This text was published in in Education, Culture and Modernisation (ed. by Peter Alheit et al) (Roskide University, 1995)

The crisis of the growth economy, the withering away of the nation-state and the community-based society

TAKIS FOTOPOULOS

 

I think that today very few people -if any- will attempt to challenge the hypothesis that contemporary society is undergoing a profound and widespread crisis. A crisis that puts into question not just the political, economic, social and ecological structures that came into being with the rise of the market economy, but also the actual values that sustained these structures and particularly the post-Enlightenment meaning of Progress. It is therefore not just the state-socialist society that has entered a state of terminal crisis, as manifested by the collapse of "actually existing socialism" in the East. The presently dominant market society, despite the claims made by its ideologues, is also in a state of serious structural crisis. Therefore, one might reasonably assume that the very type of economy and society that emerged in the aftermath of the Industrial Revolution, what we may call "the growth economy", is in a state of crisis.

 

I would like to consider three main issues which -to my mind- are the crucial issues in any discussion today about social change. These issues can be put in terms of three questions:

First, is there a common cause for the crisis of the "growth economy" in its capitalist and socialist/ social-democratic versions?    

Second, what are the dominant trends of social change at present and what are the chances - if these trends persist- of overcoming the crisis of the growth economy?

Third, should we create alternative forms of social organisation in order to overcome the crisis?

 

A. The crisis of the growth economy

 

Following a  common classification[1] of the models of development and social change we may distinguish between :

a) the "capitalist growth" model  that emphasises capital investment and growth in the GNP through a process of marketizing the economy--today's dominant model,

b) the "social equity" model that emphasises fair distribution of resources and rights through socialist statism-- a model that has been collapsing for the past 15 years or so, and

c) the "participatory" model that emphasises the activation of creative social energy at the grass roots level-- a model that seems rising at present.

 

I would argue that the first two models, in fact, belong to the same "growth economy" that historically developed out of the industrial revolution in Europe. Furthermore,  another common characeristic of the first two models that differentiates them from the third is that both are centralised and associated with top-down power structures, in contrast to the participatory model which presupposes the dispersion of power and -in its ideal form- the elimination of power relations themselves.

But, first, let me explain the terminology I use and in particular the meaning of the terms market economy, growth economy and marketization. By "market economy" I do not just mean an economy where part of the product is bought and sold in the market. It can easily be shown that, although markets have existed for a very long time, the market economy, as an economic and social system , is a new phenomenon, which first emerged at a specific place (Europe) and time (some two centuries ago)[2]. So, by "market economy" I mean the self-regulating system in which the fundamental economic problems (what, how, and for whom to produce) tend to be solved "automatically" through the price mechanism, i.e. through individual decisions, rather than through some process of social decision-making..

The emergence of the market economy set in motion two parallel processes that have since characterised social, political, economic and ecological change. The first is what we may call the marketization process and the second is the process that has led to the emergence of what we may call the growth economy, i.e. the economy founded on the partial (at least) identification of Progress with the continual development of the forces of production. The reasons why the emergence of the market economy was bound to set in motion these two processes can easily be explained at the micro-economic level. The fact that, at the time of the arrival of the Industrial Revolution, mechanized production had to be introduced in a commercial society where the means of production were privately controlled had very important implications. It meant that those controlling the means of production, in order to survive competition, had to ensure:

-First, the free flow of labour and land at the minimal cost. However, under conditions of private control of production, this flow is an inverse function of the social controls on the market. Thus, the more effective the social controls on the market, and in particular on the market for the "factors of production" (labour, capital, land), the more difficult is to ensure their free flow at the minimal cost. Therefore, historically, those having private control of the means of production have always directed their efforts towards further marketizing the economy, i.e. minimizing the social controls on the market. The marketization process is therefore a historical process that transformed the socially controlled economies of the past into the market economy of the present.

-Second, they had to ensure a continual flow of investments into new techniques, methods of production and products, i.e. they had to ensure continual growth (this logic was aptly expressed by the motto "grow or die"[3]). Therefore, it is not a coincidence that, as a modern treatise on growth puts it, "the modern idea of growth was formulated about four centuries ago in Europe when the economy and the society began to separate[4]".

So, the two major historical processes, marketization and growth, constitute the fundamental components of the new system, the market economy. But, let us examine in some more detail these two components and their social and ideological implications.

As regards marketization first, it can be shown[5] that, since the emergence of the market economy, there has been a definite long-term trend to minimise the social controls on the market. The rise in this century of what I will call statism, in other words, the period of active state control of the economy and interference with the self-regulating mechanism of the market, was a historically brief interlude to the process of marketization. The statist phase of this process lasted for only about half a century and was followed by the present rolling back of state control  over the economy (I refer here to macro-economic control of the economy, i.e. control of the level of output, investment, employment and so on) within the framework of the neoliberal consensus[6]. In particular, statism, in its Western social democratic form, represented a doomed attempt from the start to set effective social constraints on the process of marketization. This implies that the project to enhance the civil society, which is proposed by some currents within the Left today, may be just another dream: the marketization process, within the capitalist institutional framework, has proved irreversible. In other words, once a market economy is established, its own grow-or-die dynamic tends to undermine any serious effort to create self-protective mechanisms for society against the hegemony of the market and transforms society itself into a market society.

Second, as regards growth, we have to notice in advance that economic growth was not just the inevitable outcome of the workings of the market economy at the micro-economic level. Growth was, also, the selected objective of the centrally planned economy at the macro-economic level. Thus, whereas the first component of the market economy ―the marketization process― had divided the intelligentsia of the industrial era and led to the two major theoretical and political movements, liberalism and socialism, no similar divide had arisen with respect to the second component, i.e. economic growth. From Adam Smith[7] to Karl Marx[8], the fundamental problem was how humankind would maximize growth, with the help of Science and its technological applications that had created - for the first time in History - the possibility for an effective attempt to dominate Nature at a mass scale. Therefore, growth became a central imaginary signification, to use Castoriadis's terminology[9], for both capitalism and socialist statism.

