Paper presented at the Conference ‘After the Gold Rush: Economic Crisis and Consequences’, University of Iceland, Reykjavik, 27-28 May 2010. ABSTRACT. The paper argues that the current global capitalist crisis entails an assault on democracy. Since crisis connotes danger and opportunity, the recent crisis appears to be a danger to democracy but an opportunity to its antithetical ideals. At the international level, multilateral institutions have seized the moment to reaffirm the perpetuation of the discursive and structural hegemony of neoliberalism. In East and Southeast Asia, states and regional organisations have revived arguments for the institutional justification of authoritarian liberalism in the region. And in the US and Europe, attempts at restoring nationalism are gaining ground. The global crisis provides the momentum for—but not the sole cause of—the intensification of these counter-democratisation movements and tendencies.

1. THE GLOBAL CRISIS
AND THE
ASSAULT ON DEMOCRACY
Bonn Juego & Johannes Dragsbaek Schmidt
Research Centre on Development and International Relations
Aalborg University, Denmark
E-mails: bonn@ihis.aau.dk & jds@ihis.aau.dk
Presentation for the Conference
After the Gold Rush
University of Iceland, Reykjavik
28 May 2010
1

2. CONTENTS and ARGUMENT
“THE GLOBAL CRISIS ENTAILS AN ASSAULT ON DEMOCRACY.”
I. Reaffirming NEOLIBERALISM
• Profits over people, markets over societies
– The World Bank, IMF and their G-20 allies
II. Reviving AUTHORITARIAN LIBERALISM
• Authoritarian polity, Liberal market economy
– East and Southeast Asian states, ASEAN, Asian Development Bank
III. Restoring NATIONALISM
• Nationalist, protectionist, colonialist political and economic policies (xenophobia; anti-
foreign sentiment, anti-migrant sentiments, Islamophobia)
Islamophobia)
– US and European Union
2

3. (1) Reaffirming NEO-LIBERALISM
• Neo-liberal values: well-being of the financial institutions over well-
being of the people
• Crisis is functional, rather than dysfunctional, to neo-
liberalism.
• Constitutive Role of Crisis in Neo-liberalism
 Born out of crises
 Evolved through crises
 Died of crises???
3

4. NEO-LIBERALISM WAS BORN OUT OF CRISES
Complex interaction of forces/events/phenomena...
...Mutually reinforcing tendencies
 recession in the developed capitalist economies after 1973, the OPEC oil crisis, and the
collapse of the Bretton Woods system
 de-linking from the ‘gold standard’
 internationalisation of financial markets as a result of the widespread abandonment of
exchange controls
 the massive increase in foreign bank lending to the Third World as consequence of the
recession in the major economies
 the growing stagnation of command economies
 the shift from import substitution in favour of export promotion in the Third World and
the rise of the NICs in East Asia
 the imposition of structural adjustment programmes (SAPs) on the heavily-indebted
Third World as conditionality attached to rolling over foreign debt
 the restructuring of global production towards ‘post-Fordism’ and the growth of MNCs‫‏‬
 the revolution in macroeconomic policy that resulted in the weakening of trade unions,
the cutting of state budgets, deregulation, privatisation, etc.
 the advances in ICT (as the new ‘techno-economic paradigm’)‫‏‬
 Etc....
4

5. NEO-LIBERALISM HAS EVOLVED THROUGH CRISES
From crisis to crisis in the last 35 years....
• National Developmentalism (postwar-1970s)
– Crisis of Fordism/Keynesianism (stagflation)
• Washington Consensus – 1st Generation Neoliberal reforms (1980s –
mid-1990s)
– Crisis of market fundamentalism of the Washington Consensus — ‘East
Asian Miracle’ (8 HPAEs showing high growth and high equity with state
intervention)
• Post-Washington Consensus – 2nd Generation reforms (mid-1990s -
2009)
– Multiple, interdependent, interrelated crises: financial crises,
overaccumulation, overproduction, over-/under-consumption, climate
change, ecological degradation, political legitimacy, global governance
crisis, oil crisis, food price crisis, subprime crisis
5

6. NEO-LIBERALISM HAS DIED OF CRISES (???)
Multiple Crises:
RIP Neo-liberalism (1980s-2008)
• Is neo-liberalism dead?
 Depends on what we mean by ‘neo-liberalism’....
• The neo-liberal form (i.e., market fundamentalism)
is dead;
 But not the substance of capitalism as a:
 process of capital accumulation;
 relations in which labour is subordinated to capital
6

