Peripheral Conditionalities

The need to reorganize global governance so as to make space for a growing China has long been apparent. With the financial crisis of 2008, another demand emerged: the reshaping of capitalism itself. The Covid-19 pandemic represented a strategic moment to advance this dual task. A decade after the announcement of Lehman Brothers’ bankruptcy, the health emergency provided an occasion for one international grouping to launch their plea for a post-neoliberal new world order, a plea that went hand in hand with calls to restructure global governance, particularly its economic dimension. This project became known as the “new Bretton Woods.”

Though there is now a general consensus that neoliberalism is in crisis, remarkably few alternatives have emerged that might point to a meaningful change of course. Regardless of how one classifies China, it is clear that, unlike the former USSR, it in no way represents an international movement. Even though it followed the Soviet model for at least three decades, by the end of the 1970s, China was paving its own path, enabling it to survive the collapse of the Soviet bloc without abandoning its project.¹ The unique circumstances of the current crisis mean that the globalized world depends on China, but this does not imply that the country is a model that can be imitated or exported.  

The lack of an implanted and exportable post-capitalist alternative does not, however, imply an absence of serious geopolitical tensions. Nor does it exclude the existence of alternative models of capitalism that might be emulated elsewhere. There is a real possibility that the current crisis could lead to all-out war, hence the calls for a “new Bretton Woods”: reorganize global governance so that the transition to a post-neoliberal order does not eventuate in global warfare. 

The double appeal for a reform of capitalism and its governance model is framed in terms of conversion to a new creed. The content of this creed has yet to be determined, since its direction and scope entail a battle already underway within the neoliberal establishment. Whatever its outcome may be, however, this self-reform ultimately aims to become a new creed, something that, since the neoliberal era, has often been called a “consensus”—a “new consensus,” as Jake Sullivan said in April 2023.

Although it may seem paradoxical, the proposed model for this transition away from neoliberalism seeks to mimic the very rise and consolidation of neoliberalism itself. A common-sense view sees neoliberalism having emerged—fully formed—from the tenets of a newly articulated economic paradigm, with its own economic policies and precepts, and a distinct vision of society and geopolitics. Then came the takeover of institutions and the cultural and electoral battles that made this new paradigm hegemonic.²

The logic behind the contemporary adaptation of the past neoliberal project roughly unfolds as follows: neoliberalism emerged in the context of the Cold War and, within the capitalist world, managed to consolidate itself without the outbreak of a generalized war. Similarly, for some central countries, the current moment of deglobalization would be characterized by a new form of Cold War which, as long as it remains “cold,” would allow the transition to a new post-neoliberal order along the lines of the rise of neoliberalism itself. 

However, this proposal would not be feasible if it relied solely on the institutional and economic power of these global elites. There are at least two other assets that render the project plausible, even if it doesn’t materialize. First, the irreversibility of the social transformations brought about by neoliberalism has made it objectively impossible to have a program that attempts to “turn back the clock.” Today, the proposal to resume Keynesian-type regulation is little more than illusory political voluntarism. Second, the consolidation of a life-or-death political divide—born from the crisis of neoliberalism itself—serves this project of transition within the order well, as it mobilizes the far-right’s potential victory as a threat to compel moderate forces further to the left. 

Domesticated geopolitics

Neoliberalism is more than an economic doxa; it has established deep social roots.³ Its success in dismantling universal solidarity mechanisms has intensified disputes over distribution, with destructive, and self-destructive, effects. The sharp political divide that can be seen in many countries today is the result of this process. In still-democratic countries, this divide is between a right unafraid of allying itself with the far right and a new progressivism that wishes to reform neoliberalism, drawing it away from its more extreme features. This is a genuine division, not a mere “polarization” in which, according to the metaphor, both sides would belong to the same “magnetic field.”⁴ The two sides are not only different but irreconcilable. They are two “world projects.”

It might be argued that today’s political divide finds its analogy with the divide of a hundred years ago; then, there was no common ground between the distinct projects of New Deal capitalism, fascism, and Soviet socialism. The two sides of today’s divide, however, do share some common ground. This is not the ground of democracy, even though in today’s still-democratic countries, unlike a hundred years ago, the far right poses as a champion of democracy. The shared ground is neoliberalism itself and its legacy. Which parts of neoliberalism are to be preserved and which are to be discarded is the animating question. 