The growth ideology, i.e. the ideology that was founded on the social imaginary signification that "the unlimited growth of production and of the productive forces is in fact the central objective of human existence"[10], and the implied ideology of domination over Nature, became dominant. Thus, the growth ideology complements the liberal ideology in existing capitalism and the socialist ideology in the ex-socialist countries. In this sense, the growth ideology constitutes the ultimate ideological foundation for both systems, despite the significant differences in economic structures and the hierarchical patterns of concentration of power. Furthermore, the growth ideology plays the role of the "ideology in the last instance", in the sense that it determines which ideology will be dominant at the end. This is why the economic failure of "actually existing socialism" to create a Western-type consumer society was the main reason that had led to its collapse and the consequent decay of the socialist ideology, for the benefit of the now dominant liberal ideology.

So, the growth economy became a central liberal and socialist objective. Thus, growth became the main objective not just of social democracy that merely aimed ―in the postwar period at least― at enhancing social controls on the market, but also of the ruling elites of "actually existing socialism". This, despite the proclaimed effort in the East to substitute central planning for the market economy and the fact that growth did not inevitably follow from the dynamics of the Planning system itself, as it was the case with the market economy. The result was the formation of a world growth economy that took the form of either a capitalist growth economy, where the basic economic decisions were taken through the price mechanism, or of a socialist[11] growth economy, where most of the corresponding decisions were taken through the central planning mechanism. Therefore, under the "capitalist growth economy" label we may classify the Western postwar economic structures, which expressed the social-democratic consensus, as well as today's economic structures, which represent the present neoliberal consensus. By the same token, we may classify under the "socialist growth economy" label the pre-1989 economic structures in the East, i.e. the countries of "actually existing socialism".

Today, it is obvious that the world growth economy,  in both its capitalist and socialist versions, has entered a state of fundamental crisis. Thus, on the one hand, we have just seen the actual collapse of actually existing socialism- a fact that marked the end of the "socialist" version of the growth economy. On the other hand, the crisis of its capitalist version becomes apparent by its dismal failure to become universal. A clear indication of this failure is the fact that today- almost half a century since the adoption of the growth economy model by every country in the world - over 78% of world output, according to the latest World Bank Report, is produced, and 75% of world exports are generated, in a few countries of the North, where only 15% of the world population lives[12]. If we add to this the serious ecological crisis that is directly related to the emergence of the growth economy- not to mention the broader social crisis represented, for instance, by the explosion of crime[13], drug abuse etc.- then the crisis of the growth economy is apparent.

Could we trace any common cause in the failure of the growth economy, in both its capitalist and socialist versions? To my mind, there is a definite common cause, which can be expressed in terms of a basic structural characteristic of the growth economy: concentration of power, economic and political power. Thus, concentration of economic power, effected either through  the automatic market mechanism.and taking the form of accumulation of income and wealth and consequently of purchasing power in "actually existing capitalism", or through the concentration of political control over the planning process in "actually existing socialism", constitutes a basic characteristic of the growth economy. Therefore, what differentiates the two types of growth economy is the way in which the concentration of economic power is realised. From this viewpoint, the institutions through which the ownership and allocation of economic resources are organised, in both the capitalist and the socialist growth economy, play a crucial role. 

Thus, first, as far as the forms of ownership of economic resources are concerned, both the private-capitalist and the state-socialist forms of ownership lead to the pursuit of partial interests. This is because, in both cases, the form of ownership assigns to a minority the right to control the production process: either directly, through private ownership, which gives a minority the right to control the means of production (capitalism), or indirectly, through state ownership, which assigns a similar right to the bureaucratic elite in control of the planning mechanism ("actually existing socialism").

Second, as far as the mechanism for resource allocation is concerned, both the market mechanism and the planning mechanism result in establishing a few in privileged positions, at the expense of the majority.  In the market mechanism, this is brought about automatically, through the unequal distribution of income that results from the mechanism's functioning, while in central planning this is accomplished through the institutionalisation of various privileges in favour of the bureaucratic elite.

But, let us see the link between concentration and the generalised crisis of the growth economy. As far as the crisis of the socialist version of the growth economy is concerned, one may argue that the main cause of the system's inefficiency, that led to the collapse of "actually existing socialism", was the absence, first, of political democracy and, second, of self-management of the production units, i.e. the lack of workers' participation in the decision-making process[14]. This lack of participation, combined with the lack of the usual capitalist economic incentives (consumerism and the threat of unemployment) implied the total lack of work incentives and, inevitably, led to the alienation of direct producers. The socialist ideological incentives, which the bureaucratic elite tried to create in place of the economic ones did not have, of course, any chance to succeed in a system characterised by the fundamental contradiction between an ideology based upon the principles of equality and social justice and the reality of a blatantly unequal distribution of economic and political power.

In my opinion, the fundamental reason for the historic failure of "actually existing socialism" (and similar arguments could be put forward about the collapse of social democracy) lies in its attempt to merge two incompatible elements: the "growth element" that expressed the logic of the market economy, with the "social equity element" that expressed socialist ethics. Thus, whereas the growth element implies the concentration of economic power, the social equity element is inherently linked to the dispersion of economic power and to equality. One could therefore argue that the attempt by socialist statism to create a socialist growth economy, in order to make the benefits of growth accessible to everyone and to lend universal meaning to Progress- which was identified with growth-, was bound to fail, because of its disregard of the fundamental interdependence between growth and concentration of economic power.

Moreover, the attempt to merge the growth element with the social justice element created a fundamental incompatibility between the ends and means. Thus, whereas the capitalist growth economy was the inevitable consequence of the market economy and, as a result, no question of incompatibility could arise between the means (market economy) and the end (growth economy), in the case of socialist statism, the end (growth economy) was not compatible with the means (social-democratic statism / central planning). In fact, the greater the degree of statism (as in the case of central planning), the greater the incompatibility between the means and ends and, therefore, the system's inefficiency.

As far now as the crisis of the capitalist version of the growth economy is concerned, contrary to the view, still held by some, that there are natural tendencies leading to a decentralized society, it can be shown that there is a long-term trend within the market economy leading to continual concentration of economic power, even when this trend is accompanied by a simultaneous physical decentralization of the production process, as happens today. This increasing concentration can be shown at both the inter-country macro-economic level, and at the inter-company micro-economic level[15].

