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What's So Liberal About Neoliberalism?

November 1999

For more than two decades, poor people around the world have been getting poorer and their absolute numbers are rising. Today, nearly 1.6 of the world's 5.7 billion people live in severe poverty. Over 70 percent of these are women and girls, many of whom work between 60-90 hours a week to maintain the same marginal standard of living that they possessed just a decade ago. Economic misery is most widespread in countries that were colonized by Europe and the US (the so-called Third World). But even the richest country— United States—has witnessed devastating increases in poverty and income inequality, with the percentage of children living below the poverty line up 49 percent since the 1970s.

These conditions reflect the dominant economic trend of our times, "globalization." The rhetoric that accompanies this term often leaves us feeling overwhelmed and hopeless. Jargon-filled discourse on "market forces" masks the raw violence of economic exploitation, suggesting that the economy functions according to scientific principles instead of political choices. Once we accept this proposition, it is easy to believe that economic matters are simply beyond our control. But the way that people organize and distribute the world's resources is a matter of human decisions -and human rights. In fact, seemingly abstract "macro" economic policies have a concrete impact on women and families around the world. Changing these policies to meet the needs of communities instead of corporations is an integral part of the struggle for women's rights.

When Greed Went Global

Many of the economic trends that we experience today are a result of a balance of forces that crystallized after World War II. By the 1940's, the Third World (which is actually two-thirds of the world) was ravaged by colonialism. Europe was devastated by war. By comparison, the US emerged from World War II as an economic superpower. Since then, the main objective of US foreign policy has been to safeguard this position. Consider the words of George Kennan, one of the most influential post-war US policy makers addressing the State Department in 1948:

"We have about 50 percent of the world's wealth, but only 6.3 percent of its population. In this situation we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity...We should cease to talk about vague and...unreal objectives such as human rights, the raising of living standards and democratization...The less we are hampered by idealistic slogans, the better." (Walter LeFeber, Inevitable Revolutions: The United States in Central America, Norton, 1983).

Kennan's view remains the touchstone of US foreign policy, which, as in his day, generally consists of economic moves made with ideological rationales. This point is often better understood by people in countries where these policies are implemented than by those in the US whose tax dollars finance them. One reason is that foreign policy is usually presented domestically as serving the very objectives Kennan characterizes as irrelevant: human rights, living standards and, above all, democracy. But when we look at the record of post-war US military actions (both direct and covert) we see that nearly all of them aimed to force developing countries into an economic role prescribed by the US: namely, to provide markets and raw materials to industrialized countries. This economic lens highlights an important facet of US aggression against countries as diverse as Vietnam, Chile, Iraq, Congo and Guatemala. Even economically negligible countries like Nicaragua, Grenada, Haiti and Cuba have been targeted for insisting that their national resources be used to benefit local populations instead of US corporations, thereby setting a dangerous example for others.

By the 1970s the rebuilt economies of Germany and Japan challenged US economic supremacy. US corporations began looking for cheaper materials, manufacturing and labor, which were available in developing countries, where US-backed governments smashed labor movements, helping to keep production costs down. New technologies made it easier than ever for corporations to move from country to country, setting up shop until some other location became more profitable. This "flexible production" is one hallmark of today's global economy. The other is the emergence of unrestricted worldwide markets in stocks, bonds, currencies and other financial instruments. Governments have little control over these "global capital markets," which have concentrated an unprecedented proportion of the world's resources in the hands of a few corporations. In the last 20 years, corporations have gained control of 70 percent of global trade and become the world's most powerful economic actors.

While worldwide trade and commerce are nothing new, the "global economy" refers to this combination of mobile production and massive international investment in a climate of minimal government interference. This is the macro-economic condition that erodes the wages, living standards, health, social welfare and environments of so many women and families in the US and around the world.

What's So Liberal About Neo-liberalism?

