Wang Pengquan: The Shattering of the Neoliberal Myth and the Evolutionary Direction of Western Capitalism
Following the outbreak of the 2008 international financial crisis, neoliberalism—which advocates market fundamentalism and extreme individualism—became a target of public criticism, and exploring new models of capitalism became a focus for Western academia, particularly among left-wing scholars. More than a decade later, neoliberalism has not only failed to reach its end but has become even more entrenched, manifesting increasingly dangerous characteristics in certain respects. Facing the severe situation of the COVID-19 pandemic, European and American countries were stretched thin in their response, once again exposing the inherent flaws of neoliberal theory and the problems accumulated through years of implementing neoliberal policies. This has further shattered various neoliberal myths and highlighted the urgency of a transformation within Western capitalism. As Canadian scholar Henry Giroux remarked, the COVID-19 pandemic is not only a medical crisis but also a political and ideological crisis. This crisis is deeply rooted in the years of neglect by neoliberal governments regarding the importance of public health and the public interest, as well as the dismantling of numerous relevant institutions. At the same time, this crisis is inseparable from the massive crisis of inequality in wealth, income, and power, and the crisis triggered by the destruction of democratic values, education, and the environment. The performance of Western countries under the pandemic provides us with a new perspective to recognize neoliberalism for what it is and to observe the direction of the evolution of Western capitalism.
I. Market Fundamentalism Suffers Another Heavy Blow
After the end of World War II, under the dominance of Keynesianism, Western nations formed a mechanism of "regulated capitalism," and the growth rate of advanced economies exceeded any period in capitalist history. However, after the mid-1960s, accompanied by a continuous decline in profit rates, intensifying inflation, a marked increase in the burden of social welfare, and drastic fluctuations in global resource prices, Keynesian policy tools became ineffective. Large corporations in the US and Europe took this opportunity to restructure the capitalist political and economic system, pushing neoliberal ideas to the forefront of history. Neoliberalism firmly believes that human well-being can be enhanced through market competition and that profit and competition are the best drivers of development. Consequently, it strenuously advocates for marketization, liberalization, and privatization, while rejecting government intervention, labor coordination, border controls, and all other forces that might constrain capital. The goal is to increase the profit rate of capital, enabling it to occupy a dominant position in the power struggle with the state and society and to obtain unconstrained "bargaining power" within the political and interest landscapes. Neoliberal policies led to a massive loosening of government regulatory systems in Western countries, a substantial reduction in corporate taxes, a serious weakening of social security systems, and the destruction of labor organizations. The market became the template for structuring all relations of production and social relations. At the global level, borders were significantly lowered, turning the world into a globalized market system, making it easier for the power of capital to expand its operational space and create opportunities for valorization [1] on a wider scale.
During the process of neoliberal reform, medical and educational institutions—which improve worker well-being—were pushed into the market. Public health funding, which helps workers guard against risks, was squeezed out of budgets. The medical supply industry, a vital component of the real economy, was offshored. Simultaneously, the "big government" concept that had long dominated Western countries after WWII lost support, and "small government" became the trend. As US President Reagan said in his 1981 inaugural address: "Government is not the solution to our problem; government is the problem." Even formerly social democratic parties underwent transformations; the British Labour Party and the German Social Democratic Party, despite still having opportunities to govern, bid farewell to traditional democratic socialist concepts. By tacking to the right, they formed the theoretical systems and governance models of the "Third Way" [2] and the "New Middle Class" (Neue Mitte). The workers' movement and labor organizations likewise fell into a low ebb. Even though the 2008 international financial crisis proved that neoliberalism possesses serious structural problems, Western governments still gave their full support to private banks and financial tycoons; conversely, welfare spending and public expenditures were drastically cut. The healthcare and prevention systems in countries like Spain, Italy, Greece, and Portugal were further weakened. As British scholar Jeremy Gilbert noted, under this ideology, anything that hinders profit growth will be discarded; even if the affected object is as fragile as the natural environment, it remains insignificant before the profits created by the "sacred" market—this is the sole rule of the (neoliberal) ideological system.
The disastrous consequences of neoliberal policies were fully exposed during the Western response to the COVID-19 pandemic. Faced with the outbreak, some Western countries continued to fly the banner of "that government is best which governs least," ignoring their responsibilities and lacking accountability. Despite receiving ample information and serious warnings, they remained blindly optimistic and negligent in prevention and control. More egregiously, out of narrow capital interests or geopolitical considerations, some made irresponsible remarks or took advantage of other countries facing the challenges of the epidemic and international organizations supporting cooperative control efforts. The lie that "privatization and austerity are more efficient than state institutions" was shattered. This was evidenced by the fact that the public health and medical treatment systems, severely weakened over the past forty years, were powerless in the face of the pandemic. It was also seen in the severe shortage of medical supplies caused by insufficient production capacity, making it difficult for the public to receive timely testing and effective treatment, and forcing large numbers of medical personnel to be exposed to dangerous environments. Little wonder that American scholar Noam Chomsky attributed the COVID-19 outbreak to a massive market failure. In his view, the passive situation faced by Western countries stems from the "deep socio-economic problems brought by neoliberalism; savage neoliberalism has caused the market to deteriorate." "We have handed our fate over to private tyrants—pharmaceutical companies, which are corporations unaccountable to the public." Linking public services to private profit has not increased the technical and organizational capacities of Western nations; instead, it has become the reason they were caught at a loss when facing the pandemic. The pandemic showed in a cruel way that relying entirely on private capital to ensure the public interest is merely an illusion, thereby providing greater necessity and possibility for the state to reclaim the ground it lost as a primary economic actor.
In the process of epidemic prevention and control, the efficiency and humanity demonstrated by those countries with intact public service institutions and stronger governance capacities formed a sharp contrast with the hypocritical nature of neoliberal ideas. An article titled "COVID-19: The End of Neoliberalism?" pointed out: "Socialist regimes are better able to respond to emergencies. Their ability to deliver massive resources to fight an epidemic is something capitalist regimes cannot easily match." It is no wonder an Indian historian lamented that after the COVID-19 pandemic, Western countries would likely be unable to return to the past, because the past was full of problems.
II. Extreme Individualism Questioned Again
Behind the promotion of the market and skepticism of government lies the mainstream value system that neoliberalism strives to shape: extreme individualism. In the neoliberal vision, humans are "rational" actors who are selfish by nature, and they should rightfully advocate for unconstrained individualism, pursuing personal happiness and the satisfaction of needs. Is neoliberalism truly for the happiness of all? This is likely just a lie.
Neoliberalism is an ideology proposed by the Western bourgeoisie in the 1970s and 80s to solve the dilemma of Western stagflation, shed the burden of welfare, and meet the requirements for the free transnational flow of capital. The capitalist system that led this transformation strengthened rather than eliminated the exploitative elements in the relations of production by placing finance in a dominant position. In the hierarchical order shaped by neoliberalism, people are not equal; society is strictly stratified according to the amount of capital one possesses. Those who benefit most are the owners of capital and their senior managers at the top of the pyramid, while the majority of ordinary people are in an exploited position, unable to achieve success. To prevent the "disillusioned" majority from blaming the system and ideology, neoliberalism "created a powerful narrative"—namely, that individual success or failure depends solely on individual effort and ability. Correspondingly, all responsibility for failure can only be attributed to a lack of individual effort and insufficient ability, thereby removing the fundamental influence and responsibility of the system and ideology from people's view.
Meanwhile, neoliberalism vigorously promotes the ideology of individualism to dissolve concepts such as collective action, social solidarity, and community responsibility, preventing exploited workers from uniting and thoroughly dismantling the forces of resistance against capitalism. In the eyes of neolinerals, a politics based on collective solidarity and equality is a threat to the market. The increasingly severe egoism in society has shrunk the space for collective action, causing the broad masses of workers to ignore the power of cooperation within collective relations during market competition. This has hindered left-wing forces from uniting to counter the capitalist order and facilitated the maintenance of neoliberalism's status as the mainstream ideology. By changing industrial structures and socio-economic forms, neoliberalism has dealt a devastating blow to the concept of social solidarity and public consciousness in the West. Concepts of public welfare, social obligation, and democratic solidarity have come under systematic attack, while the ideas of shared responsibility and moral obligation have been ruinously weakened.
The severe deficiencies in the prevention and control of COVID-19 led Western societies, especially the United States, to deeply experience the serious flaws of extreme individualist values. Reducing gatherings and social activities and wearing masks in public were the scientific ways to deal with the epidemic. Yet, some Western citizens, adhering to extreme individualist values, still held onto prejudices and went their own way, sneering at those wearing masks and disregarding stay-at-home reminders. Western governments should have upheld a scientific and responsible attitude, taking timely measures to actively prevent and control the epidemic. However, some politicians instead advocated for extreme individualism, and their actions and decisions led the entire society in the wrong direction. US President Trump’s persistence in not wearing a mask drew widespread criticism; accordingly, in his decision-making, he first ignored scientific advice and delayed the critical window for prevention and control, and later encouraged states to reopen their economies to make economic data "look good." As a result, the United States became the country with the most severe epidemic, ranking first in the world in both COVID-19 infections and deaths. For Western society to make new political and economic choices, it must undergo a revolution in values, correcting the powerful destructive forces brought by neoliberalism and reshaping a fairer economy, a more united society, and more compassionate communities. For this reason, some Western scholars believe that neoliberalism has pushed the process of Western civilization to the edge of a cliff. To "change course from a failed track," one must "treat people with compassion, humanity, and dignity," aiming for the common interest and common concepts. This requires launching a mass movement that struggles in unity for liberation, economic justice, and a political community based on human equality. This would allow the core human values of fairness, mutual aid, and compassion to start from the community and extend to the national and global levels, transforming the foundation of global civilization "from valuing wealth to valuing life."
III. The Shattering of the Illusion of Common Prosperity
The reason Western elites were able to shape neoliberalism into a Western social consensus and mainstream ideology is inseparable from the "common prosperity" [3] illusion they wove. Cambridge University Professor David Lane said: "The elite believe that neoliberalism has raised the living standards of people in all regions of the world, including developed and developing countries, reduced absolute poverty, created the political, economic, and social conditions for people to realize their earnings, and promoted the development of democracy and world peace." However, the facts are likely far from this.
After the 2008 international financial crisis, using the strength of the entire nation to save financial tycoons and the banking industry became the first priority for Western governments; compared to this, reforms in related fields were mostly superficial. The facts of the subsequent decade or more show that the financialization of the economy remains the most prominent feature of Western capitalism. The problem of large banks being "too big to fail" has become even more serious, and the global operations of institutional investor syndicates still lack regulation. The large banks that received US government bailouts in 2008 have become even larger; the total assets of the six largest US banks have increased by 84% compared to before the 2008 financial crisis, their total cash has tripled, and the risks that once destroyed the banking system in 2008 have doubled. Meanwhile, executives of financial companies still hold high-ranking positions and high salaries, possessing more social wealth and political advantages. Yet it was the entirety of Western society, especially the working class within it, that footed the bill for the capitalist financial crisis and saved the capitalist system, only to face the predicament of even more severe polarization between the rich and the poor. From 2009 to 2018, real wages in the US private sector grew at a rate of 0.5% per year, while the GDP growth rate during the same period reached 2.2%. The income share and wealth holdings of ordinary workers are extremely low, and their ability to resist risk is extremely poor. A 2018 study by the Federal Reserve found that nearly 40% of those surveyed...
... [N1] adults were unable to cope with an unexpected expense of approximately $400. A survey conducted by Eurostat that same year also showed that 32.5% of households could not afford an unexpected expense. The 2008 international financial crisis failed to alter the capitalist logic of neoliberalism, which exacerbates the polarization between the rich and the poor. On the contrary, the polarization of wealth ownership and income distribution has intensified, and the fundamental contradiction between capital and labor inherent in the capitalist world has grown increasingly acute. The greatest inequality in history has become the most significant "achievement" of neoliberalism to survive the crisis.
The COVID-19 pandemic further unmasked the issue of economic inequality caused by the neoliberal system over several decades. While the coronavirus does not distinguish between classes, the impact it had on the rich and the poor was worlds apart. For some wealthy individuals, the pandemic merely meant maintaining a safe distance from other members of society and making more frequent use of various home services and private medical care. As Henry Giroux noted, celebrities and the wealthy took the first "lifeboats" to receive coronavirus testing; news mogul Murdoch and his family "prospered from a news empire that played down and overtly questioned the threat of the coronavirus while protecting their own health." Conversely, for the majority of ordinary laborers, the pandemic meant a series of rapidly escalating hardships. To earn a living, they had to continue engaging in precarious and potentially unprotected work, while lacking sufficient space to maintain safe distances, or even enough disinfectants and water to maintain cleanliness. Once infected, a significant portion of them found it difficult to obtain timely testing and necessary treatment, nor could they enjoy medical benefits. According to a 2019 report by the U.S. Bureau of Labor Statistics, 31% of workers in the private sector did not receive medical benefits; among private-sector workers in the service industry, this figure soared to 57%. Survey data released in early May [2023] by universities and research institutions, including the Johns Hopkins Bloomberg School of Public Health and Emory University's Rollins School of Public Health, showed that African Americans accounted for 52% of confirmed cases and 58% of deaths nationwide. Yet, according to the U.S. Census Bureau, the African American population accounts for only 13.4% of the U.S. population. Due to the long-standing existence of racial discrimination in the United States, people of color have poorer living conditions, residential environments, and physical health compared to whites, making them more susceptible to coronavirus infection. Former U.S. President Obama pointed out: "A disease like this just spotlights the underlying inequalities and extra burdens that black communities have historically had to deal with in this country."
Similarly, ethnic minorities and the impoverished became the most visible victims of the skyrocketing unemployment rate in the United States. Data from the U.S. Department of Labor showed that in April 2020, non-farm payrolls dropped by 20.537 million and the unemployment rate rose to 14.7%, the highest record since the Great Depression. Among them, the unemployment rate for African Americans was 16.7%, and for Latinos, it was 18.9%. Market dominance, government failure, and the gap between rich and poor together precipitated a humanitarian crisis that middle- and low-income earners were forced to face. In late May, the death of an African American man due to improper law enforcement by white police officers triggered riots in many places, further deepening people's reflection on the interweaving of racial contradictions and wealth polarization in the United States.
This contrast profoundly demonstrates that the problem of extreme economic inequality masked by the 2008 economic collapse is far from resolved. On the contrary, inequality continues to intensify worldwide, including in Western countries. Fewer and fewer people accumulate and reproduce their wealth, while millions are left behind without high-paying jobs or public services, finding it difficult for themselves and their descendants to enjoy the fruits of social progress. The circle of the wealthiest individuals and the managers who serve them is drifting further and further away from everyone else. Tested by this pandemic, some observers have become clearer: public problems require public solutions; neoliberalism simply cannot provide answers, and the future must ensure a "world order in which resources are distributed more equally and are under public control."
IV. The Direction of Evolution for Western Capitalism
If the 2008 international financial crisis sounded the alarm for neoliberalism, then the multiple dilemmas caused by the inadequate response to the pandemic in Western countries can be said to have sounded its death knell. In this context, the future evolutionary process of Western capitalism will exhibit three directional characteristics.
1. The profound lessons of the inadequate response to COVID-19 will accelerate the evolution of Western capitalism
The ineffective prevention and control measures in Western countries caused the COVID-19 pandemic to have a massive impact on Western society. Although some politicians have downplayed the situation, used sophistry, or even framed others to shirk responsibility, facts speak louder than words. The continuous rise in the number of infections and deaths, the ongoing deterioration of national economic conditions, and the complex interweaving of social contradictions have concentrated and exposed the enormous flaws of Western capitalism in theory, system, and culture. This has once again confirmed the general trend of development: the inevitable demise of capitalism and the inevitable victory of socialism [N2]. As early as 1848, Marx and Engels proclaimed to the world in the Manifesto of the Communist Party that "The fall of the bourgeoisie and the victory of the proletariat are equally inevitable." The task of the Manifesto of the Communist Party was to "proclaim the inevitable dissolution of modern bourgeois property." The derived "Two Inevitabilities" are scientific conclusions reached by using historical materialism and the theory of surplus value to analyze the internal contradictions of capitalism. For over a hundred years, although Western countries have created opportunities for capitalist renewal through economic growth, social welfare, and technological innovation within the framework of the capitalist system, the inherent fundamental contradiction of the capitalist mode of production—the contradiction between socialized production and private ownership of the means of production—has never been resolved. The resulting wars, crises, and upheavals have come and gone, and the problems of inequality and imbalance have always existed. The COVID-19 pandemic merely brought the chronic ailments of Western capitalism and the bitter fruits of neoliberalism before the world in an unpredictable way. The questioning within Western society regarding the government's responsibility for ineffective pandemic prevention has made neoliberal theory a target of public criticism, and capitalism stamped with the mark of neoliberalism has also come under strong scrutiny. Faced with the two difficult problems of how to respond to the pandemic crisis and how to reconstruct the theoretical foundation of Western capitalism, many Western countries will be forced to undergo a major transformation.
An important direction for the accelerated evolution of Western capitalism is to promote a rebalancing of government, capital, and society. The crucial role of government in COVID-19 prevention and control has directly destroyed the neoliberal concept that "the government that governs least governs best." The serious inadequacies of Western governments in responding to the pandemic have led people to realize more clearly that the government is no longer the "problem" as described by people in the Thatcher-Reagan era, but rather the "solution." "This solution means not only an active government, but also a good government." Realistic crises and lessons learned in blood are forcing Western countries to readjust the relationship between government, capital, and society at the institutional level, especially by strengthening the responsibilities and powers of the government in the field of public health. Whether Western countries can follow this direction to reconstruct the theoretical foundation and governance system of the capitalist system—thereby enhancing government efficacy and governance efficiency—relates not only to their economic development and social stability but also to whether the entire capitalist system can adapt to new situations, cope with new challenges, meet the needs of the development of productive forces, and thus extend its vitality.
2. Left-wing ideas and practical explorations will play a greater role in the evolutionary process of Western capitalism
Since the beginning of the modern era, capitalism has always been accompanied by various crises. In particular, economic crises originating from the basic contradictions of capitalist society have left the capitalist system teetering amidst the complex interweaving of overproduction and social contradictions. To solve the problem of social inequality centered on the contradiction between labor and capital, social resistance forces have continuously struggled under the guidance of Left-wing thought. This has forced the bourgeoisie to optimize and adjust the capitalist system, objectively developing "all the productive forces for which there is room" within it, gradually eliminating the irrational and barbaric components of capitalism, and promoting the evolution of the economic base and superstructure of Western countries toward a more rational, civilized, and even socialist direction. This is the significant value possessed by Left-wing forces and their great contribution to the development of Western society. After World War II, social democracy led the West to create a thirty-year "Golden Age of development." After the 2008 international financial crisis, Western countries have been searching for a new direction of development, attempting to transcend neoliberalism and reconstruct the economic system and social order; for this reason, some expected social democracy to "save" capitalism once again. Today, the COVID-19 pandemic has further plunged the consumerism and capital accumulation mechanisms that support capitalism into a predicament, forcing Western capitalism to face multiple crises. In this context, more and more people are turning their attention to the Left, expecting to draw wisdom for institutional transformation from Left-wing ideas and practical experiences, and to discover the power to drive change from Left-wing political organizations and social movements. Some scholars have called for global Left-wing forces to unite to build a more equal production system that is more in line with natural conditions. Some scholars have even proposed specific alternatives, such as planned non-market organized actions by the state and citizen groups to support public systems like healthcare, social security, and infrastructure to achieve the universal public interest. It is foreseeable that in the future, Left-wing ideas, political organizations, and practical explorations will influence the evolutionary process of Western capitalism to a greater extent. The degree of this influence will ultimately depend on whether Left-wing concepts are attractive and whether Left-wing parties can lead the labor movement to break through the multiple pressures of the existing capitalist system and its supporters, and win the competition against extreme populist ideas and their political forces.
3. The practical experiences and ideological theories of the non-Western world will become important points of reference for the evolution of Western capitalism
As early as 2008, the American scholar Fareed Zakaria proposed the thesis of "The Rise of the Rest." However, over the past decade or so, Western capitalist countries have either ignored this reality or treated it as a challenge, doing everything possible to eliminate or assimilate it to maintain the exclusive dominance of neoliberalism in ideology and development models. Now, the systemic failure of Western countries in pandemic prevention and control stands in sharp contrast to the effective prevention and control of many non-Western countries, forcing Western countries to face up to the institutional advantages and values of other countries. In particular, the major achievements of China's fight against the pandemic not only highlighted a perfected national governance system and strong national governance capacity but also demonstrated how the socialist system and government remain people-centered—starting from the life, safety, and vital interests of the people to meet the needs of the ordinary and the vast majority, rather than starting from profit to satisfy the pockets of a few. From a longer-term perspective, since the beginning of Reform and Opening-up and especially since the 18th Party Congress, the theoretical and practical explorations made by China—which are clearly distinct from neoliberalism—have become an important exception to the global spread of the neoliberal model. Unlike some developing countries that have been deeply harmed by neoliberalism and are mired in the middle-income trap or even in turmoil, China, on the basis of practical exploration, has continuously improved the path, theory, system, and culture of socialism with Chinese characteristics. This has not only promoted its own comprehensive progress but also "expanded the path for developing countries toward modernization, provided a brand-new choice for those countries and nations in the world that wish to speed up their development while preserving their independence, and contributed Chinese wisdom and Chinese solutions to solving human problems." The benchmarking effect formed by the development of the cause of socialism with Chinese characteristics has objectively become an external catalyst for the healthy transformation of Western capitalism.
In summary, on the one hand, we must more deeply recognize the laws of human social development revealed by Marxism through the "Two Inevitabilities," further build confidence in the inevitable demise of capitalism and the inevitable victory of socialism, and strengthen the "Four Confidences" [N3]. On the other hand, we must pay close attention to the goals, drivers, process, direction, and impact of the evolution of the Western capitalist system, fully utilize the positive factors therein to promote the building of a community with a shared future for humanity, and guard against the risks and challenges therein in a timely manner, focusing on preventing the evolution of the Western capitalist system from harming the international system and our country's development environment. (Notes omitted)
(Author's Affiliation: Institute of Contemporary Socialism, Shandong University) Web Editor: Zhang Jian Source: Guidance on Ideological and Theoretical Education, Issue 11, 2020.