This blog began last year by marking the 50th anniversary of a new approach to economic development and poverty reduction. The previous model had sought to copy the pathways of advanced economies, placing emphasis on infrastructure and industrial development. However, this approach failed to kick-start self-generating economic growth. Most people remained outside the formal sector, either as subsistence farmers or part of the quickly rising population of urban informal workers. Whereas the previous model had considered such activities to be a dead end and not worth supporting, the new model specifically encouraged them. The goal was to harness these people’s supposed inherent entrepreneurial energies to enable them to lift themselves out of poverty.
This model is often considered the brainchild of the political right and labelled “neo-liberal”. Indeed some of the responses to the first post associated it with projects such as structural adjustment programs (SAPs) promoted by the IMF and World Bank in the 1980s and 1990s. The problem is that these days “neo-liberal” is an epithet thrown around without any understanding of the true meaning of the term.
Hence, we have taken a detour from the main focus of this blog series to explore what neo-liberalism really means. As subsequent posts have demonstrated, true right-leaning neo-liberalism’s fetish is for the protection of property rights above all others. Although it opposes taxes and regulation of business, market fundamentalism is not its raison d’etre but a means to insulate property owners from democratic politics. Structural adjustment programs and the Good Governance agenda, and the Washington Consensus policy framework upon which they are based, make a fetish out of markets and in doing so contribute to the neo-liberal agenda. All of them share underlying entrepreneurial values, such as competitiveness and self-interest. However, none of them make a fetish out of entrepreneurialism itself. In fact, they barely even mention it.
To understand where the idea of entrepreneurialism as a driver of economic development comes from, we have to look elsewhere. And, confusingly, those who first promoted it also called themselves neo-liberals––in fact, they used that term before it was applied to right-leaning economics after Margaret Thatcher and Ronald Reagan came to power. However, they were using it in the American political context in which liberal refers to the political left and carries the connotation of permissiveness rather than laissez faire. These neo-liberals were the “New Left” in American politics.
Starting in the 1960s, the New Left in the US as well as in Europe emphasized social issues such as civil and political rights, environmentalism, feminism, gay rights, gender roles, and drug policy reforms. A mostly student-led movement, they viewed their parents’ lives under mass industrial capitalism––union membership for the working class or “organization men” for the middle and upper-middle classes––as stultifying. Being part of such large bureaucratic organizations might have provided security and steadily increasing income, but only at great cost to personal freedom.
They rejected all institutions that limited such freedom: not just big business, but also labor unions, the military, and government in general––which now collectively formed “the establishment”. In their view, all of these organizations were run by backroom deal-makers for their own benefit. Corporate Cold War liberalism was, in their eyes, corrupt, warlike, unjust, and suffocating to the human spirit. Their overarching political goal was expressed in the 1962 Port Huron Statement: bypass these gatekeepers in favor of a “participatory democracy” in which citizens are involved individually and directly in political decisions and policies that affect their lives rather than through elected representatives.
The New Left’s overall approach was to reject the ideologies and beliefs of the traditional left and look for solutions across the political spectrum. This philosophical promiscuity married to a conventional political ideology led them to embrace solutions from within the camp of conservatism.
They still maintained the traditional left’s underlying goal of creating a more equal, just, and inclusive society. Only now that goal was to be achieved through individual action rather than through institutions of collective action.
Also like the traditional left, they viewed social and economic problems as having structural causes, and they favored deploying technocratic expertise to solve them. However, their strategy for addressing these problems emphasized economic growth rather than redistribution.
This individualist answer to the government-led collective action of the New Deal was the harbinger of the advent of rights-based over economics-based liberalism. For example, although these left-leaning neo-liberals supported labor rights, they preferred to protect individual workers from discrimination and sexual harassment rather than strengthening labor’s collective negotiating power or expanding union coverage to groups the New Deal had excluded: Black service workers, Latin agricultural workers, and women clerical staff.
At a time of widespread prosperity in the US, at least among white households, the key problems for the new generation were not bread and butter but individual expression and social justice. What they failed to realise was that widespread prosperity had mainly been achieved through those institutions of social democracy, and excluded groups considered access to them an important marker in the path toward social justice. After all, the 1963 March on Washington was for Jobs as well as Freedom, and Martin Luther King’s famous speech was preceded by remarks from the most powerful labor leader in the country.
The New Left offered a different approach, and their ideas started to gain traction at the same time development agencies began to shift toward bottom-up strategies that targeted the poor directly and promoted their individual effort to contribute to improving their own economic conditions. They would soon get a chance to put their ideas into practice.