Suresh Naidu on the death of neoliberalism

Another short, informative video from the Institute for New Economic Thinking (INET), the progressive think tank founded by George Soros. Among other aspects, it supports and acts as a platform for all sorts of thinkers who wish to challenge the conventional wisdom in economics, in all its forms. It seems to me to be very open to new ideas and to offer space for pluralism to flourish.

Here Suresh Naidu sounds the death knell for neoliberalism, arguing that the advent of multiple global crises, namely inequality and climate change (and, one might add, the fallout from the pandemic and war), has undermined the basis of this particular ideology. He cheerfully rues that there aren’t that many genuine neoliberals left as a result.

Neoliberals do not like a free market, but they want you to think they do — Real-World Economics Review Blog

from Dean Baker

It was very frustrating to read Noam Scheiber’s profile of Jaz Brisack, the person who led the first successful union organizing drive at a Starbucks. Brisack does sound like a very impressive person and it is good to see her getting the attention her efforts warrant. However, Scheiber ruins the story by […]

Neoliberals do not like a free market, but they want you to think they do — Real-World Economics Review Blog

Quote of the week: Ha-Joon Chang on liberalism, ‘the most confusing term in the world’

Chang EconomicsUsersGuide

“Few words have generated more confusion than the word ‘liberal’. Although the term was not explicitly used until the nineteenth century, the ideas behind liberalism can be traced back to at least the seventeenth century, starting with thinkers like Thomas Hobbes and John Locke. The classical meaning of the term describes a position that gives priority to freedom of the individual. In economic terms, this means protecting the right of the individual to use his property as he pleases, especially to make money. In this view, the ideal government is the one that provides only the minimum conditions that are conducive to the exercise of such a right, such as law and order. Such a government (state) is known as the minimal state. The famous slogan among the liberals of the time was ‘laissez faire’ (let things be), so liberalism is also known as the laissez-faire doctrine.

Today, liberalism is usually equated with the advocacy of democracy, given its emphasis on individual political rights, including the freedom of speech. However, until the mid-twentieth century, most liberals were not democrats. They did reject the conservative view that tradition and social hierarchy should have priority over individual rights. But they also believed that not everyone was worthy of such rights. They thought women lacked full mental faculties and thus did not deserve the right to vote. They also insisted that poor people should not be given the right to vote, since they believed the poor would vote in politicians who would confiscate private properties. Adam Smith openly admitted that the government ‘is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all’.

What makes it even more confusing is that, in the US, the term ‘liberal’ is used to describe a view that is the left-of-centre. American ‘liberals’, such as Ted Kennedy or Paul Krugman, would be called social democrats in Europe. In Europe, the term is reserved for people like the supporters of the German Free Democratic Party (FDP), who would be called libertarians in the US.

Then there is neo-liberalism, which has been the dominant economic view since the 1980s. It is very close to, but not quite the same as, classical liberalism. Economically, it advocates the classical minimal state but with some modifications – most importantly, it accepts the central bank with note issue monopoly, while the classical liberals thought that there should be competition in the production of money too. In political terms, neo-liberals do not openly oppose democracy, as the classical liberals did. But many of them are willing to sacrifice democracy for the sake of private property and the free market.

Neo-liberalism is also known, especially in developing countries, as the Washington Consensus view, referring to the fact that it is strongly advocated by the three most powerful economic organizations in the world, all based in Washington, DC, namely, the US Treasury, the International Monetary Fund (IMF) and the World Bank.”

Ha-Joon Chang (2014), Economics: The User’s Guide, Pelican Books, p.69-70.

Reducing regional inequality in an age of multiple crises

Rising inequalities under capitalism have an important regional dimension. After four decades of neoliberal globalisation, today’s interlocking crises offer an opportunity to renew regional policies to reduce uneven development, drawing on the lessons and experiences of the past to shape a more sustainable future.

