality, and by allowing income benefits to fall behind the rate of inflation, the policy eventually reaches its objectives: to create pressure for improved quality and benefits to be met by the private sector The public health-care systems provide good examples of this form of privatization with the growth of user fees, deductibles, and restricted treatments, operations, and facilities, while at the same time a variety of incentives encourage private insurance and medical treatments. The interim goal of many governments would appear to be a two-tiered system: private but publicly supported medical treatment for the well-off, and a degraded state program for those who cannot afford to pay for private care.

Other examples are social assistance programs and insurance for unemployed and injured workers, when there are increasing qualifications and restrictions and the payments do not keep pace with the cost of living. Yet another is the government moving to restrict grants to state schools while increasing funding to encourage the growth of private schools. Similarly, the universities have experienced restrictions on grant increases, causing a rise in student fees, lower standards, and restricted eligibility, along with the need to pursue greater links to private enterprise.

In contrast to these undeclared policies of erosion, governments have taken up open policies of incentives. They use tax deductions as a form of inducement to move people towards the private provision of benefits, and the privatization of pension plans and medical insurance is a common objective of such schemes. Another method is the use of "vouchers," when, for example, the state educational budget is dispersed in the form of vouchers to parents with children, enabling them to choose public or private schools, with the ultimate goal of undermining the public system and providing private schools with state funding, of making a universal social program of benefit to the private sector. These incentives all involve a form of subsidy to those who can afford private provision at the expense of those who are and will remain completely reliant on state provision. The incentives will, moreover, encourage existing two-tiered systems in which those who have the means to set aside money or afford private fees are assisted in doing so.

In general, there is movement away from state provision of social services and programs, especially those that are "universal" or characterized as "social rights." In place of these rightful entitlements there is the reinstitution and reinforcement of the principles of the poor laws, the welfare schemes of preindustrial times. In modern welfare states some of these earlier principles have been eclipsed by that of "universality," an attribute of many modern publicly provided programs, but others were retained and merely modified. The current trends, however, present a revivification of the concept of the "deserving" versus "undeserving" poor, and of the principles of means testing, familial liability and responsibility, qualifying moral conduct, temporary benefits, deterrent eligibility criteria, targeting the "needy," and the workhouse ("workfare").

The more that these principles are put into practice, the more the principles of universality and social right are undermined or consciously rejected; and the more the failures and omissions of the system are presented as the responsibility of the individual rather than of the state or corporation, the more every aspect of the welfare state can be made into an instrument of social control. Deterrents can, for example, force people to work for subsistence or below subsistence wages; the qualifications can counter the readiness to go on strike by making the benefits conditional on reasons for being out of work; and conditions for benefits may oblige relocation, doing menial work, or eventual acceptance of low-paid jobs.

There are many reasons for these changes in policy, most of them similar to the reasons for privatization in general. Again, the policies have several overall goals: to "shrink" the state by reducing state responsibilities and employees; to "open up" state sectors to private accumulation; to divert to the private sector the revenues spent on health, education, and welfare, which represent a large percentage of national budgets; and to discipline the working classes by undermining union achievements and eroding their social security in the face of rising permanent unemployment. One of the immediate causes would appear to be the decline in the available state revenue, but this is more consequence than cause: the decline is due mainly to declining national growth, the shift in tax burden, and greater demands from capital. The broader context of these changes is the need to "harmonize" national social security reforms, which constitute barriers of varying degrees to the needs of the international market, and to open the state sector to private accumulation.

As long as the welfare state remains relatively intact, providing a wide range of services and benefits, there also remains a political aspect, albeit modest, to the determination of the kind and nature of these policies and to the disposal of the necessary public funds. With a privatized system of welfare, this element of political determination is replaced in theory by market principles - impersonal, apolitical forces beyond the control of the state, especially when stripped of its economic management policies. The effect of a privatized welfare system not only removes the future possibility of political control, but also makes the provision of essential aspects of the reproduction of the working class subject to the vagaries of market forces. As the market goes, as it follows its booms and slumps and creates ever higher rates of chronic unemployment or underemployment, so too go the benefits and services so necessary to a healthy working population. Just as stock markets can collapse, businesses go bankrupt, and corporate theft and embezzlement on a grand scale continue, so too will the elements of a privatized welfare system bear the consequences not only of the business cycle, but also of a system of contradictory class interests.

