I had many lessons from the Battle of Seattle, and one of them is that policewomen can deal it out as good as any policeman. I got beaten up, badly but obviously not fatally by one of Seattle’s Best. Yesterday, I decided go down memory lane and visit the scene of the crime. I remember seeing Medea Benjamin of Code Pink being treated fairly roughly and I rushed forward to try to get the police to stop it. At that point, a policewoman rushed me and started beating me with her baton while dragging me and dumping me on the street, with the coup de grace being a well planted kick to my derriere. But that was not the biggest blow of all. The biggest was to my ego: I was beaten and kicked but was seen as not fit to be arrested.
Like Caesar, I will divide my talk into three parts. First, some reflections on the meaning of Seattle for change in knowledge systems. Second, a discussion of how despite the deep crisis of neoliberalism, finance capital has managed to retain tremendous power. Third, an appeal for a new comprehensive vision of the desirable society.
Seattle and the Crisis of Neoliberalism
We are all familiar with Thomas Kuhn’s theory of how change takes place in the physical sciences. Dissonant data can no longer be accommodated in the old paradigm until someone comes out with a new one where they can be explained. Social scientists have appropriated Kuhn in their efforts to explain the displacement and replacement of hegemonic thinking in politics, economics, and sociology. I think that while, as in the case of the displacement of Keynesianism in the late seventies and of the rational choice and efficient market hypothesis during the recent financial crisis, the role of dissonant data has been exhaustively studied, explanations of change in knowledge systems have failed to adequately take into account the role of collective action.
The Battle of Seattle underlines in my view the very critical, if not decisive role of collective mass action in displacing knowledge systems. Let me explain.
It is now generally accepted that globalization has been a failure in terms of delivering on its triple promise of lifting countries from stagnation, eliminating poverty, and reducing inequality. The ongoing global economic crisis, which is rooted in corporate-driven globalization and financial liberalization, has driven the last nail into the ideology of neoliberalism.
But things were very different over two decades ago. I still remember the note of triumphalism surrounding the first ministerial meeting of the World Trade Organization in Singapore in November 1996. There, we were told by representatives of the U.S. and other developed countries that corporate-driven globalization was inevitable, that it was the wave of the future, and that the sole remaining task was to make the policies of the World Bank, International Monetary Fund, and the WTO more “coherent” in order to more swiftly get to the neoliberal utopia of an integrated global economy.
Indeed, the momentum of globalization seemed to sweep everything in front of it, including the truth. In the decade prior to Seattle, there were a lot of studies, including United Nations reports, that questioned the claim that globalization and free market policies were leading to sustained growth and prosperity. Indeed, the data showed that globalization and pro-market policies were promoting more inequality and more poverty and consolidating economic stagnation, especially in the global South. However, these figures remained “factoids” rather than facts in the eyes of academics, the press, and policymakers, who dutifully repeated the neoliberal mantra that economic liberalization promoted growth and prosperity. The orthodox view, repeated ad nauseam in the classroom, the media, and policy circles was that the critics of globalization were modern-day incarnations of Luddites or, as Thomas Friedman disdainfully branded us, believers in a flat earth.
Then came Seattle in 1999. After those tumultuous days in this city, the press began to talk about the “dark side of globalization,” about the inequalities and poverty being created by globalization. After that, we had the spectacular defections from the camp of neoliberal globalization, such as those of the financier George Soros, the Nobel laureate Joseph Stiglitz, and the star economist Jeffery Sachs. The intellectual retreat from globalization probably reached its high point of sorts in 2007 in a comprehensive report by a panel of neoclassical economists headed by Princeton’s Angus Deaton and former IMF chief economist Ken Rogoff, which sternly asserted that the World Bank Research Department—the source of most assertions that globalization and trade liberalization were leading to lower rates of poverty, sustained economic growth, and less inequality—had been deliberately distorting the data and/or making unwarranted claims.
True, neoliberalism continues to be the default discourse among many economists and technocrats. But even before the recent global financial collapse, it had already lost much of its credibility and legitimacy. What made the difference? Not so much research or debate but action. It took the anti-globalization actions of masses of people in the streets of Seattle, which interacted in synergistic fashion with the resistance of developing country representatives here in the Sheraton Convention Center and a police riot, to bring about the spectacular collapse of a WTO ministerial meeting and translate those factoids into facts, into truth. And the intellectual debacle inflicted on globalization by Seattle had very real consequences. Today, the Economist, the prime avatar of neoliberal globalization, admits that the “integration of the world economy is in retreat on almost every front,” and a process of “deglobalization” that it once considered unthinkable is actually unfolding.
Seattle was what Hegel called a “world-historic event.” Its enduring lesson is that truth is not just out there, existing objectively and eternally. Truth is completed, made real, and ratified by action. In Seattle, ordinary women and men made truth real with collective action that discredited an intellectual paradigm that had served as the ideological warden of corporate control.
