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

Martin O’Neill
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How nostalgic literature became an agent in American racism

From To Kill a Mockingbird to Gone With The Wind, literary mythmaking has long veiled the ugly truth of the American South.

Alongside this summer’s debate over the meanings of the Confederate flag, sparked by the Charleston shootings, another story about the history of American racism flared up. Harper Lee’s Go Set a Watchman, an early draft of To Kill a Mockingbird, revealed further discomfiting truths, this time about the background to one of the nation’s most beloved fictional standard-bearers for racial equality.

In Watchman, Atticus Finch is discovered, twenty years after the action of Mockingbird, fighting against desegregation during the civil rights era. The shock readers have felt is akin to finding an early draft of Nineteen Eighty-Four in which Orwell defends surveillance in the name of national security – but stumbling upon a segregationist Atticus Finch should not surprise readers who know their history. In the end, he proves just as problematic a symbol as the Confederate flag, and for exactly the same reasons: both flew in the face of civil rights to defend white prerogative in the South. And both were gradually romanticised through the process of revision, wrapping America in comforting white lies.

Like our euphemistic habit of calling Jim Crow laws “segregation” rather than apartheid, all of this partakes in a time-honoured communal practice of deracination through whitewashing, through popular fictions of innocence such as Mockingbird and ­popular histories such as folk tales about the innocence of the Confederate flag. America keeps willing its own innocence back into being, even as racist ghosts continue to haunt our nation’s dreams of the pastoral South, a society whose fantasy of gentility was purchased at the cost of brutal chattel slavery and its malignant repercussions.

An essential aspect of the history of American racism is also the history of its deliberate mystification. Many Americans continue to accept an idealised view of the antebellum and Jim Crow South, which emerged as part of a national romance known as the Lost Cause, a legend that turned terrorism into a lullaby. In the aftermath of the South’s crushing defeat in the civil war, southerners began trying to reclaim what they had lost – namely, an old social order of unquestioned racial and economic hierarchies. They told stories idealising the nobility of their cause against the so-called War of Northern Aggression, in which northerners had invaded the peaceful South out of a combination of greed, arrogance, ignorance and spite. Gentle southerners heroically rallied to protect their way of life, with loyal slaves cheering them all the way. This Edenic dream of a lost agrarian paradise, in which virtuous aristocrats and hard-working farmers coexisted peacefully with devoted slaves, pre-dated the war: merging with Jeffersonian ideals of the yeoman farmer, it formed the earliest propagandistic defences of slavery. One of the most powerful broadsides against this spurious fantasy was launched in 1852 by Harriet Beecher Stowe, a north-eastern preacher’s daughter who had lived in border states and seen what really happened to ­fugitive slaves. The South responded to Uncle Tom’s Cabin with a furious denunciation of Stowe’s knowledge and motives, insisting on the benevolence of their “peculiar institution” – an especially sordid ­euphemism that recast plantation slavery as an endearing regional quirk.

Once institutional slavery was irrevocably destroyed, nostalgia prevailed, and southerners began producing novels, ­poems and songs romanticising the lost, halcyon days of the antebellum era. Reaching their apotheosis in Margaret Mitchell’s Gone with the Wind in 1936, and its film version in 1939, they have become known as the “moonlight and magnolia” school of plantation fiction, exemplified by the novels of Thomas Nelson Page, whose books, such as In Ole Virginia (1887) and Red Rock (1898), helped establish the formula: devoted former slaves recount (in dialect) their memories of an idyllic plantation culture wantonly destroyed by militant northern abolitionists and power-crazed federalists. A small band of honourable soldiers fought bravely on the battlefield and lost; the vindictive North installed incompetent or corrupt black people to subjugate the innocent whites; southern scalawags and northern carpetbaggers descended to exploit battle-ravaged towns. Pushed to the limits of forbearance, the Confederate army rose again to defend honour and decency – in the noble form of the Ku Klux Klan.