The Promotion of Charities

Thousands of charities exist in the industrial nations, and many more are added each year, including educational facilities, hospitals, and a range of social services previously funded by the state. There are several important trends that form the context for this vast growth in the size and number of charitable institutions and non-profit organizations and for the conscious efforts by government and the corporate sector to promote that growth. One trend has been the multiplying social needs that have accompanied increasing long-term, structural unemployment, among other forms of social disintegration; another the growing limits on further expansion of the social wage; and a third the planned reduction and privatization of the services of the welfare state.

As these trends accelerate, the entire sphere of social reproduction, embracing all aspects of health, education, and social services, will increasingly be moved into the realm of service markets, one part of which takes the form of charities or trusts. The fostering of such institutions and agencies is but another means of privatizing public facilities; and their expansion is an attempt to shift the responsibility for the human costs of an inhuman system from the state to the individual and to transfer the means of redress from the social wage to private "gifts."

Although charitable donations amount to only a small fraction of state social expenditures, they are playing an increasingly larger role as the current trends continue to build. With this expansion, the implications of their role will become more obvious. The very existence of charities and volunteer organizations and indeed their extension tell us, first of all, that capitalist "society" is in effect a mere marketplace, and that if one is not an active employee or employer, membership means very little. Only those considered "productive" in an economic sense have a place and are considered real members, while all others (to wit, "homemakers," the handicapped, the ill or injured, the old or young, the unemployed, the artist) are in one way or another marginalized, deemed external to the social system.

Moreover, it becomes evident that society as marketplace does not provide all of its members with the basic elements of life such as employment, housing, food, and health care. Society has no mechanism, aside from social reforms or charity or volunteer work, which are anomalies to the system, to provide such "amenities" to those who are not working or who are "non-productive," or, for that matter, even to the working poor. With the decline of the welfare state and the growth of charities, all of the marginalized will increasingly become dependent on the purported benevolence or good will of others; and this in a society that looks upon altruism as abnormal.

By "dealing with" its "non-productive" members in this way, society as marketplace relies mainly on individual donations and tax revenues, that is, on deductions from the wages of those working, to shore up the chronic social destruction that takes place under capitalism. But now increasingly in the form of charity, social redistribution becomes a "voluntary" matter and indeed tax-deductible. This means that the more that goes to charity, the less goes to the state for redistribution. It is a planned paradox: charities are both a substitute for and an instrument in the demise of the welfare state.

To the degree to which charitable institutions and non-profit or volunteer organizations become the prevailing form of social redistribution, moreover, the existing "social rights" or universal entitlements to state-funded social services will be narrowed. In part in the name of charity, the erosion of the elements of "social citizenship," never fully realized anywhere, has everywhere begun.

Circumscription of Civil Liberties/Human Rights

Civil liberties or human rights are popularly understood to be God-given, inalienable, or absolute, as if standing above the real world of conflicting material interests. They are, however, the outcome of a long history of contending forces, which makes them relative to time and place. Their continuing existence in modern capitalist society is likewise relative to and dependent on a certain balance of organized class or sectorial interests. Without this balance, civil liberties can be curtailed in favour of the interests of the stronger of the contending forces. Everywhere in the world where the organized resistance of the subordinate classes has been suppressed or eliminated, there is a corresponding abnegation of human rights. The ruling classes, without organized opposition, are no respecters of civil liberties when the pre-eminent power of capital is threatened.

Civil liberties are considered fundamental rights in advanced industrial societies, and in general they are enshrined as such in constitutions These liberties vary somewhat across nations but normally comprise a range of rights, including the freedom of speech, religion, security, movement, assembly, protest, and due process of law. Most of these civil liberties have a reality, a practical application, only in conjunction with another "right," and that is the right to private property. In a system of private property, many of these freedoms depend on the possession of private property. That is, the financial wherewithal is more or less a requirement for their realization. Without it the freedoms remain, but only as abstractions, as unrealizable principles. With it the freedoms can be realized, but even then only to the limits established by contact with the freedom of others possessed of private property. The freedom of one is contradicted by the exercise of the freedom of another.

In abstract, then, these freedoms are shared by every citizen; in reality, their realization is extremely limited without money - and, increasingly, considerable amounts of money. At present, for instance, for the right of freedom of speech to have a reality, to make an impact on society, it would require at least the ownership of a journal, newspaper, or radio or television station. To use another example, given the costs of hiring a lawyer and of taking a case to court, the right to due legal process is now everywhere severely compromised for those without the means.

