The high cost of neoliberalism

Financial liberalisation undermines democracy, handing power to a “virtual senate” that acts on beha

In the contemporary world of state-capitalist nations, loss of sovereignty can lead to a diminution of democracy, and a decline in the ability of states to conduct social and economic policy on their own terms. History shows that, more often than not, loss of sovereignty leads to liberalisation imposed in the interests of the powerful. In recent years, the regime thus imposed has been called "neoliberalism". It is not a very good term, as the social-economic regime in question is not new; nor is it liberal, at least as the concept was understood by classical liberals. The very design of neoliberal principles is a direct attack on democracy.

The central doctrine of neoliberalism is financial liberalisation, which took off in the early 1970s. Some of its effects are well known. With the increase in speculative capital flows, countries were forced to set aside much larger reserves to protect their currencies from attack. It is striking that countries which maintained capital controls - among them India and China - avoided the worst of the Asian financial crisis of 1997-98.

In the United States, meanwhile, the share of the financial sector in corporate profit rose from just a few per cent in the 1960s to over 30 per cent in 2004. Concentration also increased sharply, thanks largely to the deregulatory zeal of the Clinton administration. By 2009, the share of banking industry assets held by the 20 largest institutions stood at 70 per cent.

Among the consequences of financialisation is the creation of what an analysis by the investment bank Citigroup calls "plutonomy". The bank's analysts describe a world that is dividing into two blocs: the plutonomy and the rest. The US, UK and Canada are the key plutonomies: economies in which growth is powered by - and largely consumed by - the wealthy few. In plutonomies, these rich consumers take a disproportionately large slice of the national pie. Two-thirds of the world's economic growth is driven by consumption, primarily in the pluto­nomies, which monopolise profits as well.

The virtual senate

Citigroup's "plutonomy stock basket" has far outperformed the world index of developed markets since 1985, when the Reagan-Thatcher programmes for enriching the very wealthy were taking off. This is a substantial extension of the "80-20 rule" that is taught in business schools: 20 per cent of your customers provide 80 per cent of the profits, and you may be better off without the other 80 per cent. Corporations recognised years ago that modern information technology allows them to identify profitable customers to whom they can provide grand treatment, while deliberately offering skimpy services to the rest, creating a form of "consumer apartheid".

Financial liberalisation also creates what some international economists have called a "virtual senate" of investors and lenders, who "conduct moment-by-moment referendums" on government policies. If the virtual senate determines that those policies are irrational - meaning that they are designed to benefit people, not profit - then it can exercise its "veto power" by capital flight, attacks on currency and other means. Take one recent example: after Hugo Chávez was elected president of Venezuela, capital flight escalated to the point where assets held abroad by wealthy Venezuelans equalled a fifth of the country's GDP. With capital flow liberalised, governments face a "dual constituency": voters and the virtual senate. And even in the richest countries, the private constituency tends to prevail.

The Bretton Woods system put in place at the end of the Second World War was designed on the understanding that capital controls and regulated currencies would create a space for government action responding to public will - for some measure of democracy, that is. Keynes considered the most important achievement of Bretton Woods to be the establishment of the right of governments to restrict capital movement. In dramatic contrast, in the neoliberal phase that followed, the US treasury department came to regard free capital mobility as a "fundamental right", unlike such alleged rights as those guaranteed by the United Nations Universal Declaration of 1948: to health, education, decent employment and security - entitlements that the Reagan and Bush administrations dismissed as "preposterous", "letters to Santa Claus", mere "myths".

In earlier years, the public had not been much of a problem. In his definitive history of the international monetary system, the economist Barry Eichengreen observes that, in the 19th century, governments had not yet been "politicised by universal male suffrage and the rise of trade unionism and parliamentary labour parties". This meant that the severe costs imposed by the virtual senate of lenders and investors could be transferred to the general population.

But with the radicalisation of the general public during the Great Depression and the anti-fascist war that followed, this luxury was no longer available to private power and wealth. Hence, in the Bretton Woods system, Eichengreen writes, "limits on capital mobility sub­stituted for limits on democracy as a source of insulation from market pressures". It is only necessary to add the obvious corollary: with the dismantling of that system from the 1970s on, functioning democracy was restricted.