However, both the concentration of economic power, and the consequent ecological disintegration, are not simply consequences of the establishment of the growth economy; they are, also, fundamental preconditions for its reproduction. Thus, just as the continuation of growth and marketization is not possible without the further plundering of Nature, the reproduction of the growth economy itself is equally impossible without the further concentration of economic power. For, it is precisely concentration, in the form of huge inequalities in the distribution of world income, which makes the reproduction of the growth economy possible: it is simply physically impossible for the wasteful consumption standards, which are today enjoyed by high and middle social strata in the North and the elite in the South, to be universalized and enjoyed by the world population.

Thus, the decisive element in the present crisis of the capitalist growth economy consists in the fact that the system of market economy is not inherently capable of transforming the market economy of the South into a self-sustaining growth economy, similar to the one already established in the North. This is shown by the fact that the gap between North and South has widened rapidly since the start of the peripheral marketization process, i.e. since the market economy of the former has begun to penetrate the traditional economies of the latter[16]. This inherent incapacity of the North to create self-sustaining consumer societies in the South becomes even more obvious when we allow for the fact that the earth's natural resources simply do not suffice for the standards of living enjoyed today by the privileged in the North to be universalised.

In other words, there is an absolute natural barrier that makes the globalization  of the growth economy of the North impossible. If we assume, for example, that the world population rises in the next century to 11 billion - a reasonable estimate on the basis of presently available data- then, for the inhabitants of our planet to reach the per capita energy use rates that those living in the rich countries enjoy now, world energy production would have to be eight times as great as it is at present (or twelve times as great for everybody to enjoy the US consumption standards[17]). But, on the basis of "existing estimates of all potentially recoverable mineral and energy resources (including all the deposits we are ever likely to find)...there is no chance that everybody in the world can rise to anywhere near the per capita use rates that the few in rich countries enjoy now...nor is there any foreseeable way of deriving such enormous quantities of energy from alternative sources such as the sun, wind or tides"[18].

A second basic element of the crisis of the growth economy is the ongoing ecological destruction, as a result of the growth-induced exhaustion of available natural resources,  not just the non-renewable resources (mineral stocks etc.) but also, and particularly, the renewable ones (arable land, forests, etc.). The growth ideology, shared by both the capitalist and the socialist versions of the growth economy, can also account for the fact that both types of the growth economy share a similar environmental degradation. Thus, to the extent that the essentially economic character of the present concentration of power cannot be simply reduced to capitalist production relations, as Marxists contend, to a similar extent, the ecological crisis itself cannot be merely reduced to capitalist relations and conditions of production, as eco-Marxists[19] maintain. It is, anyway, evident that an analysis of the ecological crisis on the basis of capitalist production relations fails to explain the presence of an even more serious ecological crisis in the countries of "actually existing socialism", despite the absence there of capitalist production relations. Thus, just as it would be wrong to attribute the ecological crisis merely to the growth ideology (as the environmentalists and various "realos" within the Green movement do, disregarding the institutional framework of power relations), it would be equally wrong to impute the crisis exclusively to capitalist production conditions (as eco-Marxists are trying to do, disregarding the significance of the growth ideology on the theory and practice of socialist statism).

In fact, in order to provide an adequate interpretation of the ecological crisis, we should refer not just to the capitalist production relations, but to the power relations that result from the concentration of power and the implied idea of dominating Nature[20]. We should therefore begin with the historical factors that led to contemporary hierarchical society - in which the elite draws its power mainly from the concentration of economic power - and continue with an attempt to interpret the crisis in the context of the institutional framework of the capitalist and the socialist growth economy respectively. Such an interpretation could show that the ecological crisis is directly related to the principle of economic efficiency, which constitutes a basic intermediate objective for the maximization of growth in both types of the growth economy. This principle is, in both cases, defined by criteria which do not take into consideration the social and ecological cost of production. Thus, those in (private or state) control of the means of production, design the technology and production methods in a way that, effectively, disregards the ecological effects of growth, which, for them, constitute just part of the "external" cost of production.

As regards the significance of the institutional framework in particular, in the case of the socialist growth economy, central planners could, in theory, take ecological factors into account in making their decisions; however, in practice, this would imply further lagging behind in the growth race with the capitalist growth economy and a significant worsening in the competitiveness of their export sector. On the other hand, in the case of the capitalist growth economy, those controlling the means of production have to aim at the minimization of social controls on the market for "land" (i.e. at the enhancement of the marketization process that commodifies  the environment) in order to secure the free flow of land's goods and services,

Concentration of economic power is not, of course, a new phenomenon. In all hierarchical societies, some concentration of wealth has always accompanied the concentration of political and military power in the hands of the various elites, - a fact usually "justified" through a system of social rules based upon religion. The new element in the growth economy is the fact that the reproduction of the social system itself, and of the power of the elite controlling it, crucially depends on the realisation of growth, which, in turn, is "justified" through its identification with Progress. However, the identification (in both systems) of Progress with economic growth entails the need for a more extensive division of labour, specialization, and exploitation of comparative advantages. In other words, it entails the need for a departure from the principle of self-reliance, a fact that has considerable repercussions at the economic level (unemployment, poverty, economic crises in capitalism and economic irrationalism in socialism can all be traced back to this fact), the cultural level (disintegration of social ties and values), the ecological level and, naturally, the general social level (drastic restriction of individual and social autonomy)[21].

So, to conclude with the answer to the first question, I think that the fundamental contradiction of the capitalist growth economy is that the present huge and rising concentration of economic power -a concentration that implies a widening gap between North and South, as well as within the North and the South, i.e. between privileged and underprivileged social strata- is not only a crucial element of the crisis, but it constitutes also a fundamental precondition for the reproduction of the growth economy. This fact means that the basic tenet of the growth ideology, that the living standards enjoyed today by a privileged few could be universalised, is just another utopian dream.

 

B. The dominant trends of social change today

Let us now come to the second question concerning the presently dominant trends of social change and the chances - if these trends persist- of overcoming the crisis of the growth economy.

Two years ago Riccardo Petrella, director of the Forecasting and Assessment of Science and Technology division of the European Community, wrote in an editorial piece in the Toronto Star[22]:

The new order taking shape in the world today is not the one imagined by obsolete tatesmen of  the Cold War era. Rather than nation-states weighing in on a new globallbalance of power, a hi-tech archipelago of affluent, hyper-developed city-regions is volving amid a sea of impoverished society. These city regions are actively linked ogether by transnational business firms which, in their ceaseless pursuit of new ustomers, are creating new networks that bypass the traditional nation-state framework... It thus appears that the real decision-making powers of the future will be a network of ransnational companies in alliance with city-regional governments... Today's global economy is principally organised through a system of some 30 mega-cities that are the active nodes of the world market.