In their own way, both sides of the current divide are legitimate heirs of neoliberalism—two sides of the same coin. Speaking about the United States, Gary Gerstle⁵ described how one side is heir to “neo-Victorianism” (the conservative neoliberalism of Ronald Reagan in the 1980s), while the other is heir to “cosmopolitanism” (the progressive neoliberalism consolidated since Bill Clinton’s administration in the 1990s). Today, it should be stressed, the neo-Victorian right is controlled by the far right with the explicit and brutal violence that characterizes it. The new progressivism, on the other hand, is now the establishment itself in many of the still-democratic countries. 

The call for a “new Bretton Woods” comes precisely from the establishment, which is another peculiarity of the current situation: for the new progressivism, there is no need for the costly effort of taking over the institutions. Carrying on with the analogies, the historical counterfactual for a reform of neoliberalism from within would be a Keynesian order that had managed to self-reform in order to avoid being supplanted by the “anti-system” neoliberal order. In the dispute over the spoils of neoliberalism, it is the right that presents itself as “anti-systemic” and puts forward a project of taking over the institutions. This reminds us that the call for a new Bretton Woods, although made by the new progressives, involves far more than the two main blocs of the still-democratic countries. It also courts consolidated autocracies and countries with one-party rule.

The great divide between the fearless right and new progressivism shapes domestic political spaces in still-democratic countries, but it has no clear counterpart in international alignments. When governments aligned with new progressivism adopt foreign-trade policies such as friendshoring, their geopolitical “friendships” doesn’t translate to defending the often vulnerable democracy of their partners. The underlying tension in the battle over a new order stems from the mismatch between national and global conflicts.

To a large extent, this mismatch lies at the heart of the difficulties in negotiating new patterns of global governance. As the life-or-death political divide continues in still-democratic countries, and as no consolidated geopolitical alignments exist, even among countries in the global North, an effective dialogue to reach global agreements is also indefinitely postponed. So far, nothing indicates that this dispute between the fearless right and new progressivism will be resolved in the short term.

Nevertheless, ongoing negotiation attempts should not be abandoned. Achieving new standards of global governance could mean the difference between war and peace. For many countries in the global South, a “new Bretton Woods” could include much-needed debt relief and provide funding for necessary technologies for an effective energy transition. 

Even this already quite optimistic scenario, however, is insufficient. The horizon of this new order under negotiation can not assure a genuine ecological and socially just transition. This remains true despite the fact that global inequalities are unsustainable, and the environment is on the brink of collapse. Although current discourse on geopolitical and geo-economic reorganization revolves around this premise, the actions of the three largest carbon emitting countries tell a different story. Under Biden, the United States has ramped up oil exploration and accelerated fracking; China has reduced its own climate targets, recently announcing that it might only reverse its emissions curve after 2030, postponing emissions neutrality until at least 2060; looking on, India has followed suit. 

If the International Monetary Fund, the World Bank, or the World Trade Organization could be meaningfully reformed, what’s at stake is laying the technological and productive foundations for a mere energy transition. And even within this narrow framework of a transition led by these multilateral institutions, such a transition would likely take three to four decades to be completed—if it happens at all.

For countries in the global South, the cost of this transition will be high, regardless of the outcome. The reforms may impose prohibitive standards of geopolitical alignment, standards that many of the still-democratic nations of the South may not be able to meet. The price will be especially high if the “new consensus” does not broaden its scope to tackle poverty and inequality. For many of these countries, the cost could be losing any chance of escaping the neo-extractivist trap,⁶ which strangles their domestic autonomy and constrains their role internationally. 

Globalized domestic policies

The still-democratic countries of the global South cannot afford the luxuries of economically decoupling from autocratic or one-party partners. In the current wave of deglobalization, decoupling is an option only for nations that can afford it. Friendshoring, as a trade and national-security policy, is reserved for those who can choose their friends.

