Neoliberalism, Globalization, Democracy : Challenges for Education

Forthcoming in: Globalisation Societies, Education, July, 2004

Neoliberalism, Globalization, Democracy : Challenges for Education

Mark Olssen

University of Surrey

Neoliberalism is a major obstacle to democracy in that it reduces social regulation and actively frustrates policy initiatives in a number of areas:

• Social policies which protect small scale producers of basic goods, especially foodstuffs;

• Policies to protect jobs and wages of the lowest paid groups;
• Programmes to preserve the stability of communities which markets don’t protect;
• Policies to provide employment directly;
• Policies aimed at protecting the natural environment;
• The expansion of literacy and education or health care programmes which would require a role for the public sector.

The fact that state controls have been shunned throughout the western world over the last quarter of a century has seen a huge escalation of inequality in the distribution of incomes and wealth. MacEwan (1999: 68) cites the United Nations Human Development Report (1992: 34):

Between 1960 and 1989, the countries with the richest 20% of the world population increased their share of the global GNP from 70.2% to 82.7%. The countries with the poorest 20% of the world population saw their share fall from 2.3% to 1.4%. The consequences of income distribution have been dramatic. In 1960, the top 20% received 30 times more than the bottom 20%, but by 1989 they were receiving 60 times more…. Even these figures conceal the true scale of injustice since they are based on comparisons of average per capita incomes of rich and poor countries. In reality, of course, there are wide disparities within each country between rich and poor people.

Castells (1996: 219-20) and Esping-Andersen (1993) also note a growing world trend in income inequality. In addition, as MacEwan (1999: 68-69) points out, growing income inequality reflects the fact that income has been growing more rapidly in rich countries than poor countries. Whether ones bases of comparison is pre-war or post-war, or somewhat later, the conclusion is that there has been a relative deterioration in the countries of the South compared to countries of the North. Although the 1970s provided some minor exceptions to the trend, by the late 1980s “the devastation wrought by the debt crisis and the ‘structural adjustment programmes’ it engendered was dramatic” (1999: 69).

Charles Beitz (1979) maintained a quarter of a century ago that even though interdependence produced absolute gains for most countries in a global polity, evidence still suggested that it widened the income gap between rich and poor countries. From what we can now see about globalisation, this is even more so, and Beitz’s (1979: 146) message is still apt:

Because states have differing factor endowments and varying access to technology, even “free” trade can lead to increasing international distributive inequalities (and, on some views, to absolute as well as relative declines in the well-being of the poorest classes) in the absence of continuing transfers to those least advantaged by international trade.

Neoliberals argue that the logic of globalisation dictates a greater role for markets uninterrupted by government regulatory controls. To embark on direct initiatives to improve wages or prevent poverty would require government intervention (e.g. progressive taxation) which would scare off private investors, who would therefore take capital out of country and scare off foreign investment. Hence, the logic of the global system results in TINA: ‘there is no alternative’.

The view developed here is that there are alternatives to neoliberalism which have more theoretical coherence than the poorly formulated ‘third way’ options. Although neoliberalism has constituted conventional economic dogma in the last 40 years I will argue that it can not be defended solely on economic growth grounds, and more importantly, as we shall see, that it can not be defended on political or educational grounds.

Central to my argument is that economic arguments against neoliberalism are not as important as the political arguments against it. Having said this, there are plenty of writers in recent times who remain steadfastly opposed (MacEwan, 1999; Gerschenkron, 1962, Armstrong, et.al. 1984) on economic grounds. They maintain that the claim that growth and stability result internationally without government constraint or regulation, based as it is in a naïve confidence in the self regulating capacity of markets, is empirically less than self-evident. This claim essentially involves the argument that free trade is a basic operating principle and that economic growth is fastest when the movement of goods, services and capital is unimpeded by government regulations. Invoking arguments drawn originally from David Ricardoconcerning the theory of ‘comparative advantage’[1] the free traders argument is based upon the economic sub-arguments that investment depends on the level of savings, savings rise and fall with the level of income, free trade leads to higher income, which leads to higher savings, higher investment, and higher economic growth. Hence, the free movement of goods and capital is optimal because it increases the prospects for direct foreign investment, and therefore increasesthe availability of foreign funds. But the arguments that the economic growth is possible when regulation is least is deeply flawed. Although neoliberalism allows for the free movement of goods, services and capital, there has not been an equal respect for the free movement of labour across national boundaries. More to the point however, there is compelling evidence that the massive initial growth of the rich G-7 countries[2] has been a result, not of free trade, but of extensive regulation. This is argued by Eric Hobsbawn (1968) in relation to British industry, when he claims that it “could grow up, by and large, in a protected home market until strong enough to demand free entry into other peoples markets, that is: ‘Free Trade’”. MacEwan (1999: 37) also notes that tariff protection also played a large role in the emergence of US industry, claiming that “only after the Second World War, when US industry’s dominant position in the world economy was secure, did a steady and lasting reduction of tariffs take place”.