The basic conclusion that we may derive from the above statement is that the nation-state is withering away and is being replaced by a network of transnational corporations and city-regions. I will make the hypothesis that today's decline of the nation-state, which is particularly obvious within the European Community --that is, the very place where the nation-state historically emerged-- is closely linked to the present internationalised phase of what I called the marketization process. I shall assume further that the present nationalist conflicts in Eastern Europe represent a transitional phenomenon marking the full integration of the countries concerned into the world capitalist market. In other words, these conflicts represent an earlier phase in the marketization process - a process that was partially interrupted in these countries by the advent of `actually existing socialism'. But, if nationalist conflicts in Eastern Europe might reasonably be assumed transitional, it will be hard to make a similar assumption about the rise in Western Rurope of neoracism, which could be traced to the structural changes I described above. Thus,  as the void created by the decline of statism has not been filled by a process that really empowers communities, the same marketization process that has led to the present decay of communities and community values, the drastic rise in unemployment and the decline of the welfare state has, also, led to  the present flourishing of neoracism.

But, why the nation-state is withering away within the above described process of marketization ? To answer this question we have to go back to the prewar period when, during the Great Depression in the thirties, two different models of statism developed in the West. The Nazi form of statism which, mainly due to political and military considerations, was of a "nationalist" character and the Anglo-American form of statism, which was much more internationalist[23]. The former was to find an inglorious end under the ruins of the Third Reich, whereas the latter flourished for another 30 years or so after the end of the war and, in fact, set the foundations for the present internationalised phase of the marketization process that is associated with the neoliberal consensus.

Thus, despite the rapid expansion of statism in the immediate postwar period, the growing internationalisation of the market economy, as a result  of its grow-or-die dynamic, was also actively encouraged by the advanced capitalist countries, both at the world level (GATT rounds of tariff reductions) and at the regional level (European Economic Community [EEC], European Free Trade Association [EFTA]). The old nationalist rivalries that characterised the first half of the twentieth century and led to two world wars were swiftly overcome, in view of the expansion of `actually existing socialism' and the flourishing of national liberation movements in the Third World. Thus, commercial rivalries between major capitalist nations were replaced by a rapid expansion of trade (mainly between themselves) so that, by the early 1970s, one-sixth of manufacturing goods consumed in Europe were imported from abroad[24]. Since then, the internationalisation of the economy has accelerated further[25].

However, growing internationalisation implies that the growth of the market economy today relies increasingly on the expansion of the world market rather than on that of the domestic market, as before. This is a fact that has very significant implications with regard to the state's economic role. Thus, as the accumulation of capital in today's internationalised market economy depends much more than before on the world market, the state's role in enhancing domestic demand is not as important as it used to be in the past. At present, competitiveness plays a much more significant role with respect to accumulation and economic growth than direct expansion of domestic demand through government spending. Under conditions of free trade, ccompetitiveness is crucial not only with respect to an increasingly export-led growth but also with respect to import penetration that could have serious repercussions on the levels of domestic business activity and unemployment. In this context, the prevailing conditions on the supply side of the economy, in particular those relating to the cost of production, become critical. This is why squeezing the cost of production, both in terms of labour cost and in terms of employers' taxes and insurance contributions, is so important. But, squeezing the cost of production involves a drastic reduction in statism.

Thus, it can easily be shown that the postwar expansion of statism has led to a long-term rise in the cost of production: directly, because the expansion of the welfare state meant a growing burden on employers' contributions and taxes[26]; indirectly, because, under the conditions of near-full employment that prevailed during the statist phase of the marketization process, organised labour could press successfully for wage rises that significantly exceeded productivity increases. This became a problem particularly painful for those controlling capitalist production in the period 1968-73, when a massive strike movement, not actually controlled by the trades union bureaucratic leadership, led to a fast rise in wages and a corresponding encroachment of profits[27].

So, the cumulative effect of not letting the labour market free to determine the levels of wages and employment, as the market economy requires, was the crisis of the early 1970s. The crisis, contrary to the usually advanced short-termist view, was not mainly due to the oil crisis but to a long-term structural change: the fact that the degree of internationalisation of the market economy achieved by then was not compatible with statism anymore. This was indicated by the following facts:

- first, the nation-state's effective control of the economy had become almost impossible, as a result of the relatively free movement of commodities and the  high mobility of capital that the booming Euro-currency markets etc have (de facto) introduced. The combined effect of these two developments was to leave multinational corporations free to undermine those national economic policies which were incompatible with their own objectives;

- second, the expansion of statism itself had certain built-in elements (I can not expand on this topic here) that were inevitably leading to an  inflationary crisis.

So, at the beginning of the 1970s, two parallel trends were at work: the inflationary crisis and a new trend of rising unemployment. The latter trend was mainly due to  structural unemployment, as a result of  technological changes (mainly, the information revolution) that led to  a drastic fall in the number of workers in manufacturing[28] - a fact with important implications on the strength and significance of trade unions and social-democratic parties[29]. The parallel conjunctural rise in unemployment, due to the counter-inflationary measures taken by governments in their attempt to cope with the effects of the oil crisis, simply exacerbated the situation.

