Neo-liberalism as Creative Destruction

NEO-LIBERALISM AS CREATIVE DESTRUCTION

NEO-LIBERALISM AS CREATIVE DESTRUCTION by David Harvey

Harvey, D., 2006: Neo-liberalism as creative destruction. Geogr. Ann., 88 B (2): 145–158. ABSTRACT. Neoliberalization has swept across the world like a vast tidal wave of institutional reform and discursive adjustment, entailing much destruction, not only of prior institutional frameworks and powers, but also of divisions of labor, social relations, welfare provisions, technological mixes, ways of life, attachments to the land, habits of the heart, ways of thought, and the like. To turn the neoliberal rhetoric against itself, we may reasonably ask: in whose particular interests is it that the state take a neoliberal stance and in what ways have these particular interests used neoliberalism to benefit themselves rather than, as is claimed, everyone, everywhere? Neoliberalism has spawned a swath of oppositional movements. The more clearly oppositional movements recognize that their central objective must be to confront the class power that has been so effectively restored under neoliberalization, the more they will likely themselves cohere. Key words: neoliberalism, creative destruction, class power, accumulation by dispossession, privatization, financialization, redistribution, democratic alternatives

Neoliberalism is in the first instance a theory of political economic practices which proposes that human well-being can best be advanced by the maximization of entrepreneurial freedoms within an institutional framework characterized by private property rights, individual liberty, free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to be concerned, for example, with the quality and integrity of money. It must also set up those military, defence, police and juridical functions required to secure private property rights and to support freely functioning markets. Furthermore, if markets do not exist (in areas such as education, health care, social security or environmental pollution) then they must be created, by state action if necessary; but beyond these tasks the state should not venture. State interventions in markets (once created) must be kept to a bare minimum because the state cannot possibly possess enough information to second-guess market signals (prices), and because powerful interests will inevitably distort and bias state interventions (particularly in democracies) for their own benefit. The actual practices of neoliberalism frequently diverge from this template for a variety of rea© The author 2006 Journal compilation © 2006 Swedish Society for Anthropology and Geography

sons. Nevertheless, there has everywhere been an emphatic turn, ostensibly led by the Thatcher/Reagan revolutions in Britain and the US, in political-economic practices and thinking since the 1970s. State after state, from the new states that emerged from the collapse of the Soviet Union to old-style social democracies and welfare states such as New Zealand and Sweden, have embraced, sometimes voluntarily and in other instances in response to coercive pressures, some version of neoliberal theory and adjusted at least some of their policies and practices accordingly. Post-apartheid South Africa quickly embraced the neoliberal frame, and even contemporary China appears to be heading in this direction. Furthermore, the advocates for the neoliberal way now occupy positions of considerable influence in education (the universities and many ‘think tanks’), in the media, in corporate boardrooms and financial institutions, in key state institutions (treasury departments, the central banks) and also in those international institutions such as the IMF and the WTO that regulate global finance and trade. Neoliberalism has, in short, become hegemonic as a mode of discourse, and has pervasive effects on ways of thought and political-economic practices to the point where it has become incorporated into the common-sense way we interpret, live in and understand the world. Neoliberalization has in effect swept across the world like a vast tidal wave of institutional reform and discursive adjustment, and while there is plenty of evidence of its uneven geographical development, no place can claim total immunity (with the exception of a few states such as North Korea). Furthermore, the rules of engagement now established through the WTO (governing international trade) and by the IMF (governing international finance) instanciate neoliberalism as a global set of rules. All states that sign on to the WTO and the IMF (and who can afford to stay out?) agree to abide (albeit with a ‘grace period’ to permit smooth adjustment) by these rules or face severe penalties. The creation of this neoliberal system has obviously entailed much destruction, not only of pri145