Globalisation, market fundamentalism & the fall of communism.

John Menadue

Courtesy of his blog.

Globalisation and open trade have brought great benefits to the world. But not for everyone.

The political and economic order built from of the ruins of WWII is now under challenge, with an ominous retreat into protectionism and xenophobia. We have seen it in Brexit, with working people feeling left behind and blaming foreigners for their problems.

In the US, we are seeing the near collapse of the political and social structure with the rise of Donald Trump, who appeals to protectionist instincts and wants to build walls to keep foreigners out and break trade agreements to keep imports out. It is remarkable to see the US, the ‘leader of the free world’, paying such a heavy price for the extremism of the Tea Party – disgruntled conservatives and working people – with their prejudices fed by Murdoch’s Fox Media.

In France, the extreme Right, with its xenophobia, is within striking distance of the French Presidency.

In Australia, we have the Hansonites blaming Muslims, and the populist Xenophons calling for increased protectionism.


Money Corruption Wall Street Lobbying. Image created for display at Democracy Chronicles. Democracy Chronicles. flickr cc.

The achievements of globalisation, liberalism, and openness are under attack. It is important that liberals and reformers demonstrate that the benefits of globalism and openness must continue, but that globalisation must work for all, and not just enrich the few.

The gathering storm really began with the fall of the Berlin Wall and the end of communism. The wealthy and the privileged were restrained by the threat of working people seizing power in some way. But with the fall of communism, market fundamentalists and the wealthy now show decreasing restraint in asserting their power and privilege.

In this blog on 5 November 2015, I drew attention to an article by the Economics Editor of The Guardian, Larry Elliott. In that article, Elliott said, “As the Berlin Wall fell, checks on capitalism crumbled”. The principal thesis of that article was that, with the end of communism, capitalism became increasingly aggressive and lost inhibitions. He said:

The fear that workers would ‘go red’ meant that they had to be kept happy. The proceeds of growth were shared. Welfare benefits were generous. Investment in public infrastructure was high. But there was no need to be so generous once the Soviet Union was no more. What was known as neoliberal economics was born in the 1970s, but it was not until the 1990s that market forces reigned supreme. The free market spread to poo parts of the world where it has previously been off-limits, expanding the global workforce. That meant reduction in the cost of goods, but it also put downward pressure on wages. What’s more, there was no longer any need to be inhibited. Those running companies could take an increased slice of profits because there was nowhere else for workers to go. If its citizens did not like ‘reform’ of welfare states, they just had to lump it.

This is not a new thesis, but it is becoming increasingly urgent as a result of growing inequality.

Inequality is becoming increasingly entrenched and apparent as we see the massive scale of tax avoidance by large multinational companies like Google, Westfields, Apple, Amazon, Ikea, News Corp, Glencore/Xstrada, and hundreds of others. Taxes which we pay to maintain a civilised society are becoming optional for the wealthy and powerful.

There is widespread evidence that, with the end of communism and the fall of the Berlin Wall 25 years ago, capitalism has become less restrained, and more aggressive than ever Neoliberal theorists told us that, if the rich had increased money through tax reductions and other benefits, they would increase investment and the poor would receive the ‘trickle down’ benefits. This has not happened.

There is growing concern across the world about the rise of inequality and the destructive social and economic consequences. Thomas Piketty in his book Capital in the Twenty First Century draws attention to the long-term trend towards increasing inequality. This book is terrifying conservatives. Inequality has become a major issue in the US, where the process began with Ronald Reagan and his neoliberal supporters.

Alan Kohler, in the Business Spectator, points out that “rising inequality began in the 1980s, and was the direct result of Reaganomics and its pursuit of tax breaks for the rich”. Reagan also set about quite deliberately to cripple the trade unions. This crippling of the trade unions and the tax benefits for the rich in the US have bought enormous benefits for the wealthy and a major skewing of income, with disastrous effects on the economy and political life, whereby wealthy vested interests can, in effect, buy governments. Even Rupert Murdoch has shown his concern by hopping on the bandwagon about growing inequality. But his concern is not convincing when we know that in 2015-16 Rupert, James, and Lachlan Murdoch paid themselves a combined $A111 m from 21st Century Fox , with more to come from News Corp.

Maggie Thatcher followed suit in the UK. She said there was no such thing as society, only individuals and markets. This has culminated in what the Governor of the Bank of England said in May this year that “capitalism is at risk of destroying itself and that bankers have an obligation to create a fair society”. He added, “the basic social contract at the heart of capitalism was breaking down with rising inequality” He warned “my core point is that, just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential to the long-term dynamism of capitalism itself… Capitalism loses its sense of moderation when the belief in the power of the market enters the realm of faith”.