Thus, the economic crisis of the early 1970s, which was aggravated by the collapse of the Bretton Woods system and the return to the uncertainties of flexible currencies, led to the rise of the neoliberal movement. This movement, which first emerged among the economists in academia (the Chicago School, resurrection of Hayek and so on) and later spilled over among professional politicians, especially in the United Kingdom and the United States, represented a powerful attack against social-democratic statism. Statism (in the form of nationalisations, full employment policies and the welfare state) was accused of leading to a tripartite system of economic power (state, trades unions and capital) which was undermining private capital's hegemony. The ultimate neoliberal aim was, therefore, to enhance the power of those controlling the economy, through the drastic reduction of society's control over the market. The main methods used to achieve this aim have been the following ones:

- Deregulation and liberalisation of markets

- Privatisation of state enterprises

- Reduction of the welfare state into a safety net and parallel encouragement of the  private  sector's expansion into social services

- Redistribution of the tax burden in favour of high income groups, at the expense of  low and mid-income groups

The neoliberal consensus has very important implications at the economic, political, social, ideological and cultural levels. At the economic level, the new consensus should not be taken to mean that the state has no more economic role to play. One should not confuse liberalism/ neoliberalism with laissez-faire. It was, anyway, the state itself that historically has created the system of self-regulating markets and some form of state intervention has always been necessary for the smooth functioning of the capitalist system. The state is called today to play a crucial role with respect to the supply-side of the economy and, in particular, to take measures to improve competitiveness and to train the working force to the requirements of the new technology. Therefore, the type of state intervention that is compatible with the marketization process not only is not discouraged but, instead, it is actively promoted by the neoliberal consensus, especially by the `progressive' elements within it (Clinton administration, social-democratic parties in Europe). So, it is not true that the neoliberal consensus has killed off the baby of the social-democratic consensus, i.e. the mixed economy, as it is usually assumed. In fact, it did something worse. It redefined the content of the mixed economy so that it can better serve the interests of the economic elite and reproduce, on the threshold of the twenty-first century, the same conditions of inequality and social injustice that prevailed in the beginning of the nineteenth!

However, it should be stressed that today it is not the nation-state as such that is called to play the above role with respect to the supply side of the economy. The internationalised phase of the marketization process implies the creation of huge economic blocks, within the context of which the economic role of the individual nation-state is being progressively downgraded in favour of supranational institutions. This applies, in particular, with respect to the EEC, where the relevant process has already begun, but it also applies with respect to the North American Free Trade Agreement (NAFTA) and the still informal Far Eastern block (Japan, Korea, Taiwan, Malaysia, Thailand, Hong Kong, Singapore).

In fact, the same economic aims that have brought about the neoliberal consensus have, also, led to the creation of these blocks. The basic aim is the improved competitiveness of the sections of capital that are based in each block. This improvement is expected to come about through the enlargement of the `domestic' goods market and that of the capital and labour markets. As regards the goods market, first, the larger size makes improvements in productivity much easier, mainly, because of the possibility of pooling resources on research and development. Second, as regards the capital and labour markets,  the possibility of greater movement of labour and capital creates additional opportunities to squeeze the cost of production and in particular the cost of  labour. This is because, contrary to what orthodox economic theory suggests, neither free capital movement nor free movement of labour eliminate wage differentials[30]. Instead, mobility of capital creates opportunities to invest in areas of low cost, whereas mobility of labour puts pressure on the wages of high-income countries.

In Europe, in particular, the complete liberalisation of the goods markets within the EEC block, combined with the liberalisation of labour and money markets, creates -for the first time in history- a vast economic area where an automatic system, similar to the Gold Standard system, could now function successfully. Indeed, this is the main aim behind the European Economic and Monetary Union (EMU). If we substitute the European Currency Unit (ECU), i.e. the projected common EEC currency, for gold, Europe will operate under a contemporary Gold Standard system when the EMU is completed. The reason such a system is now in a better position to function more successfully than in the past is that the basic factor that led to the collapse of the Gold Standard system has been eliminated, that is, the various restrictions on the movement of goods, labour and capital. Such restrictions, as we have seen, represented society's self-protection mechanisms against its marketization and led to the near collapse of the market economy itself. Since the neoliberal consensus has eliminated most of these restrictions, a historic opportunity has been created for the marketization process to be completed.

The present internationalised phase stands therefore a much better chance of success than the first marketization phase in the 19th century. In fact, it is possible that by the end of the century all four institutions that,  according to Polanyi, are needed for the marketization of the economy will be in place. These are the self-regulating market, the balance-of-power system, the liberal state and the international Gold Standard. At present, statism is in retreat everywhere and many state regulations with respect to the market have been abolished. In Europe, in particular, the development at the end of the century of the independent European central bank, which will replace the individual central banks, will mark, in effect, the end of the nation-state at the economic level. Second, a balance-of-power system is being established, within the framework of a United Nations controlled by the major capitalist countries. Third, the liberal state is presently omnipresent and virtually unchallenged. Finally, a kind of European gold standard mechanism, in the form of a common currency, may reasonably be expected to be in place by the end of the century.

In concluding, it is therefore obvious that the rise of neoliberalism is not a conjunctural phenomenon, as social democrats present it, but that it represents the completion of the marketization process that was interrupted by the rise of statism. The fact that neoliberal policies are supported today by both conservative and social-democratic parties, in government or in opposition, and that the basic elements of neoliberalism have been incorporated into the strategies of the international institutions which control the world economy (IMF, World Bank) as well as into the treaties that have recently reformed the EEC (Single Market Act, The Maastricht Treaty) makes it plainly evident that we are faced with a neoliberal consensus that has replaced the defunct social-democratic consensus. Furthermore, the breakdown of `actually existing socialism' in the East and the parallel collapse of social democracy in the West (as a result of the shrinking of its electoral clientele)  have created the political conditions for the completion of the marketization process. This does not just mean a return to pure nineteenth-century liberalism. It means the maximisation of the role of the market and the minimisation of social controls over it to secure maximum `efficiency', in the sense of profits and growth.

So, after the failed attempt to introduce a self-regulating economic system in the last century, a new synthesis is attempted today. The new synthesis, although it has the same objective as before, attempts to avoid the extremes of pure liberalism by combining essentially self-regulating markets with various types of safety nets and minimal controls that do not affect the self-regulation process. In the present internationalised phase of the marketization process, the need to minimise the socioeconomic role of the state is no longer a matter of choice for those controlling production. It is a necessary condition for survival. This is particularly so for European capital that has to compete with capital blocks, which operate from bases where the social-democratic tradition of statism has never been strong (the United States, the Far East). However, even at the planetary level, one could seriously doubt whether it is still possible, within the context of the market economy, to enhance the institutions of civil society. Granted that the fundamental aims of production in a market economy are individual gain, economic efficiency and growth, any attempt to reconcile these aims with an effective `social control' by the civil society is bound to fail since, as historic experience with the statist phase has shown, social control and market efficiency are irreconcilable objectives[31]. By the same token, one could reasonably argue, any effective control of the ecological implications of growth is incompatible with the competitiveness requirements that the present phase of the marketization process imposes.