This thoroughly specious story is familiar to anyone who knows Gone with the Wind, but Mitchell learned it from Page and other novelists, including Mary Johnston and Thomas Dixon, Jr. Dixon wrote a series of books celebrating the rise of the Ku Klux Klan, of which the most notorious remains The Clansman (1905), for the simple reason that ten years later a director named D W Griffith decided to adapt it into a film he called The Birth of a Nation. Released exactly a century ago, it faithfully follows the same narrative blueprint. This was neither an accident nor a coincidence: Griffith was himself the son of a Confederate colonel (memorably known as “Roaring Jake”) and had listened to legends of the Lost Cause at his father’s knee. Reading The Clansman, Griffith said, brought back “all that my father had told me . . . [the film] had all the deep incisive emotionalism of the highest patriotic sentiment . . . I felt driven to tell the story – the truth about the South, touched by its eternal romance which I had learned to know so well.” That “truth” was a story in which the cavalry that rode to the rescue of an imperilled maiden was the KKK, saving her from a fate worse than death at the hands of a white actor in blackface. Griffith had considered hiring black actors for the film, he told an interviewer in 1916, but after “careful weighing of every detail concerned”, none of which he imparted, “the decision was to have no black blood among the principals”, a phrase that says it all by using the so-called one-drop rule to justify racist hiring practices in a film glorifying racism.

The Birth of a Nation was a national phenomenon, becoming the first film ever screened at the White House, in March 1915, for President Woodrow Wilson. Born in Virginia, raised in Georgia and South Carolina, Wilson was the first southern president since before the civil war. He attended Johns Hopkins University with Thomas Dixon, who became a political supporter of his; Wilson also appointed Thomas Nelson Page his US ambassador to Italy. Many members of his administration were equally avowed segregationists; their influence reverberated for generations. Wilson’s history books were quoted verbatim by Griffith in some of The Birth of a Nation’s titles, including: “‘The white men were roused by a mere instinct of self-preservation . . . until at last there had sprung into existence a great Ku Klux Klan, a veritable empire of the South, to protect the Southern country.’ – Woodrow Wilson”.

Wilson does not, however, actually seem to have said the quotation most frequently attributed to him, that The Birth of a Nation was “like writing history with lightning, and my only regret is that it is all so terribly true”. The source for this appears to be Griffith, who told a 1916 movie magazine: “The motion picture can impress upon a people as much of the truth of history in an evening as many months of study will accomplish. As one eminent divine said of [moving] pictures, ‘they teach history by lightning!’” They can teach myths the same way, as Griffith’s film regrettably proved. Northern white audiences cheered it; black audiences wept at the malevolence it celebrated; it prompted riots and racist vigilante mobs in cities across America, and at least one racially motivated murder. Together, Griffith and Dixon worked to elevate a regional legend, designed to save face after a catastrophic loss, into a symbolic myth accepted by much of the nation.

 

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The Birth of a Nation helped to invent the feature film. It also helped to reinvent the Ku Klux Klan, which enjoyed a huge resurgence following the film’s release, spreading up through the north-east and Midwest. The Klan had a strong presence on Long Island in the 1920s, for example, which is why F Scott Fitzgerald made Tom Buchanan a believer in “scientific racism” in The Great Gatsby, a story set there in 1922, the same year in which Thomas Nelson Page died while working on a novel about the Klan called The Red Riders.

Four years later, a young writer named Margaret Mitchell began her own tale of the Lost Cause, a story that follows the same pattern, to the extent of describing Scarlett O’Hara on its first page in coded terms as a woman with “magnolia-white skin”. Gone with the Wind became a global sensation when it was published in 1936. Mitchell’s ideas of southern history were deeply influenced by Dixon’s racist ideology, although she was considerably more knowledgeable about the workings of plantation slavery than is often recognised. In fact, the great majority of antebellum southern planters (some 75 per cent) were what historians class as yeoman farmers (growing primarily for domestic use, selling only a small portion of their crop), not aristocratic owners of vast plantations. Such farmers often did not even own a slave, but rented or borrowed one or two during harvest time. But although the Hollywood version dispensed entirely with Mitchell’s sense of history (and her considerably more interesting take on historical sexism), it retained her racism, despite the stated intentions of its producers. The film of Gone with the Wind contributed greatly to the gradual displacement and dislocation of the historically specific time and place that had given rise to the antebellum plantation myth. Ben Hecht’s famed floating preface to the 1939 big-screen version labours at making the story timeless, a legend dissipating in the mists of history:

