under construction sign

Here comes zombie neoliberalism

August 30, 2019

by Rosario Guzman

(This lecture was recently discussed by IBON research head Rosario Guzman with a group of international theologians)

The South Korean independent film in 2016, Train to Busan, had definitely added a novel attack to the zombies genre. It appears now that the zombie theme has been revived after considerable time of having been run into the ground. For 2019, there are about 16 upcoming (if not yet shown already) zombie films, a number never seen before in any given year.

But like any other themes that have pervaded our culture, our current obsession with zombies is but our subliminal reflection on what is happening with the global economy – or more precisely, on how it is desperately being reanimated. Critical analysts have coined the terms zombie capitalism, zombie neoliberalism or even zombie consumption to describe the mindless continuation of what is otherwise dead.

A moribund system

The global economy has been in a protracted crisis, a marked slowdown since the 2008 financial crash with US capitalism as the epicenter. The growth rate of the gross domestic product (GDP) of the 20 most advanced capitalist countries has hovered only above 3% in the last three years. This is failing to recover the pre-2008 levels, much less the growth spurt of over 5% in 2010 when governments did suicide borrowing just to save the financial system.

Global trade has slowed down as well. It is not reaching the exports value recorded in 2013, and worse, the ongoing US-China trade war has more extensive impact on the global trade-dependent poor regions. Foreign direct investment (FDI) had its third consecutive fall in 2018, registering tepid outflows of only US$1.3 trillion. Finally, profitability, the single most important indicator for the capitalist class, went down to 6.8% in 2018 from an average rate of 9.8% before 2008.

This is not to say, however, that the global economy before this was fine, or that what we are witnessing is just a perversion of an otherwise well-functioning system. Crisis is inherent in capitalism, and the escalating contradictions quite evident. Crisis has been addressed by increasing technology, colonizing markets, extracting super-profits from colonies and neocolonies, waging wars, and imposing neoliberalism. But the crisis only continues to manifest in a cycle of rising inventory, retrenchment of workers, lowering of wages, limited consumption, and alienation.

This has brought the long-term fall in the labor share in income. The International Monetary Fund (IMF) observed in 2018 that since the 1980s, even more so since 2008, the share of revenues that went to corporate profits had increased over time while the share of revenues going to workers had declined.

Yet, the scandalous widening income inequality between the super-rich 1% and the rest of us 99% is worrisome to capitalists and neoliberalists, the IMF included, not so much for the increasing super-exploitation of workers and the world’s lack of justice. The growing concern is simply for the sluggish demand that eventually threatens the survival of the market economy.

For four decades, the principal means of neoliberalism to address the problem of declining consumption had been debt and financialization – the very ‘solution’ that crashed global finance in 2008. Financial and nonfinancial corporations, governments and households alike accumulated huge debts – debt was the main driver of economic growth. Today, there is already very little debt that can be created and productive activity is virtually lifeless to support old and new debts. Yet, neoliberalism presents the same bankrupt solution – the undead – debt and financialization – by extending a period of very low interest rates that can let the economy idle. Like a zombie, illogical as it is, neoliberalism keeps stumbling on.

Ugly, persistent, dangerous

Global debt is ballooning again to US$250 billion in 2019, a big jump from seven years ago and now accounting for 320% of global GDP. The undead continues to feed on the involvement of nonfinancial institutions in financial activities and the concentration of share ownership in the hands of financial corporates. Debt-driven consumption has remained the unintentional compulsion of the decaying system. Cannibalism, the highest form of capitalism at this point, is the continued privatization of public resources so that transnational corporations (TNCs) can go on devouring super-profits, leaving the public buried in debt and prohibitive user-fees.

Rentierist profit strategies instead of productive investment are being employed to extract super-profits – the positive difference between the actual profits and typical profits, which can only be achieved through rent-seeking behavior. Privatization is the main strategy of zombie neoliberalism, and sectors such as energy, utilities, telecommunications and healthcare are the brains that rentiers crave for. Why not, the demand for these is inelastic (i.e. you will avail of these services no matter what happens), thus they serve deliciously oozing super-profits.

Speaking of brains, surplus profits are also being realized through the strategic use of intellectual property rights (IPR), the monopoly control of technology, such that the monopoly capitalists will still be raking in profits long after the lifespan of the product. IPRs are most profitable in new high-technology sectors such as online services and software platforms, information-intensive goods and services, and pharmaceuticals. IPR triggers profits simply with the use of new and useful inventions, the cost of which is ultimately passed on to the consumers, and not from investment in actual production.

The share of super-profits in total profits of TNCs has increased comparing the periods of 2001-2008 and 2009-2015, the UNCTAD notes. The percentage has reached 49% for the top ten percent of TNCs and as high as 55% for the top one percent. TNCs in the last two decades, it turns out, have been extracting profits that are more like rents in character. The income is derived simply from TNC ownership and control of assets instead of deployment of economic resources in production.

They are on our shores

Actually, the zombies have been walking around the Philippines for some time now. They have bitten our government officials, our economic managers, academics, and all other neoliberal apologists who have taught us that there is no other way but to liberalize our economy.

Today, the Philippines is facing a new wave of risks, primarily arising from the Duterte government’s pursuit of FDI-led and debt-driven economic growth particularly in counter-productive infrastructure development. This is coupled with the raid of public resources through privatization, particularly in public services and natural resources. The Duterte government has prepared for these neoliberal attacks first by reforming the tax system to lower the taxes paid by rich people and foreign and big local corporations and to tax the poor more.

The Duterte government has also maximized the imposition of neoliberalism by using the legal systems (also with the impending amendment to the Philippine Charter) to provide TNCs and foreign governments enormous incentives and concessions, greater protection, and even the right to sue our own government. As on other shores, neoliberalism is feeding on the super-exploitation and repression of Filipino workers through low wages, wage stagnation and labor contractualization.

In such a short time, we have witnessed elevated inflation brought about by increasing excise and value-added taxes on consumption goods. We are also seeing higher government debt of Ph7.8 trillion as of March 2019, where it was only Php5.9 trillion when the Duterte administration started three years ago. The Duterte administration is exhibiting the fastest growth in debt in nine years and the highest monthly borrowing rate never seen before after the Marcos dictatorship. Finally, income inequality has never been as acute as now, with the different dimensions of poverty indicating the worsening condition of the Filipino people.

A peculiar narrative is adding to the zombie theme in the Philippines. Economic managers are desperately weaving hypnotic untruths to push people into believing that neoliberalism is the way to be and it is absolutely necessary for the people to be in the grip of neoliberalism. But the harsh impact of past and present neoliberal policies is unequivocal – the poor majority are not buying the narrative. For them, like a zombie, neoliberalism is decaying, it cannot be reformed, it just has to be killed. ###