So, what are the chances ―if these trends persist― of overcoming the crisis of the growth economy? The presently dominant strategy attempts to overcome the crisis on the basis of policies emanating from the liberal credo of freeing the market forces and minimising social control, i.e. further marketization. However, this strategy, in fact, is nothing less than the rational organization of inequality. This becomes obvious by the fact that no dimension of the crisis can be resolved by further marketizing the economy.

Thus, as regards, first, the economic crisis, in the sense we defined it, the enhancement of the marketization process could confidently be expected to aggravate the crisis, since it is bound to further widen the North-South gap, as well as the gap between the privileged and the non-privileged within the North and the South. As regards, second, the ecological crisis, the strategy of freeing the markets inevitably leads to a deepening of this crisis, as the historical experience of the last 200 years has shown when the rise of the market economy and the subsequent growth economy was followed by the greatest ecological disaster in the history of humankind. Finally, as regards the social crisis, it is unavoidable that the marketization of society would further undermine traditional, as well as community, values and deepen this crisis.

At the same time, concentration of political power cannot be reduced through the decentralization of economic power, supposedly brought about by the freeing of markets, deregulation and so on.  On the contrary, minimizing social controls on the markets further reinforces economic concentration ―which is simply a by-product of the market economy― whereas, at the same time, it leads to supranational forms of political concentration that correspond to the supranational forms of economic concentration already established. In fact, the trend towards the formation of a federal super-state in Europe, actively supported by neoliberals and social-democrats, constitutes a characteristic example of political concentration supplementing economic concentration.

 

C. The need for an alternative form of social organisation

Finally, coming to the last question I asked at the beginning, whether we should create alternative forms of social organisation in order to overcome the crisis, I think that today few doubt, and research has conclusively shown, that participation should infuse any model of social change, i.e. that social change should at least be initiated at the local level. The real issue therefore is not whether the participatory model is desirable but whether any real participation is feasible within the present institutional framework, which is defined at the political level by representative forms of democracy and at the economic level by the internationalised market economy and its institutions (TNCs, IMF, World Bank etc.). i.e. the institutional framework which tends to develop, as we saw above, into a series of  networks of city-regions within federated structures of political power.  In short, the real issue is decentralisation versus remaking society.

In this context, it is interesting to note that today both the proposals for decentralisation and those to remake society are centered at the community level. In view of what was said before, this is not of course a surprising development, as it just represents the inevitable consequence of the collapse of socialist statism on the one hand and the failure of "actually existing capitalism" on the other. A failure that is both economic, as shown by the fact that this system cannot even meet the basic needs of at least 20% of the world's population[32], and ecological, as the advancing ecological disintegration reveals. Thus, a new consciousness is emerging among radical movements in the North and the various community movements in the South- a consciousness, which ascribes the basic cause for the failure of both capitalism and socialism to the concentration of power. It is therefore becoming increasingly realised that social and individual autonomy[33] can only be achieved in the context of direct and economic democracy, i.e. "a structure and a process that, through direct citizen participation in the decision-taking and decision-implementing process secures an equal distribution of political and economic power among citizens"[34].

However, the rebirth of democracy is today possible only at the community level (the municipality or its subdivisions). It is only at the community level that the conditions that would make direct and economic democracy possible could be fulfilled, i.e. economic self-reliance, municipalization of economic resources and  democratic allocation of goods and services among the confederally organized communities; it is also at the same level of confederated communities that the preconditions for an ecological society can be met.

The community is, of course, a notoriously disputed -some even say anachronistic- concept. However, I would agree with David Clark that community could never be destroyed or civilisation itself would collapse and that the real issue is how to define and operationalise the concept of community so that it would be useful in the urbanised, technological and highly mobile society of today. A useful starting point is David Clark's definition of the concept of community, which is defined in terms of what he calls "ecumenicity" (i.e. a sense of solidarity that enables people to feel themselves part of and not hostile towards wider society) and autonomy (i.e. a sense of significance that enables people to feel they have a role to play in the social scene, a role that is defined by rules that members of the community choose themselves and feel free to modify)[35].

However, the ecumenicity and autonomy elements can only be described as the necessary conditions defining community relations. I think that community members cannot have a real sense of solidarity and especially a real sense of significance, unless a third element is present, which I call the democracy element. The democracy element, which rules out the concentration of political and economic power, is in fact the sufficient condition for any true community. Historically, this has always been the case. Thus, as Michael Taylor[36] has shown, drawing on the experience of stateless primitive societies, peasant communities and `intentional' (utopian) communities, a community requires  rough economic equality, as well as relations between its members that involve reciprocity (mutual aid, cooperation, sharing) and that are direct (i.e. unmediated by representatives, leaders, etc.) and many-sided[37]. So, taking into account all these three elements (ecumenicity, autonomy, democracy) we may end up with a definition of community like the one recently put forward by Murray Bookchin as "a municipal association of people reinforced by its own economic power, its own institutionalization of the grass roots, and the confederal support of nearby communities organized into a territorial network on a local and regional scale"[38]. I think that starting from a definition of community, like the one given by Bookchin, we could develop a model of a community-based economy and society. Unfortunately, I can not expand further this topic here and I can only refer those interested to some recent bibliography[39] on the matter.

It is, I hope, obvious that the community has been used above as the fundamental social, political and economic unit on which a new type of society could be founded, i.e. a third social system beyond socialist statism and neo-liberal capitalism. In this context, the new radical proposals for a community-based society represent a synthesis of the democratic tradition founded in classical Athens (direct democracy), the socialist tradition (economic democracy) and green radicalism (ecological society),  and , potentially, they offer the only realistic way out of the present multidimensional crisis.

However, as I hinted above, apart from radical proposals to remake society, on the basis of a new community-based social system, there are also community-based proposals to decentralise society, in the sense of empowering communities at the expense of the centre. Today, the concept of community has become fashionable again. Religious "communitarianism", with its religious notion of "community", competes with statist communitarianism, where the need to revive the "community" is used as a means to fight crime and strengthen the security state (see eg Clinton's 1994 "State of the Union" address). Similarly, parts of the old social-democratic movement, like, for instance the British Labour Party,  turn today to various forms of "communitarianism", in the sense of empowering communities as counter-balancing forces to the market and the supranational federal forms of statism presently developing. It is obvious that these fashionable notions of community have nothing to do with the concept of community that a community-based society has to develop, because religious or statist definitions of community take for granted the very institutional framework that a community-based society has to transcend.