Economic globalization is based on a theory called "neo (or new)-liberalism." The term can be confusing in the US, where "liberal" is associated with left-of-center politics. Economic liberalism, however, holds that minimal government intervention and unrestricted (i.e., "liberal") manufacturing, commerce and trade are the key to economic growth. In theory, this growth is supposed to benefit everyone. (Remember the "trickle-down" promises of Reagan and Bush?) But the theory ignores the class inequalities built into categories like gender, nationality and race, which ensure that not everyone benefits equally from economic "good times." The US, for example, has witnessed astounding profits for large corporations and plummeting wages, job security and working conditions for most people, with women and people of color hit hardest by the "economic boom."

Simply put, Neo-liberalism helps ensure that the world's wealthiest people remain at the top and get richer. This goal is pursued by taking wealth (mostly in the form of wages and social benefits) away from poor and middle-income people worldwide, and reallocating it to the richest (mainly in the form of corporate profits). The trend is visible both within countries (in the US, the percentage of national assets owned by the richest 10 percent has more than doubled in the last 20 years: the top one percent now own more than the bottom 92 percent combined); and between countries (the gap between poor and rich countries has doubled since 1960, with a total transfer of more than $400 billion from 1982 to 1990).

In the US, neo-liberal policies dismantle social welfare systems and force poor women (who are the majority of welfare recipients) into "workfare" programs at below-minimum wages, thereby driving down wages in general. These policies bolster prisons as a for-profit industry and a means of social control, outlaw affirmative action, and in general, discredit the idea that governments have a responsibility for the welfare of their people. Neo-liberalism is also evident in US foreign policy, with Clinton's "trade not aid" prescription for Africa serving as an ideological counterpart to the rhetoric of domestic welfare reform, and nearly all developing countries forced to adopt neo-liberal economic models, based on the doctrine of "free trade."

What's So Free About Free Trade?

Advocates of neo-liberalism say they favor unregulated, or "free," trade. But in reality, all rich countries maintain their advantage through erecting trade barriers and subsidizing industry. US enterprises that are internationally competitive- like agribusiness, pharmaceuticals and high technology- are all heavily subsidized by tax dollars (profits, by contrast, are pocketed by corporate owners). Neo-liberal trade arrangements, like the North American Free Trade Agreement (NAFTA), actually increase protectionist measures in areas where the US has an advantage. In fact, the World Bank reports that these measures cost developing countries twice the amount that they receive in foreign aid. Meanwhile, only developing countries are held to the letter of "free trade" and barred from buffering industry against foreign competition. One way to understand "free trade," then, is as the freedom of industrialized countries to exploit developing economies.

NAFTA, for example, locks Mexico into serving as a market for US agribusiness by setting conditions in which Mexican farmers cannot compete with their US counterparts. As Mexico's chief creditor and trading partner, the US demanded an end to Mexican farm subsidies, while large-scale US farmers each continue to receive an average of $29,000 a year in indirect government aid. Since NAFTA took effect in 1994, US corn and grain has flooded the Mexican market, bankrupting nearly one million Mexican farmers. About 85 percent of the rural labor force has gone from being poor, but getting by, to watching their children go hungry.

The crisis is acute in Chiapas, home to three percent of Mexico's population, but 13 percent of its corn production. NAFTA is the latest in a long history of assaults on the rights and resources of indigenous people in Chiapas. That's why the Zapatistas chose the day of its signing to rise up and demand democratic reform as a basis for economic and racial justice. Some of the loudest calls to crush the rebellion came from US corporations like Chase Bank, which had invested billions in Mexico under NAFTA. In response, the US quickly stepped up training and funding for Mexico's army, which has subjected the people of Chiapas to massacres, rapes and a "scorched earth" campaign that has driven thousands to the brink of starvation. By conditioning rising corporate profits on increased exploitation of the poor in developing countries, neo-liberal policies like NAFTA promise to perpetuate the use of US-backed violence as the last word in securing corporate interests.