There was a land of Cavaliers and Cotton Fields called the Old South . . . Here in this pretty world Gallantry took its last bow . . . Here was the last ever to be seen of Knights and their Ladies Fair, of Master and of Slave . . . Look for it only in books, for it is no more than a dream remembered. A Civilisation gone with the wind . . .

as history recedes into ellipses.

Yet even this feudalist imagery has a specific history of its own, forming another crucial part of the popular culture of the Lost Cause. It was Mark Twain, whose works remain one of our most powerful literary antidotes to the toxin of moonlight and magnolia, who most famously named its source: the novels of Sir Walter Scott. Scott “did measureless harm”, Twain insisted in his 1883 Life on the Mississippi, “more real and lasting harm, perhaps, than any other individual that ever wrote”. Scott’s bestselling romances filled southerners’ heads with enchanted “dreams and phantoms . . . with the sillinesses and emptinesses, sham grandeurs, sham gauds and sham chivalries of a brainless and worthless long-vanished society”. In fact, Twain concluded acidly, “Sir Walter had so large a hand in making Southern character, as it existed before the war, that he is in great measure responsible for the war.” This is only slightly exaggerated: Scott’s novels were as popular in early-19th-century America as were the films of The Birth of a Nation and Gone with the Wind a century later. It is certainly thanks to the popularity of novels such as Ivanhoe and Waverley that the cult of the “clan” was distorted into the Ku Klux Klan, with its bogus orders and knights. Scott’s novels may even have given rise to antebellum America’s use of the medieval word “minstrel” to describe itinerant blackface musicians; the OED offers no logic for the coinage, but its earliest citation is from 1833, when the mania for Scott’s work in the American South was at its highest. The feudal fantasy of “gallantry”, “cavalier knights” and “ladies fair” is a powerful one, not least, doubtless, because it gives America a sense of a much older past than it has, merging our history with a faux-feudalism in which slaves are rewritten as serfs, bound by devotion to the land and the family they serve.

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But even as Gone with the Wind was in its ascendancy, another national narrative was slowly gaining traction. Black writers including W E B DuBois, Zora Neale Hurston, Langston Hughes and Richard Wright were vigorously challenging the dominant racist narrative, while white southern writers such as Ellen Glasgow and, especially, William Faulkner, also began debunking and complicating this facile tradition. Faulkner took from the Lost Cause legends that he, too, had heard as a child in Mississippi, some much darker truths about memory, history, distortion, perspective. Faulkner’s Absalom, Absalom! is probably his greatest meditation on the processes of myth-making and how they intersect with national history, writing a Homeric epic of America. Absalom came out in 1936, the same year as Gone with the Wind, and in many ways can be read as a corrective to it, shaking off the dreams of moonlight and magnolia to show the Gothic nightmare underneath.

Just twenty years later, a young woman who had been born in the year Margaret Mitchell began to write Gone with the Wind, named Nelle Harper Lee, produced her own version of the story of America’s struggles with its racist past. To Kill a Mockingbird takes place between 1933 and 1935 (just before Gone with the Wind was published), during which time Atticus Finch tells his young daughter, Scout, that the Ku Klux Klan was “a political organisation” that existed “way back about 1920” but “couldn’t find anybody to scare”, relegating the Klan to ancient history, instead of a mere dozen years before Lee’s story.