Similar arguments could be put forward against the type of communitarianism presently expanding, particularly in North America and Britain, in the form of what is usually called "Community Economic Development" (CED). This involves a strategy of gradual removal of land, labour and capital from the market economy (through the establishment of Community, Land Trusts, community financial institutions, community enterprises etc.) with the double aim to create a community culture and to make private firms and the state socially responsible. However, community economic development, although useful with respect in particular to its first objective, could not seriously challenge the present concentration of political and economic power, as supporters of it admit:

New forms of economic activity and institutions created in the community will never be dequate, within an economy dominated  by private enterprise, to generate enough jobs and wealth at a local  level to compensate for the consequences of economic centralisation outside of the community...Since communities do not control in any direct way economic resources, partnesrships with both government agencies and representatives of  busines have been accepted as inevitable by CED activists in order to secure both recognition and resources. These are tricky relationships because of the inequality of power[40].

It is therefore obvious that CED, by not aiming at establishing a political and economic power base at the community level, (which could only be achieved, as the supporters of a community-based society argue, by contesting local elections in order to develop "a new public sphere ―and in Athenian meaning of the term, a politics― that grows in tension and ultimately in a decisive conflict with the State"[41]),  could easily end up as another attempt for radical decentralisation. But, radical decentralisation, within the existing institutional framework, is neither feasible nor desirable. It is not feasible, because, in the context of the present internationalised phase of the marketization process, any attempt to create real counterbalancing centres of power would fail, unless these centres of power are compatible with the logic and dynamic of competitiveness. It is not desirable, because the problem of democracy today is not just how to force the present centres of political and economic power to delegate some of their power to local centres of power, which would simply reproduce at the local level the concentration of power at the centre. The problem is how we can create new forms of social organisation that do not presuppose centres of power at all, but the dispersion of power to all citizens, i.e. true democratic forms of organisation and a return to the classical meaning of Politics, in the context of which "neither rule nor being  ruled exists"[42]

 


 

[1]. Gunatilleke Godfrey et al, Ethical dilemmas of development in Asia, Lexington Books: Heath and Company, 1983.

[2]. See the pioneering work of Karl Polanyi, The Great Transformation, the Political and Economic Origins of Our Time (Boston: Beacon Press, 1944/1957.

[3] The logic of growth has been adequately analyzed from both the liberal and the Marxist perspectives. For further analysis, from the ecological standpoint, see, e.g., Michael Jacobs, The Green Economy, (London: Pluto Press,1991), pp. 3-49. Also, the chapter entitled "Why capitalism needs growth" in R.Douthwaite's book is useful, despite the shortcomings of the book in general, mainly due to the deep ecology approach that it adopts (Richard Douthwaite, The Growth       Illusion,(Devon, UK: Resurgence, 1992), pp. 18-32).

[4] Henry Teune, Growth, (London: Sage, 1988), p.13.

[5] Takis Fotopoulos, "The nation-state and the market", Society and Nature, no. 5, (vol. 2, no. 2/1994), pp. 37-80.

[6]   Takis Fotopoulos, The neoliberal consensus and the crisis of the growth economy, (Athens:          Gordios    Press, 1993) (in greek)

 

[7] Adam Smith, The Wealth of Nations, (Harmondsworth, 1970), p. 104

[8] As Sean Sayers observes, quoting from Marx's Capital vol. 3 and Grundrisse, "Marx regards the immense expansion of production to which capitalism has led as its progressive and 'civilising' aspect, (Sean Sayers, "Moral values and progress", New Left Review no. 204. March-April 1994, pp. 67-85).

[9] See Cornelius Castoriadis, L'institution imaginaire de la societe,(Paris Seuil, 1975), part VII, and Philosophy, Politics, Autonomy, Oxford University Press, (Oxford: Oxford University Press, 1991), ch.8.

[10] Cornelius Castoriadis, Philosophy, Politics, Autonomy, p. 184.

[11] The terms "socialist" and "capitalist" are simply used in order to distinguish various types of the growth economy on the basis of the criterion of methods of allocating economic resources. For a discussion of the nature of the regimes of "actually existing socialism", which can surely not be characterised as socialist even by the standrads of classical Masrxism, see Takis Fotopoulos, Dependent Development: the case of Greece (Athens: Exantas Press, 1985 & 1987), ch. A.

[12] Data calculated from World Development Report 1994 (New York: Oxford University Press, 1994), Tables, 1, 3

[13] In Britain, for instance, it took 30 years for the crime rate to double, from 1 million incidents in 1950 to 2,2 million in 1979. However, in the past ten years, the crime rate has more than doubled and exceeded the 5 million mark in 1992; at present, it is estimated that it has topped 6 million, (R. Reiner, The Observer (15 Sept. 1991) and J. Young, The Guardian (1 Feb. 1992).

[14] Such views are expressed, e.g., by Cornelius Castoriadis, Political and Social Writings (Minneapolis: University of Minnesota Press, 1988), vols. 1-2, as well as by Rudolf Bahro, The Alternative in Eastern Europe (London: Verso, 1978).

[15] See Takis Fotopoulos, "The end of socialist statism", Society and Nature, no 6 (vol 2, no 3/1994), pp. 11-68.

[16] 200 years ago, the average per capita income in the rich countries was only one and a half times higher than that in poor countries (P.J. McGowan & B. Kurdan, "Imperialism in World System Perspective", International Studies Quarterly, vol 25, no 1, March 1981, pp. 43-68.In 1900, it was six times higher and in 1952/54  8.5 times higher, whereas by 1970 it was 13 times higher, Paul Bairoch, The Economic Development of the Third World Since 1900, (London: Methuen, 1975), pp. 190-2). Since then, the gulf has become even wider and by 1991 the average per capita income of the 19 richest countries in the OECD was 21 times higher than that of countries with low and medium income (World Bank, World Development Report 1993, Table 1).