In Haiti, trade liberalization and privatization (the sale of government-owned national resources to foreign investors) are the centerpiece of the neo-liberal "development" model. Implemented through the Structural Adjustment Programs of the International Monetary Fund (IMF) and directly through the United States Agency for International Development, these policies have proved much more beneficial to US corporations than to the people of Haiti. Before structural adjustment was imposed in the 1980's, 70 percent of Haitians were peasant farmers. Most of the country's food came from women's small family plots. By now, US imports have almost wiped out local agriculture. Haitian women can no longer feed their families. On a national scale, "food dependency" holds Haiti's government captive to further US demands, like an injunction against raising the minimum wage. A key ingredient of the neo-liberal recipe, "wage repression" is a disaster for Haitians and a boon to the many US assembly plants that have set up shop in Port-au-Prince. These corporations take advantage of a huge reserve of workers, including the tens of thousands of women who were driven off their land by US agribusiness and left with little choice but to accept rock-bottom wages and miserable conditions.

In the singular logic of neo-liberalism, profit is the only measure of economic success. Providing decent jobs at a living wage, respecting the rights of workers to unionize, protecting the environment and ensuring national food supplies are all seen as liabilities for corporations. A major thrust of neo-liberal policies is to limit government "interference" in these matters. So is lifting restrictions on international investment and marketing, which allows corporations to manufacture in low-cost Third World countries and maintain the same access to profitable US markets as if they were producing in New Jersey or Michigan. One result has been a sharp rise in sweatshop models of manufacturing. In Guatemala alone, the number of maquilas (Spanish for sweatshops) has quadrupled since 1994. Like their counterparts in Haiti and elsewhere, workers, 90 percent of whom are young women, endure meager wages and brutal conditions, including sexual abuse and beatings. The Guatemalan government does little to enforce protective labor laws. Officials say that if it did, foreign corporations would simply relocate to a country with even fewer controls.

This problem is emblematic of a global economy where workers, communities and even governments have lost their leverage to demand standards for corporate conduct. The ease with which corporations can now relocate jobs and investment-or simply threaten to do so-gives them a powerful upper hand. This dynamic has helped spark a worldwide downward spiral in labor, social and environmental conditions, as communities and whole countries compete to offer corporations the cheapest deal. Poor countries are most vulnerable to accepting degraded conditions, while US workers suffer plant closings, downsizing, union busting and cuts in benefits. In fact, the rights of workers in all countries are eroded by policies that prioritize corporate profit over people's needs.

Economic Rights are Women's Human Rights

Multinational corporations are able to trample the rights of the world's majority in part because the global arena lacks democratic structures through which people can organize against corporate abuses. At present, the only governing bodies of the global economy are institutions like the IMF, the World Bank and the World Trade Organization, which conduct their operations in secret and impose far-reaching decisions without the consent of communities affected by them. A central challenge of today's progressive movements is to create effective mechanisms to win transparency, accountability and representation for ordinary people in the global economy.

MADRE is part of this emerging effort. MADRE provides women in marginalized communities worldwide with the skills and resources to survive, resist and ultimately transform abusive neo-liberal policies. MADRE's international advocacy enables community-based women to take an active role in creating new, democratic structures in the global arena; and MADRE's public education work in the US promotes alternatives to exploitative economic policies.

The women's human rights movement has taught us the importance of creating international responses to global problems based on women's local experience. The model is crucial in a world where key concerns (unemployment, immigration, environmental destruction, violence, militarization, etc.) are global in reach and more interconnected than ever before. To overcome today's problems, we must replace single-issue politics and purely national solutions with integrated approaches and effective international organizing. This model, which has always been the foundation of MADRE's work, is proving critical in the struggle to defend economic human rights for women and families around the world.

"Everyone has the right to [an adequate] standard of living...including food, clothing, housing, medical care and necessary social services and the right to security in the event of unemployment, sickness, disability, widowhood or old age..." -Article 25 of the Universal Declaration of Human Rights

By Yifat Susskind, Communications Director