Real choices

In Latin America, specialists and polling organisations have, for some time, observed that the extension of formal democracy was accompanied by an increasing disillusionment about democracy and a lack of faith in democratic institutions. A persuasive explanation for these disturbing tendencies was given by the Argentinian political scientist Atilio Boron, who pointed out that the new wave of democratisation in Latin America coincided with neoliberal economic "reforms", which undermine effective democracy. The phenomenon extends worldwide, although it appears that the tendency may have reversed in recent years, with departures from neoliberal orthodoxy.

The annual polls on Latin American opinion by the Chilean polling agency Latinobaró­metro, and their reception in the west, are interesting in this respect. Few elements of the reigning western orthodoxy are upheld with more fervour than the view that Chávez is a tyrant dedicated to the destruction of democracy. The polls are therefore a serious annoyance that have to be overcome by the usual device: suppression.

The November 2007 poll had the same irritating results as in the preceding few years: Venezuela ranked second behind Uruguay in satisfaction with democracy and third in satisfaction with leaders. It ranked first in the assessment of the current and future economic situation, equality and justice, and education standards. True, it ranked only 11th in favouring a market economy but, even with this flaw, overall it ranked highest in Latin America on matters of democracy, justice and optimism, far above the US favourites Colombia, Peru, Mexico and Chile.

The Latin America analyst Mark Turner has written of an "almost total English-speaking blackout about the results of this important snapshot of [Latin American] views and opinions". He also found the usual exception: there were reports of the finding that Chávez is about as unpopular as Bush in Latin America, a fact that will come as little surprise to those who are familiar with the bitterly hostile coverage to which the Venezuelan president is subjected in the media, not least (and this is an odd feature of this putative dictatorship) in his country.

In the US, faith in institutions has been declining steadily. It is interesting to compare recent presidential elections in the richest country in the world and the poorest country in South America, Bolivia. In the 2004 US presidential election, voters had a choice between two men born to wealth and privilege, who attended the same elite university, joined the same secret society where privileged young men are trained to take their place in the ruling class, and were able to run in the election because they were supported by pretty much the same conglomerations of private power. Their announced programmes were similar, consistent with the needs of their primary constituency: wealth and privilege.

By contrast, in the December 2005 election in Bolivia, voters were familiar with the issues: control of resources, cultural rights for the indigenous majority, problems of justice in a complex multi-ethnic society and many others. They eventually chose Evo Morales, someone from their own ranks, and not a representative of narrow sectors of privilege. There was real participation, extending over years of intense struggle and organisation.

Election day was not just a brief interlude for pushing a lever and then retreating to passivity and private concerns, but one phase in ongoing participation in the workings of the society. The comparison, and it is not the only one, raises some questions about where democracy promotion is most needed.

Latin America has real choices, for the first time in its history. The usual modalities of imperial control - violence and economic strangulation - are much more limited than before. There are lively and vibrant popular organisations providing the essential basis for meaningful democracy. Latin American and other former colonies have enormous internal problems and there are sure to be many setbacks, but there are promising developments as well. It is in these parts of the world that today's democratic wave finds its basis and its home. That is why the World Social Forum has met in Porto Alegre, Mumbai, Caracas, Nairobi, not in northern cities, though by now the global forum has spawned many regional and local offshoots, doing valuable work geared to problems of significance in their own regions.

The former colonies, in Latin America in particular, have a better chance than ever before to overcome centuries of subjugation, violence and foreign intervention, which they have so far survived as dependencies with islands of luxury in a sea of misery. These are exciting prospects for Latin America, and if the hopes can be realised, even partially, the results cannot fail to have a large-scale global impact as well.

Extracted from "Hopes and Prospects" by Noam Chomsky (Hamish Hamilton, £18.99)
© Noam Chomsky 2010 penguin.co.uk

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Tweeting terror: what social media reveals about how we respond to tragedy

From sharing graphic images to posting a selfie, what compels online behaviours that can often outwardly seem improper?