Nor is it any coincidence that Mrs Dubose, the racist old lady addicted to morphine, forces Jem Finch to read Walter Scott’s Ivanhoe to her as a punishment: there are more encoded traces of Lost Cause history in Mockingbird than many readers have recognised. Mockingbird resists this history on balance, but it also participates in collective myth-making, most significantly in its depiction of lynching as a furtive, isolated practice in the dead of night. It would be pretty to think so. In Lee’s version, a lynch mob is dispersed by the innocent prattle of the child Scout, who unwittingly reminds its members of their basic “decency”. In fact, by the 1920s, lynching in the South was often publicly marketed as a tourist attraction, in a practice historians now refer to as “spectacle lynching”, which took place in the cold light of day, with plenty of advance warning so people could travel from outlying areas for the fun. There were billboards and advertisements letting tourists know when and where the lynching would take place; families brought children and had picnics; postcards were sold and sent (horrific images of which are easy to find online). Burning at the stake was common; victims were often tortured or castrated, or had limbs amputated, or were otherwise mutilated first; pregnant women were burned to death in front of popcorn-crunching crowds. This was so well established that in 1922 the National Association for the Advancement of Colored People took out a full-page advertisement in the New York Times with the headline “The shame of America”, demanding, in underscored outrage: “Do you know that the United States is the Only Land on Earth where human beings are BURNED AT THE STAKE?” It went on to outline a few salient facts: between 1889 and 1922, 3,436 people had been lynched in America. Of these, “only 571, or less than 17 per cent, were even accused of rape”. Eighty-three of the victims were women, which further undermined the myth that rape led to lynching.

Lee’s picture of lynching in To Kill a Mockingbird is not merely sentimental, but an active falsification: it participates in a wider American story seeking to minimise, even exonerate, the reactions of white southerners to African Americans’ claims to equal rights under the law. It functions as a covert apology, suggesting that lynching was anomalous, perpetrated by well-meaning men who could be reminded of common humanity – when, in fact, members of lynch mobs in the 1920s posed for photographs in front of their victims. But Atticus Finch stands up to racism, and Scout persuades Cunningham and the rest of the lynch mob to go home. This is why it matters that an earlier version of Atticus advocated segregation: it shows that the process of revising Mockingbird was a process of idealisation, promising readers that systemic racism could be solved by the compassionate actions of noble individuals.

This is the consolatory promise of individualism, that the nation can be redeemed collectively by isolated instances of benign action. The romance of individualism has always been how America manages injustice and unrest, how it pastes over irre­concilable differences and squares imaginary circles: the heroic figure who temporarily, occasionally, overcomes all structural and social impediments is taken as communal evidence that these obstructions don’t exist, or aren’t very obstructive. It is, of course, a deeply Christian idea: the redemptive individual who expiates collective sin, the original lost cause, sacrificed for the good of all.

The doctrine of individualism is further tangled up in yet another exculpatory logic: that of states’ rights. The remnants of this rationale also surface at the end of Go Set a Watchman: Atticus Finch argues that segregation is really a matter of states’ rights, and Jean Louise, his now adult daughter, though nauseated at his racism, accepts the legitimacy of that argument. What right has the federal government to insist that the people within its borders adhere to its laws, or even to the principles (truth, justice, equality, democracy) they purport to uphold? Some might conclude from reading this passage that, like paradise, causes are invented to be lost. The idea of the Lost Cause redeems a squalid past; it is an act of purely revisionist history, disavowing the notion that slavery or racism had anything to do with the civil war and its vicious, lingering aftermath. Glorifying that history as “gallantry” is not merely dishonest: it is ruinous.

Dismissing all of this as ancient history, or mere fiction, is not the solution, it is part of the problem. As Faulkner famously observed and this brief account shows, the past isn’t dead; it isn’t even past. The word “legend” comes from the Latin legere, to read. Many insist that the stories we consume endlessly are harmless entertainment, but that, too, is part of the mystification, pretending that these legends did not arise precisely to veil an ugly truth with moonlight, to smother with the scent of magnolia the stink of old, decomposing lies.

Now listen to Sarah Churchwell discussing the fiction of the American South with the NS's Tom Gatti:

An American in London, Sarah Churchwell is an author and professor of American literature. Her latest book, “Careless People: Murder, Mayhem and the Invention of the Great Gatsby”, is published by Virago.

This article first appeared in the 20 August 2015 issue of the New Statesman, Corbyn wars