Global recession, a pandemic, climate change, war. We live in an era of multiple crises. All of these have an uneven impact on our societies; in the absence of policy reforms, they can exacerbate existing inequalities. This is the case at the national level, but also at the level of the regions within particular countries. The latest issue of the Cambridge Journal of Regions, Economy and Society (CJRES) features a range of articles on the rethinking of ‘spatial policy’, or policies which respond to geographical inequalities as an essential part of advancing social justice and sustainability (the editorial pieces are free to view). The editors argue that over the past four decades, geographical inequalities in economic prosperity and social conditions have been rising in almost all capitalist countries, as well as some emerging economies such as China. This is in spite of attempts by many governments to use regional policies to reduce inequality. ‘Left-behind’ regions and communities have experienced diminished social cohesion and bred political disaffection, in some cases undermining support for moderate or traditional political parties and threatening democracy. If the latter is to be sustained and its legitimacy enhanced, capitalism needs to be seen to be delivering prosperity, justice and freedom. Policies which encourage poorer regions to catch up with richer ones within capitalist economies are essential to this end. Continue reading

The realities of deregulation

deregulationBelow is a quote from my current reading, Banking Systems in the Crisis – The faces of liberal capitalism, a book which explores the different impacts of and responses to the crisis of 2008 across the so-called liberal market economies, including the US and UK, as well as Canada, Australia, New Zealand and Ireland. The quote itself considers the realities of deregulation as part of economic liberalization, noting that it is more complex and nuanced than simply restoring ‘freedoms’ to economic actors and the economy more generally. Since markets are helpfully seen as a human construct, deregulation is necessarily political. Its champions probably understand this as much as its critics, but will often use the rhetoric of an apolitical free market economics to justify and obscure reality.

“In many ways, what is commonly known as deregulation can be seen as both a prerequisite for, and a companion process of, a programme of economic liberalization. The lifting of market restrictions is often considered to be an essential precondition to creating ‘freedom’ for market actors. However, since markets are inevitably human political constructs, freedom is a relative concept. The increased freedom of one party within a contract, for example, necessarily impinges on the freedom of the counterparties to that contract. As a result, ‘reregulation’ is perhaps a more accurate description of the loosening of market constraints.

Demands for market deregulation often create markets whose rules work more in favour of particular capitalist interests than those of others – notably, for example, suppliers or customer firms, workers, the state, other members of society and the environment. This is because the rules of the free market do not, as theorized, favour all actors equally. There are differences in pre-market access to resources (finance, in particular), networks and markets, which give particular capitalist interests in-market advantages; and there are likely to be expectations of state intervention in the event of crisis (particularly financial crisis) which prioritize the interests of some over others. Moreover, state intervention does not necessarily serve the agenda or longer-term interests of the state or society, particularly when the costs incurred are effectively socialized, whilst the benefits remain private. In response to recurring international financial crises since the 1970s, for example, governments have acted decisively – usually at not inconsiderable costs – to contain the fall-out by providing the lender of last resort facilities to financial institutions, countries or markets experiencing a sudden withdrawal of funds. This tradition was continued during the crisis of 2008, the costs of which continue to mount as the problems requiring resolving have proven to be protracted.”

Suzanne J. Konzelmann, Marc Fovargue-Davies and Frank Wilkinson (2013), ‘The return of ‘financialized’ liberal capitalism’ in Suzanne J. Konzelmann and Marc Fovargue-Davies, Banking Systems in the Crisis, Routledge, p.48-9.

Many Middle Ways: stakeholder capitalism – recasting Keynesian political economy

Will Hutton is a political economist, author and journalist of the left, whose book from the mid 90s, The State We’re In, was a surprise bestseller in Britain. It was highly critical of the direction the economy, society and politics under conservative rule were taking at the time, and made a powerful case for an institutional revolution which he argued was essential to fundamentally improve the country’s economic performance alongside its social cohesion, in order to achieve ‘the good society’.

Tony Blair’s ‘New Labour’ came to power in 1997 and, while Blair himself had initially been drawn to Hutton’s ideas in the form of ‘stakeholder capitalism’, his new government was in the end politically to the right of this programme. Hutton is no socialist, but he has been arguing passionately for years for a comprehensive recasting of Keynesian economics and social democracy. In the spirit of my series of posts on the many middle ways possible under capitalism, Hutton’s progressive and leftist ideas are worth exploring. Continue reading

Economics: social science, natural science – or blind faith?

I frequently enjoy posting quotes or extracts from books and articles on this blog. While of course they are not my original work, I try and choose ones that both inspire and reflect my thinking and writing. In recent weeks I have been posting a series of longer posts on aspects of the ‘many middle ways’ that characterise political economic systems between ‘free’ markets and socialism. History seems to show that neither extreme is satisfactory in achieving and sustaining prosperity, justice and freedom. Both have plenty of modern adherents, but these pure systems remain unachievable utopias, at least in the way that their supporters imagine them. While of course the world has seen attempts at both, they have to date not turned out as hoped. They have variously undermined democracy and human rights, fueled inequality and financial and economic instability, and damaged social cohesion.