7. Neo-liberalism: A strategy for market-led
development, A blueprint for crisis management
– Debt crisis in Latin America (1982)
 Crisis Response: SAPs
– Financial Crises: Scandinavia (early 1990s); Mexico (1994); East and Southeast Asia
(1997); Russia (1998); Argentina (2001); Turkey (2001-02); US Subprime
mortgage (2007-2009)
 Crisis response: ‘open’ international financial architecture
– US subprime crisis (2007-09)
 Crisis response: Bush-Paulson-Bernanke-Obama Bailout Programme (restore
power of corporations; assure ascendancy of finance capital)
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8. Demise of the Multilaterals?!?
“Never again” became the slogan of a number of the affected
governments. The Thaksin government in Thailand declared ist
“financial independence” from the IMF after paying off its debts in
2003, vowing never to return to the Fund. Indonesia has said it will
pay off all its debts to the IMF by 2008. The Philippines has refrained
from contracting new loans from the Fund, while Malaysia defied it by
imposing capital controls at the height of the crisis.
Ironically, then, the IMF has become one of the key victims of the 1997 debacle.
This arrogant institution of some 1,000 elite economists never recovered from
the severe crisis of legitimacy and credibility that overtook it—a crisis that was
deepened by the bankruptcy of its star pupil Argentina in 2002. In 2006, Brazil
and Argentina, following Thailand’s example, paid off all their debts to the
Fund in order to achieve financial independence. Then Hugo Chavez let the
other shoe drop by announcing that Venezuela would leave the IMF and the
World Bank. This boycott by its biggest borrowers has translated into a budget
crisis for the IMF.”
—Walden Bello (30 July 2007), “All Fall Down”,
in Foreign Policy In Focus
8

9. The World Bank, IMF and their G-20 allies:
Using the global crisis to their advantage....
G-20: IMF is back!
Dominique Strauss-Kahn, Managing Director of the IMF, G-20 Press Conference, 2 April 2009
“Maybe some of you were in the IMF press
conference at the end of the Annual
Meeting last October. And if some of you were there,
then you may remember
that what I said at that time is that IMF is back.
Today you get the proof when
you read the communiqué, each paragraph, or
almost each paragraph – let's
say the important ones – are in one way or another
related to IMF work.”
9

10. WORLD BANK: Exactly the same global neo-liberal project!
World Bank, Global Monitoring Report 2009: A Development Emergency, p. xii.
The report sets out six priority areas for action to confront the development emergency that now faces
many of these countries. First, we must ensure an adequate fiscal response in developing countries to
protect the poor and vulnerable groups and to support economic growth. Priority areas must be
strengthening social safety nets and protecting infrastructure programs that can create jobs while
building a foundation for future productivity and growth. The precise fiscal response needs to be tailored
to individual country circumstances, consistent with maintenance of macroeconomic stability. Second,
we must provide support for the private sector and improve the climate for recovery and growth in
private investment, including paying special attention to strengthening financial systems. Helping small
and medium enterprises get access to finance for trade and investment is vital for job creation. But the
crisis has also underscored the importance of broader reforms to improve the stability and soundness of
the financial system. Third, we must redouble efforts in human development and recover lost ground in
progress toward the MDGs. We can do this not only by strengthening key public programs for health
and education, but also by better leveraging the private sector’s role in the financing and delivery of
services.
In support of these efforts to help developing countries, the report emphasizes three key global
priorities. Donors must deliver on their commitments to increase aid. Indeed, the increased needs of
poor countries hit hard by the crisis call for going beyond existing commitments. National governments
must hold firm against rising protectionist pressures and maintain an open international trade and
finance system. Completing the Doha negotiations expeditiously would provide a much-needed boost in
confidence to the global economy at a time of high stress and uncertainty. Finally, multilateral
institutions must have the mandate, resources, and instruments to support an effective global response
to the global crisis. The international financial institutions will need to play a key role in bridging the
large financing gap for developing countries resulting from the slump in private capital flows, including
using their leverage ability to help revive private flows.
Source: World Bank, Global Monitoring Report 2009: A Development Emergency, p. xii.
10

11. World Bank President Robert Zoellick (31 March 2009, prior to the G-20
Meeting): New Powers for the Multilaterals!
• “a WTO monitoring system to advance trade and resist
economic isolationism, while working to complete the Doha
negotiations to open markets, cut subsidies, and resist
backsliding”;
• “a monitoring role for the IMF, to review the execution of ..
stimulus packages and assess results, calling for further
action if necessary”;
• IMF and World Bank Group monitoring of actions and
results in the banking sector, with financial sector
assessments to be extended to developed countries, “with
the results published, taken seriously, and followed up”;
• an overhaul of the financial regulatory and supervisory
system” in which “most of the actual authority over
regulation will rest with national governments”, but within
which an expanded FSF [Financial Stability Forum] “could
become another important institution of a stronger
multilateral system, working with the IMF and the World
Bank group on implementation”
11

12. IMF: ‘An opportunity to make progress on seemingly intractable issues’
IMF (February 2009), Initial Lessons of the Crisis for the Global Architecture and the IMF
Bottom line. The crisis has revealed flaws in key dimensions of
the current global architecture, but also provides a unique
opportunity to fix them. On the flaws, surveillance needs to
be reoriented to ensure warnings are clear, successfully
connect the dots, and provide practical advice to policy
makers. An effective forum for policy makers with the
ability and mandate to take leadership in responding to
systemic concerns about the international economy is key.
Ground rules for cross-border finance need to be
strengthened. And, given the growing size of international
transactions, resources available for liquidity support and
easing external adjustment should augmented and
processes for using them better defined so they are more
readily available when needed. These are all ambitious
undertakings. But the damage wrought by the crisis
provides an opportunity to make progress on seemingly
intractable issues. The moment should not be missed.
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13. (2) Reviving ‘AUTHORITARIAN LIBERALISM’ in ASIA
(Authoritarian Polity, Market Economy)
‘Democratic Peace’
 © PEACEFUL CO-
EXISTENCE AMONG
AUTHORITARIANISM™
AUTHORITARIANISM
‘Modernisation Theory’
 © NEO-LIBERAL
ECONOMIES
EMBEDDED IN
AUTHORITARIAN
POLITIES™
POLITIES
13

14. States’ Bailouts and Resiliency Plans
(Bailouts for the poor???)
Malaysia Philippines
First stimulus measure: increase
capitalisation of a government Economic Resiliency Plan (ERP):
investment company by USD 5 PhP 330 billion
billion (also to stabilise stock
exchange)
14

15. Lessons of the 1997 Asia Crisis
• Democratisation may be stalled.
– Justification for authoritarian rule (e.g. ‘Asian Values’)
• Human Rights compromised.
– Human rights obligations sidelined in the name of
surveillance and internal security (Malaysia, Singapore)
• The poor severely neglected.
– e.g., ASEM Trust Fund failed to target the poor,
workers, and the vulnerable, adversely affected groups.
15

16. ADB and ASEAN: Banking-as-usual for the private sector and
for free flow of capital, goods, services and investment
Loans under LIBOR for economic Towards a competitive ASEAN
recovery, private sector single market by 2015
development, and open market
(less on social protection)
16

17. THE GLOBAL CRISIS AND THIRD WORLD
DEVELOPMENT: INFORMAL ECONOMY
• Mainstream analyses of crises: not so
applicable to the Third World
• A big majority of economic activities:
informal sector (including in China and
India)
• THE NEOLIBERAL EFFECTS
– SAPs: de-industrialisation
– WTO/GATT: de-agriculturalisation
– Crises: de-skilling / de-servicing
– What is left?: Informal economy!!!
17

18. (3) Restoring ‘NATIONALISM’ in US and EUROPE
The process of capitalist development in US and Europe is
not a process of liberalism, but of NATIONALISM!
NATIONALISM
‘Buy/Employ European’ — ‘Buy American’
 Colonialism (continuous dependency, intensifying ‘war on terror’)
 Protectionism (against free market ideology)
 Bailouts (of corporations and financial institutions, not of the workers)
 Islamophobia (against Muslims)
 Xenophobia (anti-foreign/migrant/refugee sentiments) 18

19. On US Bailouts....
In times of crisis,
“assets return to their rightful owners”!
‘Financial crises have always caused transfers of ownership and power to
those who keep their own assets intact and who are in a position to
create credit, and the Asian crisis is no exception....there is no doubt
that Western and Japanese corporations are the big winners.....The
combination of massive devaluations, IMF-pushed financial
liberalization, and IMF facilitated recovery may even precipitate the
biggest peacetime transfer of assets from domestic to foreign owners
in the past fifty years anywhere in the world, dwarfing the transfers
from domestic to US owners in Latin America in the 1980s or in Mexico
after 1994. One recalls the statement attributed to Andrew Mellon: "In
a depression assets return to their rightful owners”.’
—R. Wade and F. Veneroso (1998),
‘The Asian Crisis: The High Debt Model versus the Wall Street-Treasury-IMF Complex,’
in The New Left Review, 228 (1998), 3-23.
19

20. EU to trade aid for raw materials
Politiken News in English, 4. Nov 2008
Europe needs raw materials
for its growing hi-tech
industry. The EU
EU Industry Commissioner Günther Verheugen Commission wants to use
aid as leverage for supplies.
A single mobile phone requires some 40 different raw
materials - some of them particularly rare.
"Many of the raw materials are found in Africa - a
continent that thanks to foreign and aid policy has Europe
as its most important partner…."
"We must use these instruments to ensure that we have
secure access to raw materials…."
20

21. CONCLUSION
The global crisis is not the sole cause or the impetus
for these anti-democratic projects and tendencies,
but it has strengthened and even accelerated the
institutional and discursive assault on democracy
that has already been in train across the world
long before the crisis.
21

22. I. Reaffirming NEOLIBERALISM
• Profits over people, markets over societies
– The World Bank, IMF and their G-20 allies
II. Reviving AUTHORITARIAN LIBERALISM in Asia
• Authoritarian polity, Liberal market economy
– East and Southeast Asian states, ASEAN, Asian Development Bank
III. Restoring NATIONALISM in US and Europe
• Exclusivist, exclusionary, colonialist political and economic policies
– US and European Union
22

23. The intensified assault on the
ideals of democracy and the
process of democratisation
points to the way where, why,
and how peoples’ resistance
and struggle can be mounted.
23

24. Thank you.... (“,)
—Bonn Juego, bonn@ihis.aau.dk
—Johannes Dragsbaek Schmidt, jds@ihis.aau.dk
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