The principle of “comparative advantage” has led to the re-primarization and deindustrialization of economically dependent countries. In Latin America, for example, this has transformed most countries into neo-extractivist societies and economies, despite the fact that a number of left-wing governments have formulated programs opposing neoliberalism. There is no reason to attribute neoliberal intentions to governments that explicitly reject them. But it is necessary to distinguish their intentions from the practices they have been forced to adopt in order to make their political projects viable, given the inescapable nature of neoliberalism as the global regulatory framework for capitalism. 

Today, there is no room left for a third way, either in discourse or in practice. Both nationally and globally, left-wing, or simply progressive, governments are part of the field of the new progressivism. As a global order, neoliberalism has overshadowed domestic aspirations, re-establishing the boundaries of action available to peripheral countries. In this context, “resisting” neoliberalism means exploiting the small loopholes within an overarching framework that is not very elastic. This is seen clearly when analyzing the effects of neoliberalism in many peripheral countries.

In the years following the Second World War, many Latin American countries adopted a development strategy that aimed for greater autonomy and productive self-sufficiency, whose emblem was the so-called “import-substitution industrialization.” Import substitution was considered key to creating significant domestic consumer markets and reducing or overcoming the typical dependence on primary-goods exports.

With the consolidation of the neoliberal order, the globalization of the principle of “comparative advantage” rendered import substitution obsolete as a national project. Latin America’s so-called “advantages” led to the overexploitation of minerals and agricultural products, which largely supplanted the contribution of complex industries to national GDPs. Latin American countries were progressively confined to the neo-extractivist trap. 

Though this trap severely limits the region’s room for maneuver, it does not mean that the only option is to return to the previous developmentalist project; such a return is neither possible nor desirable. The material conditions are no longer there and the industrializing national projects of the past were also marked by authoritarianism, environmental destruction, and growing inequalities—issues that should not serve as models for contemporary ambitions.

Today, as in the past, the task is to seek frameworks for domestic development and international integration that allow for the broadest possible exercise of autonomy. This time, however, it must be achieved without exacerbating inequality, imposing barriers to ecological transitions, or threatening democracy.

For this to happen, the four decades of neo-extractivism propelled by neoliberalism must not be viewed as a purely economic problem. Neoliberalism itself is an authentic model of society, not just a set of economic precepts. Its expression on the periphery of the globalized world must be read through this same lens. The same applies to the current calls for a transition to post-neoliberalism; the terms in which the new order is planned and the different development trends it will entail around the world need to be scrutinized in all their complexity.

Recognizing the specificity of the current moment also involves understanding that the neo-extractivist trap is not set in the same way everywhere. Identifying the various forms of devastation left by the globalization of “comparative advantages” around the world is, in fact, the first theoretical task in understanding the global South’s position within the decline of the neoliberal order.

In many still-democratic countries of the South, the political dimension of this trap is expressed through the fundamental divide between the fearless right and new progressivism. In Brazil, for example, the neo-extractivist trap has the country caught between global climate collapse and the possibility of holding back the far right domestically. The predatory exploitation of natural resources, without reservations or restrictions, is part of the far right’s agenda. Conversely, the abandonment of predatory extractivism in favor of building a low-carbon society is central to the program of new progressivism. Yet, if the new progressivism aims to continue defeating the fearless right in elections and maintain its program of tackling inequalities, it cannot entirely relinquish neo-extractivism. That’s how the neo-extractivist trap sets itself up. 

What comes after neoliberalism

In the context of these reformist debates, there are likely two possible outcomes. The ongoing wave of deglobalization may provide many countries in the global South to break out of dependency, giving them more room for action. This process would take time and doesn’t mean a total escape from the extractivist trap. An alternative outcome would see the continuation of neoliberalism for those countries caught in the neo-extractivist trap. This would mean the coexistence of neoliberal and post-neoliberal orders for a long time, stratified, with the usual inequalities, according to the relative power and freedom of each country. This would have consequences for the energy transition, which would have to follow a riskier path, rolled out unevenly between the countries of the North and South.⁷ This could also mean the coexistence of still-democratic and authoritarian neoliberal orders, alongside democratic and authoritarian post-neoliberal orders. 