I would not say that neoliberalism was defeated in Seattle. But, to use a war metaphor, Seattle was certainly the Stalingrad of neoliberalism. It would take another decade before it would be definitively rolled back, and it took the global financial crisis to do this, with its sweeping away of the Rational Choice Theory and the Efficient Markets hypothesis that had been the cutting edge of the globalization of finance.
Finance Capital’s Persistent Structural Power
But the rollback of the neoliberal paradigm is only half the story. Even with its ideational crisis, the forces of global capital have waged a fierce rearguard battle. As an example of this let me just take the case of finance capital’s successful effort to resist any change in the face of the naked necessity and social consensus for comprehensive reform.
When the ground from under Wall Street opened up in autumn 2008, there was much talk of letting the banks get their just desserts, jailing the “banksters”, and imposing draconian regulation. The newly elected Barack Obama came to power promising banking reform, warning Wall Street, “My administration is the only thing that stands between you and the pitchforks”.
Yet nearly eight years after the outbreak of the global financial crisis, it is evident that those who were responsible for bringing it about have managed to go completely scot-free. Not only that, they have been able to get governments to stick the costs of the crisis and the burden of the recovery on their victims.
How did they succeed? The first line of defense for the banks was to get the government to rescue the banks from the financial mess they had created. The banks flatly refused Washington’s pressure on them to mount a collective defense with their own resources. Using the massive collapse of stock prices triggered by Lehman Brothers going under, finance capital’s representatives were able to blackmail both liberals and the far-right in Congress to approve the US$700 billion Troubled Asset Relief Program (TARP). Nationalization of the banks was dismissed as being inconsistent with “American” values.
Then by engaging in the defensive anti-regulatory war that they had mastered in Congress over decades, the banks were able, in 2009 and 2010, to gut the Dodd–Frank Wall Street Reform and Consumer Protection Act of three key items that were seen as necessary for genuine reform: downsizing the banks; institutionally separating commercial from investment banking; and banning most derivatives and effectively regulating the so-called “shadow banking system” that had brought on the crisis.
They did this by using what Cornelia Woll termed finance capital’s “structural power”. One dimension of this power was the US$344 million the industry spent lobbying the U.S. Congress in the first nine months of 2009, when legislators were taking up financial reform. Senator Chris Dodd, the chairman of the Senate Banking Committee, alone received US$2.8 million in contributions from Wall Street in 2007–2008. But perhaps equally powerful as Wall Street’s entrenched congressional lobby were powerful voices in the new Obama Administration who were sympathetic to the bankers, notably Treasury Secretary Tim Geithner and Council of Economic Advisors’ head Larry Summers, both of whom had served as close associates of Robert Rubin, who had successive incarnations as co-chairman of Goldman Sachs, Bill Clinton’s Treasury chief, and chairman and senior counsellor of Citigroup.
Finally, the financial sector succeeded by hitching the defense of its interests to one of the few remaining resonant assumptions of an otherwise crumbling neoliberal ideology: that the state is the source of all things bad that happens in the economy. While benefiting from the government bailout, Wall Street was able to change the narrative about the causes of the financial crisis, throwing the blame entirely on the state.
This is best illustrated in the case of Europe. As in the U.S., the financial crisis in Europe was a supply-driven crisis, as the big European banks sought high-profit, quick-return substitutes for the low returns on investment in industry and agriculture, such as real-estate lending and speculation in financial derivatives, or placed their surplus funds in high-yield bonds sold by governments. Indeed, in their drive to raise more and more profits from lending to governments, local banks, and property developers, Europe’s banks poured US$2.5 trillion into Ireland, Greece, Portugal and Spain.
The result was that Greece’s debt-to-GDP ratio rose to 148 percent in 2010, bringing the country to the brink of a sovereign debt crisis. Focused on protecting the banks, the European authorities’ approach to stabilizing Greece’s finances was not to penalize the creditors for irresponsible lending but to get citizens to shoulder all the costs of adjustment.
The changed narrative, focusing on the “profligate state” rather than unregulated private finance as the cause of the financial crisis, quickly made its way to the USA, where it was used not only to derail real banking reform but also to prevent the enactment of an effective stimulus programme in 2010. Christina Romer, the former head of Barack Obama’s Council of Economic Advisers, estimated that it would take a US$1.8 trillion to reverse the recession. Obama approved only less than half, or US$787 billion, placating the Republican opposition but preventing an early recovery. Thus the cost of the follies of Wall Street fell not on banks but on ordinary Americans, with the unemployed reaching nearly 10 percent of the workforce in 2011 and youth unemployment reaching over 20 percent.
The triumph of Wall Street in reversing the popular surge against it following the outbreak of the financial crisis is evident in the run-up to the 2016 presidential elections. The U.S. statistics are clear: 95 percent of income gains from 2009 to 2012 went to the top 1 percent; median income was US$4,000 lower in 2014 than in 2000; concentration of financial assets increased after 2009, with the four largest banks owning assets that came to nearly 50 percent of GDP. Yet regulating Wall Street has not been an issue in the Republican primary debates while in the Democratic debates, it has been a side issue, despite the valiant efforts of candidate Bernie Sanders to make it the centerpiece.