Why did they post that? Why did they share a traumatising image? Why did they tell a joke? Why are they making this about themselves? Did they… just post a selfie? Why are they spreading fake news?

These are questions social media users almost inevitably ask themselves in the immediate aftermath of a tragedy such as Wednesday’s Westminster attack. Yet we ask not because of genuine curiosity, but out of shock and judgement provoked by what we see as the wrong way to respond online. But these are still questions worth answering. What drives the behaviours we see time and again on social media in the wake of a disaster?

The fake image

“I really didn't think it was going to become a big deal,” says Dr Ranj Singh. “I shared it just because I thought it was very pertinent, I didn't expect it to be picked up by so many people.”

Singh was one of the first people to share a fake Tube sign on Twitter that was later read out in Parliament and on BBC Radio 4. The TfL sign – a board in stations which normally provides service information but can often feature an inspiring quote – read: “All terrorists are politely reminded that THIS IS LONDON and whatever you do to us we will drink tea and jolly well carry on thank you.”

Singh found it on the Facebook page of a man called John (who later explained to me why he created the fake image) and posted it on his own Twitter account, which has over 40,000 followers. After it went viral, many began pointing out that the sign was faked.

“At a time like this is it really helpful to point out that its fake?” asks Singh – who believes it is the message, not the medium, that matters most. “The sentiment is real and that's what's important.”

Singh tells me that he first shared the sign because he found it to be profound and was then pleased with the initial “sense of solidarity” that the first retweets brought. “I don't think you can fact-check sentiments,” he says, explaining why he didn’t delete the tweet.

Dr Grainne Kirwan, a cyberpsychology lecturer and author, explains that much of the behaviour we see on social media in the aftermath of an attack can be explained by this desire for solidarity. “It is part of a mechanism called social processing,” she says. “By discussing a sudden event of such negative impact it helps the individual to come to terms with it… When shocked, scared, horrified, or appalled by an event we search for evidence that others have similar reactions so that our response is validated.”

The selfies and the self-involved

Yet often, the most maligned social media behaviour in these situations seems less about solidarity and more about selfishness. Why did YouTuber Jack Jones post a since-deleted selfie with the words “The outmost [sic] respect to our public services”? Why did your friend, who works nowhere near Westminster, mark themselves as “Safe” using Facebook’s Safety Check feature? Why did New Statesman writer Laurie Penny say in a tweet that her “atheist prayers” were with the victims?

“It was the thought of a moment, and not a considered statement,” says Penny. The rushed nature of social media posts during times of crisis can often lead to misunderstandings. “My atheism is not a political statement, or something I'm particularly proud of, it just is.”

Penny received backlash on the site for her tweet, with one user gaining 836 likes on a tweet that read: “No need to shout 'I'm an atheist!' while trying to offer solidarity”. She explains that she posted her tweet due to the “nonsensical” belief that holding others in her heart makes a difference at tragic times, and was “shocked” when people became angry at her.

“I was shouted at for making it all about me, which is hard to avoid at the best of times on your own Twitter feed,” she says. “Over the years I've learned that 'making it about you' and 'attention seeking' are familiar accusations for any woman who has any sort of public profile – the problem seems to be not with what we do but with who we are.”

Penny raises a valid point that social media is inherently self-involved, and Dr Kirwan explains that in emotionally-charged situations it is easy to say things that are unclear, or can in hindsight seem callous or insincere.

“Our online society may make it feel like we need to show a response to events quickly to demonstrate solidarity or disdain for the individuals or parties directly involved in the incident, and so we put into writing and make publicly available something which we wrote in haste and without full knowledge of the circumstances.”

The joke

Arguably the most condemned behaviour in the aftermath of a tragedy is the sharing of an ill-timed joke. Julia Fraustino, a research affiliate at the National Consortium for the Study of Terrorism and Responses to Terrorism (START), reflects on this often seemingly inexplicable behaviour. “There’s research dating back to the US 9/11 terror attacks that shows lower rates of disaster-related depression and anxiety for people who evoke positive emotions before, during and after tragic events,” she says, stating that humour can be a coping mechanism.