The categorical imperative to avoid warlike solutions to international conflicts at any cost is often confused, in still-democratic countries, with the defense of the new progressivism. In the current balance of forces, only a generalized victory of new progressivism can preserve some democracy domestically and allow for the creation of geopolitical blocs capable of negotiating a peaceful coexistence as far as possible. The enduring maintenance of peace, in turn, is an essential condition for the effectiveness of any global agreement aimed at tackling the ecological emergency. 

This is an extremely narrow horizon for action. In the global North, the political straitjacket of the new progressivism certainly constrains the neoliberal defectors it shelters to some extent, but it restricts their left field even more. The dependent position of still-democratic countries of the South and their consequently diminished margin for action on the global stage intensifies new progressivism’s domestic constraint on the left. 

The geopolitical blocs of the future will be characterized by major asymmetries in power. The still-democratic countries of the global South can and should negotiate the terms of their participation with autocratic, one-party countries. The latter are interested in maintaining links with a potential new progressive geopolitical bloc, while the former are not inclined to “decouple” their economies from countries that are not aligned with this bloc.

Even in the context of some international relief and the beginnings of an energy transition, the constraints imposed on the countries of the South will not be limited to dependence on external financing and technology transfers. Even with access to financial aid, the global South will still be deprived of the theoretical and practical tools needed to exploit as much as possible the room for action that the new scenario might open up—just as it was four decades ago when neoliberalism emerged. Things are likely to remain this way unless the struggle for an effective reform of global governance is coupled with efforts to produce these tools.

It is possible that a “new Bretton Woods” will not happen, just as it is possible that the neo-extractivist trap will remain set for a long time. Nevertheless, the global South can still take action: as analogies are in vogue, let the call for a new Bretton Woods be joined by a call for a new dependency theory.

In the 1960s, dependency theory sought to understand the specific position developing countries held in the world economy and politics. In the case of Latin America, it was closely associated with the principle of import substitution industrialization and the “structuralism” typical of the economic thinking of the Economic Commission for Latin America, the ECLAC, later widened to include the Caribbean.

One path to producing the necessary tools for the current moment is to renew dependency theory—a path that can start with the development of a new economic theory but cannot be reduced to that alone if its aim is to truly understand neoliberalism and discern accurately the tendencies of a post-neoliberal reconfiguration of capitalism. The theoretical and practical tools required at the present time cannot be produced without an interdisciplinary and collaborative effort.⁸ And this effort cannot be limited to the work of a single research group or a single region of the world. Nor can it involve merely adapting obsolete formulations to current circumstances. To begin with, it must take into account not only the criticisms directed at the original version of dependency theory, but also the self-criticisms voiced by its theoreticians, particularly since the 1980s. 

At the time of the Bretton Woods negotiations, the possibility of import-substitution industrialization and dependency theory did not exist. Likewise, today, there are insufficient instruments for the global South to negotiate its participation in a potential new model of global governance. In the search for a historical reference for such collaborative action, it may be that the movement of 1974, when the joint effort of developing countries culminated in the resolutions of the New International Economic Order (NIEO), suits the South better than 1944. By the time of the NIEO, dependency theory was already an available tool, which was effectively used in proposals submitted to the UN. Even so, it must be remembered that the 1974 formulations, even fifty years ago, arrived too late: their Keynesian framework was unfeasible for peripheral countries then, just as it seems to be for the globalized world at present.

In a world where crises overlap, formulating common parameters capable of taking into account the particular conditions of different countries is a necessary, albeit difficult, task. It may take time to shape a global effort to produce these instruments, as happened both in the Bretton Woods negotiations and in the development of NIEO’s proposals. However, no matter how great the distance between the timidity of action and the urgency of the moment, and no matter how overwhelming the magnitude of the effort required to find adequate answers to so many questions, the most prohibitive course of action is to do nothing.

In its original version, this text was published in The Ideas Letter (April 18, 2024) with the title “A New Dependency Theory Moment.” A shortened and modified version was published with the title “What comes after neoliberalism? The neo-extractivist trap of the Global South could be an opportunity to renew dependency theory” by the magazine piauí (n. 213, June 2024).

Translator: Glenda Vicenzi