Even today, there has been a tendency by the richest countries to selectively protect industries at particular times. Those that have achieved major developmental growth since the World War II have also had stronger more regulative control over foreign commerce, with regard to both trade and investment. One of the most notable cases here is Japan who in the post World War II period have consistently rejected free trade and extensive foreign investment in favour of state assisted promotion of its national businesses. Armstrong, et.al. (1984) and MacEwan (1999) document how Japan has protected its industries since the 1950s, starting with the auto industry, applying quotas and very high tariffs in the 1950s and 1960s, almost prohibiting foreign investment, placing regulatory controls on Japanese businesses that imported foreign technology (requiring them to substitute the imported components with Japanese copies within a certain time frame). Similarly the Japanese computer industry has been protected in more recent times.

South Korea too has adopted similar protectionist policies to Japan protecting its domestic markets since the 1960s, favouring Korean owned firms and using state industries and agencies to assist with national production goals, using ‘credit policies’, ‘price controls’ to protect industrial development (Hart-Landsberg, 1993; Amsden, 1989). Countries like South Korea and Taiwan have avoided foreign direct investment and writers like Peter Evans (1987) claim that the relationship between foreign direct investment and economic growth suggest a negative correlation. Other noted economists (Krugman, 1986; Helpman and Krugman, 1985; Stewart, 1986) have also argued that a free trade argument cannot be supported on purely economic grounds.

The globalisation thesis also ignores the persistence and likely increasing importance of the nation state and their crucial role of governments in influencing the structure and dynamics of the new international economy (Carnoy, et.al., 1993). On this point, we can agree with Stephen Cohen (1990) that the international economy is not truly global in the way that has sometimes being represented. Not only are markets far from fully integrated, but capital flows are restricted by banking and currency regulations, the mobility of labour is undermined by immigration controls, and multinationals must still base their operations in their ‘home’ countries. In this sense market openness is far from reciprocal. Although America and Europe have become relatively open markets for trade and foreign direct investment, many economies, including the Japanese, Korean, Taiwanese, Indian and Russian (Castells, 1996: 98-99) have maintained a high degree of protection.

Central to the view I am arguing here is that state regulation is today crucial for the global economy, and for democracy in the world. While my argument here supports a strong state, it is maintained that individual states must be regulated by global networks of democratically constituted international agencies. Because education and skills are crucial for the global economy, and for the mass labour force, it is imperative that states support educational development. When institutions of civil society are weak so civic stability and authority are undermined. Even accepting a new level of economic interdependence between nations, and a shift from postindustrialism to the informational society, unless we are to lapse into a form of technological determinism, we must still see the capacity of individual nation states, both individually and in blocks, to resist the pressures of international capital and the agencies of neo-liberal control. A number of things make education pivotal here. If nations are going to compete in the global market place, then:

• the generation and production off added value will be crucial;
• to add value will require the generation and production of knowledge and skills;
• the nation-state will progressively need to offset the destabilizing effects of capital in order to guarantee these resources.

In this context the welfare state become decisive productive force because (a) it contributes to added value, economically, (b) it insures the social conditions of existence; and (c) it enhances cultural capacity. In this sense, the state cannot be seen as merely a redistributive agency, or as unproductive. Although, as Castells (1999: 54) notes, states become players in the global economy, they have, as always, the potential for national agency on the basis of the defense of the specific national interests they represent. The function of the state is to construct a new welfare state that underpins, i.e., stabilises and insures the social conditions of existence for the citizenry. This can be described as a non-bureaucratic welfare state.

The difference between this conception of a welfare state and traditional Keynesian conceptions is important here. There is no reason why a revised welfare state should be statist or overly centralised. The development of forms of `associational socialism' (Cohen and Rogers, 1995; Hirst, 1995) or of decentralised democratic social democracy (Bobbio, 1987) have called for radical, democratic alternatives based on citizenship, parliamentary democracy, the rule of law, the strengthening of the institutions of civil society and liberal democracy, as well as decentralisation. This model of radical democratic community has much to teach welfare liberals who have traditionally supported the institutions of liberal democracy. Essentially, the future for a revived welfare state lies in its commitment to democratisation through new limited forms of decentralisation, citizenship, participation and the separation of powers. Such commitments can also, under certain circumstances, imply the extension of democracy from the polity to the economy and to civil society. This model of welfare democracy supports the strengthening of the institutions of civil society, from student and citizen involvement in schools and public services, to consumer representatives on the boards of large business enterprises, to new radical, pluralist, decentralised and participatory forms of democracy.