“The offensiveness or appropriateness of humor seems, at least in part, to be tied to people’s perceived severity of the crisis,” she adds. “An analysis of tweets during a health pandemic showed that humorous posts rose and fell along with the seriousness of the situation, with more perceived seriousness resulting in fewer humour-based posts.”

The silence

If you can’t say anything nice, why say anything at all? Bambi's best friend Thumper's quote might be behind the silence we see from some social media users. Rather than simply being uncaring, there are factors which can predict whether someone will be active or passive on social media after a disaster, notes Fraustino.

“A couple of areas that factor into whether a person will post on social media during a disaster are issue-involvement and self-involvement,” she says. “When people perceive that the disaster is important and they believe they can or should do something about it, they may be more likely to share others’ posts or create their own content. Combine issue-involvement with self-involvement, which in this context refers to a desire for self-confirmation such as through gaining attention by being perceived as a story pioneer or thought leader, and the likelihood goes up that this person will create or curate disaster-related content on social media.”

“I just don’t like to make it about me,” one anonymous social media user tells me when asked why he doesn’t post anything himself – but instead shares or retweets posts – during disasters. “I feel like people just want likes and retweets and aren’t really being sincere, and I would hate to do that. Instead I just share stuff from important people, or stuff that needs to be said – like reminders not to share graphic images.”

The graphic image

The sharing of graphic and explicit images is often widely condemned, as many see this as both pointless and potentially psychologically damaging. After the attack, BBC Newsbeat collated tens of tweets by people angry that passersby took pictures instead of helping, with multiple users branding it “absolutely disgusting”.

Dr Kirwan explains that those near the scene may feel a “social responsibility” to share their knowledge, particularly in situations where there is a fear of media bias. It is also important to remember that shock and panic can make us behave differently than we normally would.

Yet the reason this behaviour often jars is because we all know what motivates most of us to post on social media: attention. It is well-documented that Likes and Shares give us a psychological boost, so it is hard to feel that this disappears in tragic circumstances. If we imagine someone is somehow “profiting” from posting traumatic images, this can inspire disgust. Fraustino even notes that posts with an image are significantly more likely to be clicked on, liked, or shared.

Yet, as Dr Kiwarn explains, Likes don’t simply make us happy on such occasions, they actually make us feel less alone. “In situations where people are sharing terrible information we may still appreciate likes, retweets, [and] shares as it helps to reinforce and validate our beliefs and position on the situation,” she says. “It tells us that others feel the same way, and so it is okay for us to feel this way.”

Fraustino also argues that these posts can be valuable, as they “can break through the noise and clutter and grab attention” and thereby bring awareness to a disaster issue. “As positive effects, emotion-evoking images can potentially increase empathy and motivation to contribute to relief efforts.”

The judgement

The common thread isn’t simply the accusation that such social media behaviours are “insensitive”, it is that there is an abundance of people ready to point the finger and criticise others, even – and especially – at a time when they should focus on their own grief. VICE writer Joel Golby sarcastically summed it up best in a single tweet: “please look out for my essay, 'Why Everyone's Reaction to the News is Imperfect (But My Own)', filed just now up this afternoon”.

“When already emotional other users see something which they don't perceive as quite right, they may use that opportunity to vent anger or frustration,” says Dr Kirwan, explaining that we are especially quick to judge the posts of people we don’t personally know. “We can be very quick to form opinions of others using very little information, and if our only information about a person is a post which we feel is inappropriate we will tend to form a stereotyped opinion of this individual as holding negative personality traits.

“This stereotype makes it easier to target them with hateful speech. When strong emotions are present, we frequently neglect to consider if we may have misinterpreted the content, or if the person's apparently negative tone was intentional or not.”

Fraustino agrees that people are attempting to reduce their own uncertainty or anxiety when assigning blame. “In a terror attack setting where emotions are high, uncertainty is high, and anxiety is high, blaming or scapegoating can relieve some of those negative emotions for some people.”

Amelia Tait is a technology and digital culture writer at the New Statesman.