The quote below is from a book which examines what it calls the “insecurity cycle in British Public Policy”, or the shifts between market liberalisation and social interventionism. The first has tended to produce insecurity associated with unemployment, poverty, inequality and instability, while securing rentier incomes and business profits. By contrast, the second gives rise to insecurity of a different kind, that of rentier incomes and business profits, even while it produces more security of employment, income and equality. The authors argue that this cycle is irregular and subject to a number of key political, social and economic forces over time. But it seems to persist, at least in Britain. Continue reading

Michael Hudson on the End of History and Fukuyama’s about-face

hudson-200x300Another extract in this occasional series from Michael Hudson’s J is for Junk Economics (p.88-9), a book which aims “to revive a more reality-based analysis and policy-making…[by reconstructing] economics as a discipline, starting with its vocabulary and basic concepts.” This time he considers the phrase famously coined by political scientist Francis Fukuyama in the early 1990s, and how events superseded Fukuyama’s ideas, forcing a change of heart.

End of History: A term reflecting neoliberal hopes that the West’s political evolution will stop once economies are privatized and public regulation of banking and production are dismantled. Writing in the wake of the collapse of the Soviet Union, Francis Fukuyama’s The End of History and the Last Man (1992) coined the term “liberal democracy” to describe a globalized world run by the private sector, implicitly under American hegemony after its victory in today’s clash of civilizations.

It is as if the consolidation of feudal lordship is to be restored as “the end of history,” rolling back the Enlightenment’s centuries of reform. As Margaret Thatcher said in 1985: “There is no alternative” [TINA]. To her and her neoliberal colleagues, one essayist has written “everything else is utopianism, unreason and regression. The virtue of debate and conflicting perspectives are discredited because history is ruled by necessity.”

Fukuyama’s view that history will stop at this point is the opposite of the growing role of democratic government that most 20th century economists had expected to see. Evidently he himself had second thoughts when what he had celebrated as “liberal democracy” turned out to be a financial oligarchy appropriating power for themselves. In 1995, Russia’s economic planning passed into the hands of the “Seven Bankers,” with US advisors overseeing the privatization of post-Soviet land and real estate, natural resources and infrastructure. Russian “liberalism” simply meant an insider kleptocracy spree.

Seeing a similar dynamic in the United States, Fukuyama acknowledged (in a February 1, 2012 interview with Der Spiegel) that his paean to neoliberalism was premature: “Obama had a big opportunity right at the middle of the crisis. That was around the time Newsweek carried the title: ‘We Are All Socialists Now.” Obama’s team could have nationalized the banks and then sold them off piecemeal. But their whole view of what is possible and desirable is still very much shaped by the needs of these big banks.” That mode of “liberal democracy” seems unlikely to be the end of history, unless we are speaking of a permanent Dark Age in which forward momentum simply stops.”

John Weeks on the politics of environmental action

An interesting piece by John Weeks, Professor Emeritus of economics at SOAS, with insights on environmentalism as well as the impacts of neo-liberalism on public policy. An excerpt and link to the full piece below:

A central characteristic of neo-liberal ideology is to render contentious public policy issues apolitical. As I show in my forthcoming book, Debt Delusion (Chapters 6 and 7), misrepresenting economic policies as apolitical was central to the construction of the reactionary neo-liberal agenda. While the neo-liberal grip has weakened, especially over economic policy in Britain, it remains powerful. An outstanding example is the UK debate over membership in the European Union, which the centre presents as a choice between civilization and chaos.

The Politics of Environmental Action (full article) – via Brave New Europe

 

The blinkered vision of free-market economics

“[T]he academic models that are supposed to explain how, and under what circumstances the ideal system of human interaction in markets is supposed to work as well as the prerequisites for the existence of such a system to actually work not only ignore the essential role of government in our economic, social and political lives, but the assumptions on which these models depend – the most important being that no economic actor has the power to influence a market price, to influence the political process, to manipulate consumers, that information is free and therefore all market participants have perfect information about the determination of market prices, that there are no external costs or benefits associated with the production or consumption of goods, that an individual’s choices are unaffected by the choices of others, and that people behave rationally as ‘rationally’ is defined within the discipline of economics – are impossible to achieve in the real world…”

Taken from a recent review in the journal Contributions to Political Economy, 38, p.96-98, by George H. Blackford of John Komlos, The Foundations of Real-World Economics: What Every Student Needs to Know. Routledge: Abingdon, 2019.