Collision Course: Endless Growth on a Finite Planet (18 page)

Thatcher herself was a devotee of Hayek’s ideas. At a British Conservative Party policy meeting in the late 1970s, in response to a paper recommending a “middle way” strategy, she slammed one of Hayek’s books down on a table and announced, “This is what we believe.”
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Once she was elected, neoliberalism became firmly entrenched in British economic policy. As she remarked in 1993, “The spirit of enterprise had been sat upon for years by socialism, by too-high taxes, by too-high regulation, by too-public expenditure. The philosophy was nationalisation, centralisation, control, regulation.… This had to end.”
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Across the Atlantic, the Carter administration appointed the monetarist Paul Volcker to head the Federal Reserve in 1979. Closely associated with Wall Street, Volcker immediately tightened money supply and pushed interest rates up to 15 percent—and later close to 20 percent— a measure intended to tackle the inflation problem but also providing a handsome restoration of profitability to financial interests.
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Throughout the 1970s, business had cut costs in whatever way it could, including moving production overseas, freezing wages for existing workers and lowering wages for new. But the US economy remained mired in stagflation, and people were faced for years on end with price surges, shortages at the petrol pump, and sky-high interest rates.

Reagan was another admirer of Hayek’s work and used rhetoric similar to that of Thatcher—curbing welfare, balancing the budget, and cutting taxes. As in the UK, the neoliberal publicists were already well established in proliferating think tanks. Nearly a third of Reagan’s economic advisers were members of MPS,
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and the Heritage Foundation provided the newly elected Reagan administration with a massive 1,000-page volume called
Mandate for Leadership
, analogous to
The Brick
, written by Chicago school economists and adopted by the incoming Pinochet dictatorship.
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Reagan gave his cabinet members a copy of
Mandate
, a guide to the free market way. It was described by one supportive journalist from the
Washington Post
as “a kind of handbook for the new administration.”
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The Heritage Foundation claims that nearly two-thirds of its policy recommendations were implemented. Some thirty of the authors of this tome were appointed to the administration, including the author of the tax policy.
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Between them, the Heritage Foundation, the Hoover Institution, and the American Enterprise Institute contributed 150 personnel to Reagan’s administration.
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The influence and tactics of the neoliberal intelligentsia were similar on both sides of the Atlantic. MPS member Ralph Harris, head of the IEA and mentor to Keith Joseph, saw the role of the think tank enthusiasts this way:

Americans can best judge the influence of the many MPS members surrounding President Reagan. From Britain I have no quiver of doubt that Margaret Thatcher’s central reform of trade unions, state industries, monetary policy, and much else owed a great deal to the advisors and members of Parliament directly instructed in market analysis by IEA publications shaped by Mont Pèlerin principles. But the decisive role was played by our academics and journalists who helped transform public opinion on the market alternative to the failing collective consensus.
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“Globalization Round II”: Rules Are Relative

Neoliberalism not only drew on ideological precedents and a long history of business propaganda, it also aimed to revive the world market that had emerged before World War I. Thomas Friedman, a
New York Times
columnist and ardent free trade enthusiast, argues that “the first era of globalization and global finance was broken apart by the successive hammer blows of World War I, the Russian Revolution and the Great Depression.” He characterizes the “new era” as “Globalization Round II.”
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Friedman, for whom the late twentieth century resumed where the early twentieth century “robber barons” left off, has no trouble being blunt: “The driving idea behind globalization is free-market capitalism,” he says.
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For the citizens of the global south at the World Social Forum at Porto Alegre in 2001, globalization was also understood as the latest manifestation of capitalism, though they referred to a longer history than Friedman’s, seeing it as “part of the continuum of colonization, centralization and loss of self-determination that began more than five centuries ago.”
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Although the globalization narrative, as purveyed by the laudatory media and embraced by most governments worldwide, implies that it is about breaking down barriers and embracing the whole world on one big level playing field, it is also clear that labor rights, economic justice, and the environment are not up for inclusion in the new global rule book (discussed in chapter 13). These values are not to be globalized, as the media critic Norman Solomon has argued:

The form of “globalization” deemed worthy of the name by media is corporate globalization, which gives massive capital even more momentum to flatten borders and run roughshod over national laws.… Fans of “globalization” routinely contend that protection of labor rights or the environment amount to unfair restraint of trade, retrograde protectionism and antiquated resistance to “reforms.”
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Thus, globalization reflects the preferences of the global business elite and ignores those of workers, the world’s peasant populations, people concerned about protecting the environment, indigenous peoples, or people committed to social justice.

Though Thomas Friedman favors a more liberal application of the “level playing field” where the views of such groups might be heard, he nonetheless celebrates market forces as the driver of Schumpeter’s creative destruction:

The more you let market forces rule and the more you open your economy to free trade and competition, the more efficient and flourishing your economy will be. Globalization means the spread of free-market capitalism to virtually every country in the world.… The essence of capitalism is the process of “creative destruction”—the perpetual cycle of destroying the old and less efficient product or service and replacing it with new, more efficient ones.… Those [countries] which rely on their governments to protect them from such creative destruction will fall behind in this era.
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It was instructive to observe, in the course of the October 2008 financial meltdown, that the harsh market prescriptions imposed on the Asian economies in their financial crisis in the late 1990s were not deemed suitable for the global north. In 2008,
USA Today
reported the outrage of Koreans that, back in 1998, the “Americans told them to sell off assets and get the government’s hands off the private sector”
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—no bailout for them. The destruction side of free market creative destruction, though imposed mercilessly on the developing world as bitter but necessary medicine, was assiduously avoided as the first world provided massive government support to its “free market” institutions, apparently quite willing to risk “falling behind,” as Friedman puts it. President Bush told CNN television in mid-December 2008, “I’ve abandoned free-market principles to save the free-market system.”
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The rules of the free market game are surprisingly fluid; they do not apply to the most powerful players or, at least, are modified when these players’ own interests are at stake.