[17] Calculations based on the, World Development Report 1993, World Bank, Tables 1 and 5. Even now, for the present world population to reach the per capita energy consumption levels enjoyed by the 19 richest OECD countries, the annual world production of energy should quadruple (or increase six times, for everybody to enjoy the American consumption standards).

[18] Ted Trainer, Developed to Death, (London: Greenprint, 1989), p. 120. According to Ted Trainer, if we try to globalize the present Western energy consumption standards relying, instead, on nuclear energy, then, on the basis of a world population reaching 11 billion in the next century, we should need to build 200,000 giant nuclear reactors, i.e. one thousand times the world's present nuclear capacity!

[19] See, for instance, James O'Connor, "Capitalism, Nature, Socialism", Society and Nature, no.2. (vol. 1 no.2), pp. 174-202.

[20] See the pioneering work of Murray Bookchin and especially his latest Urbanization without cities, Black Rose Press, 1992 and Remaking Society, Black Rose Press 1989.

[21] For further analysis on this subject, see T. Fotopoulos, "The economic foundations of an ecological society", Society and Nature, no. 3 (vol. 1, no. 3), pp. 1-40.

[22] R. Petrella, "Techno-racism:the City-states of the Global market will create new Apartheid", Toronto Star, 19/8/92. See, also, Manuel Castells, "European Cities, the informational society and the global economy", New Left Review, March-April 1994.

[23] Polanyi derives the same conclusion as regards the two types of statism, although within the context of a different problematic. Polanyi, The Great Transformation, p. 245.

[24] Thus, whereas import penetration (imports as a percentage of production of manufacturing plus imports) within Europe was only 6% in 1937 and 1950, it increased to 11% in 1963 and 17% in 1971 significantly higher than the 1913 level of 13%. Philip Armstrong et al., Capitalism Since World War II (London: Fontana, 1984), Table 10.3, p. 215.

[25] The average annual rate of growth of imports in the group of the 7 more advanced capitalist countries increased by almost 40% between 1965-1980 and 1980-90 (from 3.9% in 1965-80 to 5.4% in 1980-90). World Development Report 1992 (New York: World Bank), Table 14, p. 244.

[26] In Britain, for instance, total taxes as a proportion of company profits (excluding national insurance contributions) increased from about 44% in 1955-59 to 48.6% in 1967-70. Andrew Glyn & Bob Sutcliffe, British Capitalism, Workers and the Profits Squeeze (London: Penguin, 1972), Table F.1, p. 260.

[27] Actual post-tax real wages and productivity in advanced capitalist countries increased at about the same rate from 1960 to 1968 (4%), but in 1968-73, the former increased by an average of 4.5% versus a rise of 3.4% in the latter. Armstrong et al., Capitalism Since World War II, Table 11.10, p. 260. As a result, the share of profits in business output fell by about 15% in 1968-73. Armstrong et al., Capitalism Since World War II, p. 246.

[28] In the `Group of 7' biggest capitalist economies (the United States, Japan, Germany, France, the United Kingdom, Italy, Canada), the proportion of the active population employed in manufacturing fell almost by a third between 1972-73 and 1989-90, from an average of 32% in 1972-73 to 22% in 1989-90. International Labour Organization (ILO), Yearbook of Labour Statistics, (Geneva: ILO, various years)

[29] In the United Kingdom, for instance, the proportion of the active population in non-manual work increased from 12.8% in 1951 to 31.9% in 1978. Nick Bosanquet, After the New Right (London: Heinemann, 1983), p. 126. As a result of these trends, the structure of the British electorate changed drastically, and the proportion of the manual working class fell from a half to a third of the electorate within a 20-year period (1964-83). Bob Jessop et al., Popular Capitalism, Flexible Accumulation and Left Strategy,  New Left Review (Sept.-Oct. 1987).

[30] For instance, in the EEC, despite the conditions of free trade which have been established for a number of years, the average gross hourly earnings of industrial workers (in purchasing power terms) on the periphery (Greece, Portugal) are half of those at the centre and there are no significant trends to close the gap, Eurostat, A Social Portrait of Europe (Luxembourg: Statistical Office of the European Communities, 1991), Table 6.13, p 72

[31] See also, M. Olson, The Rise and Decline of Nations (New Haven, Connecticut: Yale University Press, 1988).

[32] According to the latest (1994) report of the International Labour Office (ILO), in 1993, 1.1 billion people lived in poverty conditions. An earlier World Bank report classified one third of the South's population as poor (World Development Report 1990,  p. 28).

[33][xxxiii] The term "autonomy" is used not in the usual Anglo-American sense of individual "liberty", in its liberal John Stuart Mill meaning, but in the ancient Greek sense of "autos-nomos",  i.e. to give to oneself one's laws, (see Cornelius Castoriadis, Philosophy, Politics, Autonomy, Oxford University Press, 1991, ch. 7).

[34] Takis Fotopoulos, "The economic foundations of the ecological society" Society and Nature,   no. 3, (vol.1, no. 3/1993), p 5. 

[35] David Clark, "The concept of community education" in Community Education, ed by Garth Allen et al, Open University Press, Milton Keynes, pp 58-60.

[36] Michael Taylor, Community, Anarchy, and Liberty (Cambridge: Cambridge University Press, 1982), pp. 26-32.

[37] Michael Taylor also shows conclusively why the liberal arguments of the `anarcho-capitalist school' (F. Hayek, R. Nozick and others), that no equality would survive for long without state interference, are logically and historically invalid and that, in fact, community is a necessary condition for the maintenance of an approximate equality; Michael Taylor, Community, Anarchy, and Liberty, pp. 95-104.

[38] Murray Bookchin, Urbanization Without Cities (Montréal: Black Rose Books, 1992), p. 245

[39] See Society and Nature vol 1 no 3 and, in particular, the articles by Murray Bookchin, "The meaning of confederalism", pp. 41-54, Howard Hawkins, "Community control, workers' control and the cooperative commonwealth", pp. 55-85 and Takis Fotopoulos "The economic foundations of an ecological society", pp. 1-40.

[40] Eric Shragge, "The politics of community economic development" in Community Ecoomic Development, Black Rose Press, 1993, pp. 9-10.

[41] Murray Bookchin, "What is communalism?" Green Perspectives, no. 31, October 1994.

[42] Hannah Arendt, The Human Condition, University of Chicago Press, 1958, p. 33