Implicitly recognizing this problem and the potential consequence of a loss of legitimacy for the justice system, many industrial nations introduced state-supported legal services and human rights commissions to allow those without the financial means to be represented in court or to find redress for violations of their civil liberties. Both the services and commissions have been tacit acknowledgements of the contradictions within a system of private property, in which the rights of those with property can be exercised while the rights of those without are circumscribed or blocked. In fact, the promulgation, defence, and expansion of civil liberties or human rights can and do restrict the activities of the corporate sector. From the point of view of business, the exercise of civil liberties by subordinate classes is nothing less than a fetter to the unrestrained use of the power entailed in private property by owners over non-owners.

In practice, subsidized legal services and human rights commissions have served, however inadequately, those without financial means, in particular the poor and dispossessed, to resist in a limited way encroachments on their rights by the owners of the means of production, distribution, housing, and so on. They have provided a modicum of protection for those without means from those with means, and in the process they have placed restrictions on the powers of the possessors of substantial property. Given the present decline in the possibilities for capital accumulation, these restrictions become less and less tolerable because they encroach on the powers of ownership and present the possibility of modifications or an end to practices that are immensely profitable - to name one example, unequal pay for women and minorities.

Given the negative current and potential effects for capital of these state-supported instruments of defence of civil liberties for the powerless and disadvantaged in society, the state has begun to reduce their financing, powers, scope, and independence from government. In the United States under Reagan, both legal services and the human rights commission were substantially restricted, as they were in several Canadian provinces during the 1980s and in Britain in the early 1990s.75 Although the budgets and powers were cut, the form of these services and commissions and even some of the legislation were left in place, thus guarding against criticism that these governments were evading their responsibilities to those without the power of capital. The abstract freedoms remained (although these too are coming under attack), while the practical possibility of the powerless realizing them was further restricted. Legal protection for the poor, for women, for minorities, was undermined, while it became easier for the corporate sector to do as it pleased. Another route for legitimate protest was narrowed.

As these restrictions are legislated, other circumscriptions to civil liberties also take place. The laws passed to increase citizens' access to information about government have been progressively restricted in practice or in law. Although the right to know what one's government is doing is not as a rule enshrined in constitutions, such a right is at least implicit in the notion of democracy. These laws, then, do point to a contradiction, namely, the fact that so-called democracies operate in relative secrecy from their own citizens, and that citizens have at best only limited and narrow access to government information.

Far from becoming more accessible to its citizens, governments are increasingly employing powers to restrict access to information about their activities. Most of those nations referred to as liberal democracies are expanding mechanisms such as official secrets acts, national security laws, public order bills, and highly restrictive definitions of the public interest.

A further circumscription is implicit, and that is the increase in police budgets and powers taking place throughout the industrial world. Police intelligence work and surveillance grow with little regard for accountability, while other aspects of government activity meet with financial restraint.

As a counter to the growing "national security state," the courts can not be expected to act as a "check or balance." The manner in which judges are chosen in most countries remains profoundly undemocratic, and considerable abuse of judicial power can be traced to the selection process itself. Given this process, and the "politics" of judicial decisions (some of the most draconian restrictions to civil liberties recently have originated in the courts and not in legislatures), as well as the declining access to legal aid, the future of the judiciary will most likely remain one of the pillars of a system of growing inequalities. Citizens will increasingly need a means to protect themselves from the abuse of judicial powers.

To understand the current restrictions in civil liberties or human rights it is necessary to see them as the political reflection of an earlier system of private property, from a time when ownership meant the individual ownership of the means and product of production. In the transition from feudalism to capitalism, civil rights represented the transformation from existing political privilege based on heredity and landed wealth to that of political equality of all citizens before the state. The later rise to pre-eminence of capitalist private property, for the most part a development of the nineteenth century, changed the basis of these civil rights in that this property became "the right, on the part of the capitalist, to appropriate the unpaid labour of others or its product, and the impossibility, on the part of workers, of appropriating their own product." Civil liberties, then, became fully realizable only for the capitalist and more or less abstractions for the working classes. The degree to which civil liberties became and have remained realities for the working classes - those with little or no significant real property - has usually borne a strong relation to the organized power of those classes or to their threat to the "public order" within the nation-state.

The apparent persistence of civil liberties or human rights for the working classes in the industrial nations, long after the property basis for those rights had been transformed, has rested on the historical conditions of a certain stage in the development of capitalism, namely, the national, social, and economic foundations of liberal democracy. As these conditions have declined or disappeared with the coming of the global economy, so too have the respect for civil liberties and these liberties themselves. A world dominated by global transnational corporations without supranational political control provides little basis for civil liberties for the working classes, except as abstractions for ideological reasons or when capital has been forced to acknowledge them.

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Preparing for the Consequences: The Growth of Prison Facilities

As neo-liberal policies have come to be adopted across the industrial nations, as they have started the process of dismantling the welfare state and downsizing the size and role of government, one clear countertendency stands out: the expansion of forms of coercive social control in almost every country. In many jurisdictions police powers have been broadened, and in some cases police budgets have been increased or police allowed sources of finance independent of public authorities. Most strikingly, there has been a large growth in prison facilities and inmate population.

These tendencies, most marked in the United States, are present in many Western nations. According to Andrew Rutherford, prison systems in several industrial countries:

remain set on a relentless expansionist course despite expenditure cuts on schools, hospitals and social services. Indeed, imprisonment has emerged as a growth industry even in periods of economic stagnation, and some prison systems are geared up to redoubling their size over the coming decades. Far from protecting citizens from crime, the massive growth of incarceration undermines the essential values which distinguish free societies from authoritarian ones.

Despite falling crime rates, the prison population in the United States continues to grow and is expected to reach about two million in 2001, making the country's rate of incarceration among the highest per capita in the world. In keeping with this growth, it has been argued that "corrections will represent the largest single item in many state budgets." In many U.S. states the rate of increase in corrections expenditure now far exceeds that for non-coercive social expenditures. While the United States is in the forefront of the expansion of penal institutions, other countries are pursuing similar policies. Britain, France, West Germany, and even Holland have begun large construction programs to increase the number and capacity of penal institutions. In Britain new prison construction represents "the largest expansion programme undertaken this century. Twenty-six new prisons between 1983 and 1995 will be provided, at an estimated total capital cost of £870 million at 1987 prices."

Assuming that crime and imprisonment are related, one might at first glance also assume that the explanation for the present expansion programs is due to a rise in crime. There is, however, no direct or consistent correlation between the amount of crime and the prison population. A survey of data and literature on the relationship illustrated that rates of incarceration and of crime may, but equally may not, correspond. Rutherford concluded that the size of "prison populations" is "primarily the consequence of policy choices and practice. The use made of custody, prison population size and other aspects of the prison system are the result of decisions made throughout the criminal justice system and the wider political sphere."

This point was made not simply by showing the lack of a consistent correlation between crime rates and rates of imprisonment, but also by looking at how the German Nazis and Italian fascists carried out an expansion of prisons and their populations in the 1930s. In both countries, the governments openly advocated policies of expansion and intended them to be part of their national "development" programs, as part of a solution for dealing with dissenters to the "reconstruction" of those societies.

It can be argued, then, that the growth of penal facilities today similarly reflects a conscious choice, one that rests on a particular philosophy and is by no means directly or solely related to the amount of crime.

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... The coming of the global economy has brought with it the "sovereignty of capital," more or less unimpaired except by remaining national powers and jurisdictions.

In other words, politics in the form of liberal democracy in the national sphere enabled a citizenry to modify - and made it both necessary and advantageous for capital to compromise on - the exercise of the property rights attached to capital. But at the global level there is no comparable political structure or jurisdiction, and there the accumulation of capitalist private property can be pursued without political interference - though not without certain regulation or restrictions emanating from such organizations as the WTO, IMF, WB, and BIS. These constraints, however, are not political, but rather are the formalization of the rules of global competition between capitals. From this level and with the advantages of global self-generation, capital has little need to compromise with national political policy, and indeed it is positioned to demand broad policies reflecting its own needs - hence, neo-liberalism.

The political dilemma for capital is how to maintain the trappings of democracy in the West, as crucial to social control, while economic inequality and long-term unemployment increase, chronic decline of living standards sets in, and the powers of national and local government decline. The consequent growing loss of legitimacy is exacerbated by several other factors, including decreasing political access; widening corporate blackmail over jobs, pollution, and taxes; expanding numbers of single-party or coalition political systems; an increasingly obvious meaninglessness of party alternations in power; and spreading political corruption. Among the industrialized countries, Italy and Japan are probably the most notorious examples of national governments characterized by political corruption, but they are hardly alone."

The loss of legitimacy in turn will have an increasing number of effects. Voter apathy will be the least important, while a range of extraparliamentary activities will grow, encompassing forms of direct political and economic action, both legal and illegal, and perhaps more terrorism. The future of social control, given the declining legitimacy of government and growing unemployment, is almost certainly going to rest increasingly on forms of state coercion. If market principles are to prevail, imposed from the international level, it is not plausible to imagine their co-existence with democratic principles, except where these principles exist in form only.

Globalization and the Decline of Social Reform

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