The neoliberals present their case in terms of how they favour an open and competitive market, when in practice a major objective is to favour capital against labour and the community. In Australia, market-based approaches to climate change through carbon taxes or an emissions trading scheme are rejected in favour of government handouts to polluters. Vested interests are able to bring influence or buy governments in a way not possible 25 years ago before communism collapsed.

We have seen rapacious banks, with their obscene executive salaries, bringing the world economy to its knees in the global financial crisis.

In Australia, we have a government which speaks about ending the age of entitlement, but seems determined to extend the benefits of the privileged. We had a Royal Commission allegedly about trade union corruption, while the real agenda was to cripple the trade unions, the strongest countervailing force for justice in the Australian economy and society. The CFMEU is fair game, but not the much more culpable and gloating Commonwealth Bank.

There is a view by the present government, as the Liberal Party platform says, “that only businesses and individuals are the creators of wealth and employment”. It sees government as a burden, rather than as a contributor to the common wealth.

There is a danger that the increasingly unrestrained power of capital and big business legitimises destructive social divisions, encouraging people to separate themselves from society in physical or metaphorical gated communities such as schools and hospitals. It allows the connection between contributions to be severed. It encourages rent-seeking, speculation, and protection of privilege, rather than productive investment. Increasingly, companies in Australia are paying large amounts in dividends, buying back shares, and sitting on idle cash, rather than investing in the future of the Australian economy and Australian jobs. There are not many ‘trickle-down’ benefits in all of this. But Malcolm Turnbull persists with his ‘Economic Plan’, with large company tax cuts.

The fall of communism has emboldened the exponents of capitalism. There is a continual assertion of the importance of business over and against society and the community. Attacks on trade unions, such as we see in Australia, are part of the increasing insolence of the powerful.


Pope Francis. Gwydion M Williams. flickr cc.

Pope Francis is one clarion voice saying that business and the market must be underpinned by morality. He has challenged market fundamentalists who hawk ‘trickle-down’ theories, calling them naive. He has denounced the new tyranny of unfettered capitalism, and calls inequality “the root of social evil”. He is a lonely voice at the moment.

The fall of communism is proving to be a great boon for the powerful at the expense of the powerless. The restraints on the powerful are crumbling.

Posted by on Oct 29 2016. Filed under Economic issues, Recent articles by SPC members. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

1 Comment for “Globalisation, market fundamentalism & the fall of communism.”

  1. Thanks John Menadue for giving us a succinct summary of the historical antecedents leading to the current ‘worship’ of neo-liberal economic fundamentalism e.g. the fall of the Soviet Union and the Berlin Wall.

    Also illuminating is the rare insight of a key official immersed in the prevailing hegemony of neo-liberal market dogma – the Governor of the Bank of England. I was truly amazed to see that the Governor recently (April 2016) sensed “capitalism is at risk of destroying itself . . . . unchecked market fundamentalism can devour the social capital essential to the long-term dynamism of capitalism itself “. There is more of this healthy self-doubt around now, in late 2016, after Brexit and the Trump victory in the US, and anticipated victories of demagogue candidates in European elections in 2017. The self-destruction inherent in the idolatry of neo-liberal market capitalism is thankfully starting to dawn on more and more people.

    What the world really needs now however, is the equivalent of a Brexit or Trump to create similar self-doubt around neo-liberal economic fundamentalism and environmental destruction. That’s because, the Bank of England Governor might just as well have said: ” capitalism is at risk of destroying life on earth. . . . unchecked market fundamentalism can devour the natural capital essential to the long-term dynamism of life itself “.

    This is borne out in the recent book by Australian academics Wright and Nyberg entitled “Climate Change, Capitalism and Corporations – processes of creative self-destruction”. The authors document their 7 years of research demonstrating widespread hubris and self delusion amongst corporate leaders that corporations and markets will themselves solve the climate crisis. The authors label this “the myth of corporate omnipotence” and go on to say “the tragedy is that . . . .businesses have created a ‘fantasy’ of sustainability that suggests markets, innovation, and technology will solve climate change, thereby obscuring the phenomenon of creative self-destruction” (p.44). Note here, the ‘self-destruction’ Wright and Nyberg have in mind, is not referring just to corporations themselves, neither it the self-destruction referring to the capitalist eco-political system. Rather, this reference to self-destruction is to the very bio-sphere upon which all life on the planet depends.

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