“Global Middle Class” to Save the World Economy

The broad acceptance of deregulation facilitated liquidation of the very natural world that the scientists of the 1960s and 1970s had so urgently argued needed protection. Indeed, unfettered extraction was one strategy in the pursuit of renewed growth. Notions of embracing slower growth, scaling down, or seeking a “steady state” remained outside mainstream concepts of reality—for business and government alike. The neoliberal concept for the world economy advocated extending the consumer template to the whole world.

On the eve of the 2007 meeting of the Asia-Pacific Economic Cooperation (APEC) forum in Sydney, the Economic Analytic Unit of the Australian government’s Department of Foreign Affairs and Trade (DFAT) published its report,
APEC and the Rise of the Global Middle Class
, a document that describes APEC as made up of “member economies” (not member countries). Focused squarely on the goal of economic growth, it claims that “international integration and market liberalisation” (popularly known as globalization) have led to the economic growth of recent years, which in turn is driving the emergence of a new global middle class, predicted to expand by some 2.2 billion people by 2030, many of them concentrated in the Asia-Pacific region. The report expresses satisfaction that the “increased purchasing power” of this vast new consumer class “is contributing to the recent strength of global growth and should drive stronger global growth in the future, helping to lift millions more out of poverty and build further wealth … boosting their living standards as the pool of global consumers grows.” The rising global middle class is at one point described as “the dividend” of economic globalization and at another as “a down-payment on … the fight against extreme poverty.”
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The future of human civilization is viewed through the lens of consumption, which, along with growth itself, is understood to be the solution to poverty.

The strategies for fostering these developments are familiar neoliberal nostrums: free trade, liberalizing service industries, and expanding foreign investment; strengthening the financial sector (there is no hint or suspicion of the financial collapse that was to occur just twelve months later); and finding ways to tackle environmental problems “within a framework of continuing economic growth,” since “the key question for policymakers is how to ensure that strong growth continues.” The report subordinates all environmental issues, including global warming, to growth, and settles for the hope that more growth will eventually allow attention to be paid to the degradation caused by growth in the first place. The central motive for the report’s commitment to environmental sustainability seems to be to “ensure that environmental degradation does not threaten ongoing growth.”
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Based on the World Bank’s modeling for its 2007
Global Economic Prospects
, DFAT projects that the middle class will double as a percentage of the world population by 2030, while the percentage of poor will decrease by 20 percent. (Middle class is defined here as having some scope for discretionary expenditure over and above basic necessities; in the World Bank’s terms, this means their incomes are above about $12 a day.) The figures do indeed project an extra two billion middle-class people in 2030, and this outcome is said to represent “an unprecedented decline in poverty and increase in affluence.” Urbanization will increase and an explosion of new consumption is expected, its principal elements being access to meat in the diet, car ownership, tertiary education, mobile telephony, and international travel. Citing Goldman Sachs, the report predicts that China could well have over 500 million cars on its roads by 2050 and India even more—between them far exceeding the entire global passenger fleet in 2008, estimated at 622 million.
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The report is silent on the implications of such a situation for either greenhouse gas emissions or petroleum consumption; it ignores the danger to climate and assumes resources will be available. According to DFAT, “the emergence of a new consumer class represents the chance for business to tap new markets, creating still further employment opportunities.”
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A brave new world of multiplied consumers will drive economic growth—DFAT’s analytic economists go no further.

The APEC report stresses that the poor (non-middle class) will decrease as a percentage of world population. The poor will, however, actually
increase
in gross numbers, though the report does not mention this aspect of the statistics. More than five billion people will still be poor in 2030, according to the World Bank’s modeling. More than five billion people who lack the latitude of discretionary spending will still be struggling to keep their families fed, clothed, and housed. This does not seem to be such a “good news” story after all. Although the UN’s Millennium Development Goals apply to the “extremely poor” (defined very narrowly as those living on less than $1 a day), it is difficult to see much ground for optimism; if the gross numbers of people living in poverty are not going to decrease, it is hard to share DFAT’s satisfaction with the role of APEC or globalization or economic growth in “lifting millions out of poverty.” The most that can be claimed about the figures presented here is that most of the 2.2 billion extra people expected on earth by 2030 will be added to the “global middle class” rather than to the mass of the poor. This assumes, however, that roughly three times as many Western- style consumers can be accommodated as occurs today—which seems unrealistic.

The neoliberal—or globalization—agenda so accurately depicted in the DFAT report did not cause the ecological problems that have built up for at least fifty years, but it has compounded them. What we now confront is the moment when the exponential curve has turned the corner and is approaching the planet’s physical limits, when, for the first time, we are doubling massive populations and colossal production systems every few decades. The economist Ross Garnaut, in his July 2008 address to Australia’s National Press Club, remarked in passing that world economic output will be fifteen times greater in the course of the current century.
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The financial collapse of late 2008 and the subsequent ongoing recession slowed this trajectory only modestly, with all governments (along with the corporations) frantic to restart the expansion. Since material artefacts will make up the majority of such an expanded output, it is hard to imagine what kind of world would harbor a human economic apparatus fifteen times greater than the present one.