This constitutes a different response to the crisis of the state than does neo-liberalism. Rather than abandon ideas of the common good and of collectivism, this response to statism is not to abandon the state in preference for individual self-reliance, radical forms of decentralisation, or to abandon public goods in favour of privatisation and markets, but rather to bring them under greater democratic control. This might conceivably mean then any or all of the following:

1. Decentralise state powers into civil society but maintain ultimate state regulation and control. The state’s function becomes an ‘ethical’ function of ensuring democratic justice, including the equal distribution of resources and capabilities, as well as the existence and maintenance of democratic processes.
2. Strengthen controls and checks of central government over employers and all corporate actors in terms of the functions named in point (1) above. Reciprocally, strengthen the controls and checks of the associations of civil society over government. As all that can make the state legitimate is its democratic mandate, to frustrate or disregard due democratic procedure or contestation is to call its own legitimacy into question.
3. Promote a more active role for citizenry. Although this would emphasise participation to a greater extent than post Schumpeterian realist conceptions, it would not put a requirement of classical forms of participation of citizens within voluntary associations. Rather, participation would be increased partly through more direct reliable communications with the citizenry over issues of concern. New forms of communications technology offer new possibilities for both communications and dialogue between leaders, institutions, the state and the citizenry.

The acceptance of limited forms of devolution and associational control is advocated on the grounds of democracy, not economic efficiency. Controls on government can be extended through legal and constitutional safeguards, through extending the separation and devolution of state powers, through promoting a vibrant civil society, increasing the number and strength of counteracting centres of power to the state, and promoting a strong role for independent associations. None of these undermine or erode the state’s in maintaining social justice including the equitable distribution of resources and capabilities within society. Activities of specific individuals or groups of individuals will only be restrained to the extent they conflict with the rights of other individuals or with certain democratically negotiated public goods.

In Britain, Paul Hirst (1995, 2000a) is one recent author who has advocated a theory of associational democracy utilising a Durkheimian emphasis on democracy as a two-way communication between governors and governed, centering on the state and corporativist occupational groups in the polity. At the basis of making democracy more effective in an increasingly fragmented society, Hirst advocates an associative democracy model which involves devolving many state functions to society while retaining public funding and central control. Such a conception contributes to a model of a revised welfare state.

In Hirst’s account, “associative self-governance” would establish democratic legitimacy to organisations, reduce the need for external governance, and make possible radical administrative decentralisation. Rather than privatisation, Hirst advocates devolved service provision to self-governing voluntary associations which are governed by constitutional democratic rules of the society. Organisations would receive public funds proportionate to membership for providing public services. Options of voice and exit could still apply. Efficiency measures such as limited use of ‘user-pays’ to steer public policy could still be used without accepting limitations on the size of the public sector, or ideological commitments to increased privatisation. While such proposals would make radical decentralisation possible, effectively removing many tasks from central government, and while market technologies could be used as ‘tools’ if effective and fair, overall participation would not be dependent on ability to pay[3]. In this sense, says Hirst (2000a: 29-30), associational self-government would extend representative democracy rather than replace it, and “national democracy would be… strengthened and made viable by a democratized civil society”. This would not only turn state organisations from top-down state administered bureaucracies into democratically self-governing associations, thus separating service provision from supervision, but such associations would check the power of other corporate entities, including the state. In Hirst’s view, such a model of associative democracy is neither statist nor laissez-faire. It confronts fragmentation via democratization.

The model of a decentralised welfare society advanced here is compatible with the notion of community, which has been advocated as the basis of a revived welfare state since the 1970s (Le Grand, 1982; Joppke, 1987). The model is compatible too with Peters and Marshall's notion of an empowerment community which they argue is consistent with a genuine state of participatory democracy (Peters and Marshall, 1988a, 1988b, 1988c, 1988d, 1988e, 1990). Such a notion of community embodies the strengthening of the institutions of civil society and an increase for the possibilities for democratic participation. There is nothing inherently wrong with arguments for devolution of authority to schools or other community agencies. Such a devolution must be accompanied however, by theories of participatory structures that are genuinely democratic. My argument here is that devolution promotes a greater separation of powers, and thus strengthens democracy. This would entail moves towards a more responsive, community-based, service delivery welfare state which might involve power sharing, devolution, as well as forms of community-based public ownership of business enterprises (along the lines in New Zealand of the Trustee Savings Banks, prior to 1990s, for example)[4]. Such a conception is consistent with those that advocate a conceptual shift from the notion of a `welfare state' to that of a `welfare society' in which family, voluntary societies, local bodies, trade unions and employers play a greater role (Davey and Dwyer, 1984). It is a welfare state which is sensitive to institutional abuses of power, which is committed to the twin goals of full employment and equality of opportunity as well as to universal welfare entitlements and Keynesian demand management. It is a welfare state which constitutes a viable alternative to the bureaucratic welfare state. In Joppke's words (1987: 250), "it pursues the egalitarian project of a non-bureaucratic decentralized and self-reliant welfare society". Consistent with Peters and Marshall's `empowerment community', it is based on the values which encourage and promote cooperative rather than competitive behaviour and which make for a sense of cohesion and community. As Peters and Marshall (1990: 81) put it: