The neoliberal project: an overview of theory and practice

The word ―neoliberalism‖ has been used and abused widely in political debates across the world since its emergence in the late 1970s. It is beyond the scope and not the aim of this dissertation chapter to engage in detail with these debates or to investigate the concept in depth. However, since neoliberal-ism is the political-economic paradigm that has (re-)shaped world economics and policies in many countries, one cannot ignore its implications for the poor and marginalised. Moreover, as briefly touched on in the previous section, it provides a lens through which one can explain the growth of the informal sector (both as a good and bad thing), and one where informal workers are seen as ―heroes‖

(entrepreneurs) rather than victims or people without choice (whether this is appropriate or not). The point here is that neoliberalism is the framework within one has to see the development of policies of states and cities across the globe. This dissertation holds that neoliberalism is the underlying ideology that informs the policies and practices which everything but pro-poor (esp. in the long run). In addi-tion to this hegemony of neoliberal thinking that informs policies and programmes globally, in South Africa and the CCT, the City‘s attitude towards informality is an old-fashioned and racist desire for social control of unruly (black) poor people, implemented now through neo-liberal techniques of governance. One of the main features of this neoliberal approach (apart from economic rationalities),

237 Richard Martin and Ashna Mathema, Development Poverty and Politics: Putting Communities in the Driver’s Seat (London/New York: Routledge, 2010), p. 19

238 Ibid., p. 22

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is a shift of responsibility towards communities and local peoples who are supposed to become more active, engaged and responsible for their own economic development and wellbeing. It therefore seems necessary to provide a short overview of what neoliberalism is, what its aims and what the consequences are.

As indicated in the previous section, the rise of informality is seen as linked to the emergence of neo-liberal capitalism, or neo-neo-liberalism. David Harvey describes the essence of this paradigm as follows:

Neoliberalism is a theory of political economic practices proposing that human well-being can best be advanced by the maximization of entrepreneurial freedoms within an institution-al framework characterized by private property rights, individuinstitution-al liberty, unencumbered markets, and free trade. The role of the state is to create and preserve an institutional frame-work appropriate to such practices.²³⁹

Neoliberalism finds its (clearest) expression in liberal democracies (although certain neoliberal poli-cies are also implemented in states with other forms of government), and one of its key features is privatisation of state services and property. The freedom that is proposed is basically about free trade.

The arguments behind neoliberal reforms were that too much state regulation, inflexible bureaucra-cies, a bloated public sector, ‗unsustainable‘ welfare expenditure and too little competition hinder economic development. For a prosperous future, economies and societies have to be made ‗fit‘ in order to prevail in a globalised world in which everyone would benefit from free trade.

David McDonald explains that neoliberalism can be identified based on specific policies like fiscal restraint, privatisation, market liberalisation or export-oriented growth. Since this is not a static affair but an ―ongoing, and internally contradictory process of market-driven sociospatial transformation‖²⁴⁰ he proposes that it would better be called ―neoliberalization‖, which can come in different forms. Ne-oliberal ideas have been incorporated on all levels in liberal democracies and its features are supposed to signal modern governance:

Neoliberalism has become a hegemonic signifier for ―best-practice‖ governance, diffusing from a gleam in Friedrich Hayek‘s eye to become everyday discourse and practice. […] At scales ranging from the supranational to the municipal, good governance is now widely ac-cepted as entailing ―neo-Schumpeterian‖ economic policies favouring supply-side innovation and competitiveness; decentralisation, devolution, and attrition of political governance; dereg-ulation and privatization of industry, land and public services; and replacing welfare with

‖workfarist‖ social policies. This policy agenda has diffused over space and across scales with remarkable speed, displacing long-running and apparently deep-rooted welfare and interven-tionist state agendas in nations and cities alike. A neoliberal subjectivity also has emerged that normalizes the logics of individualism and entrepreneurialism, equating individual freedom

239 David Harvey, ‗Neoliberalism as Creative Destruction‘, in: Annals of the American Academy of Political and Social Science, Vol. 610, (March 2007), pp. 22-44, here: p. 22

240 David A. McDonald, World City Syndrome: Neoliberalism and Inequality in Cape Town (New York and Oxford:

Routledge, 2008), p. 71

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with self-interested choices, making individuals responsible for their own well-being, and re-defining citizens as consumers and clients.²⁴¹

Moreover, for opponents, Globalisation is seen as the evil brought about by neoliberal reforms, and implemented by the ―villains‖ World Bank and the International Monetary Fund (IMF), especially with their Structural Adjustment Programmes (SAPs):

The countries the Fund [IMF] instructs must place the control of inflation ahead of other eco-nomic objectives; immediately remove their barriers to trade and the flow of capital; liberalise their banking systems; reduce government spending on everything except debt repayments;

and privatise the assets which can be sold to foreign investors. These happen to be the policies which best suit predatory financial speculators. They have exacerbated almost every crisis the IMF has attempted to solve.²⁴²

This has plunged many countries, particularly in the Global South, into economic crises and depend-ency from the creditors. These countries have to subject their national policies to international ap-proval, which in essence means that international institutions, which have no accountability links to the populations, can remodel a nation according to their gusto, instead of the (democratically) elected governments pursuing their (election) programme. National budgets are often strained by high debt repayments, leaving little room for large-scale expenditures in the national economy or social pro-grammes.

In Planet of Slums, the critical assessment of the contemporary state of cities, Mike Davis argues that capitalism, and especially its neoliberal offshoot, which was forced upon the Global South through SAPs from the 1970s on, creates an urban world dominated by slums.²⁴³ People who are pushed to the margins of urban life have to live in often precarious sanitary and health circumstances, and to fight for daily survival by taking every livelihood option that gapes.

The way in which 1970s neoliberalism significantly differs from liberal pursuits of the 19^th century is that it attempts to drive back the state more than ever before, and that it is now a global project ―ac-cepted by elites and mainstream political parties in varying forms almost everywhere around the world, and implemented at scales ranging from municipal to supranational authorities.‖²⁴⁴ Davis goes as far as to say that structural adjustment in the form of ―the brutal tectonics of neoliberal

241 Helga Leitner, Eric S. Sheppard, Krisin Sziarto, and Anant Maringanti, ‗Contesting Urban Futures: Decentering Ne-oliberalism‘, in: Helga Leitner, Jamie Peck, and Eric S. Sheppard (eds.), Contesting Neoliberalism: urban frontiers (New York: The Guildford Press, 2007), p. 1f.

242 George Monbiot, ‗Clearing Up This Mess: John Maynard Keynes had the answer to the crisis we‘re now facing; but it was blocked and then forgotten.‘

http://www.monbiot.com/2008/11/18/clearing-up-this-mess/

Accessed: 26.02.2013

243 Davis, Planet of Slums.

244 Leitner et al., ‗Contesting Urban Futures‘, p. 3

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tion since 1978‖ has and is remodeling societies similar to the fundamental reshaping of human fu-tures in the course of late-Victorian imperialism (1870-1900), which created a ‗Third World‘ in the first place.‖²⁴⁵

One consequence of liberalisation is the collapse of formal urban employment in the developing world and the rise of the informal sector. Along with this, the hopes and promises associated with urbanization of being places of growth and prosperity, ―the cities have become a dumping ground for a surplus population working in unskilled, unprotected and low-wage informal service industries and trade.‖²⁴⁶