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time he considers the phrase famously coined by political scientist Francis Fukuyama in the early 1990s, and how events superseded Fukuyama’s ideas, forcing a change of heart.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.

David Harvey on the persistence of neoliberalism

David Harvey is a distinguished professor of Anthropology and Geography at the City University of New York Graduate School. He has written extensively on aspects of Marxist political economy, including a number of popular books and guides to Marx’s Capital.

In the first part of this interview with the Real News Network he discusses the persistence of neoliberalism despite its manifold failures.

The political limitations of neoliberalism

“Neoliberalism is inimical to economic democracy and it hollows out political democracy. The neoliberal discourse and practice of TINA (There Is No Alternative) blocks the political expression of dissent and feeds apathy, populism and the far right. This is the outcome of a neoliberal political project including a modality of democracy that isolates the political from the socio-economic sphere, restricts democracy to the former, and limits democracy to voting in elections while, simultaneously, imposing a strongly illiberal agenda towards civil liberties and collective action. The crisis of this modality of democracy has become evident through increasing global instability and the proliferation of ‘pseudo-‘ or ‘illiberal’ democracies and ‘electoral authoritarian’ regimes, ‘failed states’, civil wars and ‘terrorism’, especially in the post-colonial world. The limitations of conventional democracy have also raised concerns in the ‘advanced’ West, where large numbers of people now reject ritualistic elections leading to power scarcely distinguishable political parties as a means of addressing their economic and political concerns. Despite their limitations, the ‘Arab Spring’ and the emerging popular movements in crisis-hit Western economies have reiterated their aspiration for a substantive form of democracy, encompassing the ‘economic’ domain that has been insulated by neoliberalism – that is, including substantive choices about the nature of social provision, the structure of employment, and the distribution of income.”

Alfredo Saad-Filho (2019), Value and Crisis, Ch.10, p.217

Jason Hickel on global poverty and neoliberalism

Jason Hickel is an anthropologist who has written extensively on global poverty and inequality, as well as political economy. Here is a recent post of his, discussing the nature and measurement of, and trends in, global poverty, as a response to a critique by Steven Pinker.

Hickel strongly disputes the idea that falling poverty, where it has occurred, has been due to neoliberal globalisation. Rather, the successful industrialisation and economic development that are necessary for sustained poverty reduction have been achieved with state intervention, industrial policies, and strategic integration with the global economy in countries such as South Korea, Taiwan, Singapore and China.

There is a huge literature on this, but Ha-Joon Chang is perhaps one of the best known academics to have written popular books on how particular forms of state intervention have promoted capitalist development. 23 Things They Don’t Tell You About Capitalism is the easiest read and I have posted a number of excerpts from it over the last few years. Bad Samaritans is also good value. For a more academic discussion see Kicking Away the Ladder.

Thanks to the excellent blog The Case For Concerted Action for posting on this first and drawing my attention to Hickel’s work.

Anwar Shaikh on the mythology of neoliberalism

“Neoliberalism claims that free trade is the best way to foster economic development. But its doctrine is premised on the faulty notion that international competition levels the mighty and raises up the weak. Real competition operates quite differently: it rewards the strong and punishes the weak. From this perspective, the neoliberal push for unfettered free trade can be viewed as a strategy that is most beneficial to the advanced firms of the rich countries.

This also explains why the Western countries themselves, and subsequently Japan, Korea and the Asian Tigers, resisted free-trade theories and policies so strenuously when they were themselves moving up the ladder. Equally importantly, it allows us to make sense of the actual policies that they followed in their rise to success: using international access to markets, knowledge and resources as part of a greater social agenda. The object should not be to level the playing field, but to bring up the levels of the disadvantaged players. In this regard, practising neoliberalism on the poor of the world is a particularly cruel sport.”

Anwar Shaikh (2005), The Economic Mythology of Neoliberalism, in Alfredo Saad-Filho and Deborah Johnston (eds.), Neoliberalism: A Critical Reader, Pluto Press, p.48

Michael Hudson on underdevelopment

Taken from Michael Hudson’s iconoclastic ‘dictionary’ J is for Junk Economics (p.237):

“Underdevelopment: A term coined by the economic historian and sociologist Andre Gunder Frank (1925-2005) to describe the policies by which Europe’s colonies and subsequent Third World countries have been turned into indebted raw-materials exporters instead of balanced economies capable of feeding themselves and remaining free of foreign debt and its associated loss of sovereignty. The term implies that they will follow the same pattern as “developed” economies. But they are misshapen, often supported by violent creditor oligarchies. This maldevelopment is euphemized by stages of growth theory suggesting that malstructured economies need simply “wait their turn” to develop in a healthy way. Locked into debt-dependency on the leading financial nations, they are forced to adopt neoliberal anti-labor policies and relinquish their public domains to rent-seeking monopolists. This is the opposite of the US- and European-style protectionist drive to ensure economic self-sufficiency in food and basic industry.”

Trumponomics Part 1: Causes of the phenomenon

TrumponomicsAs promised, here is a review of some of the ideas covered in the fairly weighty tome Trumponomics – Causes and Consequences, recently published by the World Economics Association.

The book consists of 30 chapters, each one written by a different author. They are wide-ranging, but all come from a left perspective on economics and politics.

I am not going to review it chapter by chapter, but thought I would discuss some of the main ideas. As there is plenty to get through, I have divided it into three posts to be published this week: part 1 – causes, part 2 – consequences, and part 3 – alternatives.

Part 1 – Causes

A number of the chapters discuss the reasons for the electoral success of Donald Trump. The book is written by economists, so inevitably many of them have an economic basis. However, since their sympathies are with left wing heterodox thinking, much of it could be classed as political economy, which often incorporates political, historical and sociological ideas to an interdisciplinary analysis.

Broadly speaking, the rise of Trump can be explained by patterns of socio-economic change in recent decades which have left many behind; by the perception that particular elites, including the Democrats, have become disconnected from the concerns of ordinary people and have been captured by Wall Street and the ideology of neoliberalism; and by a campaign whose rhetoric successfully appealed to raw emotion rather than to rationality alone. Continue reading

Free-market policies rarely make poor countries rich (Ha-Joon Chang’s Thing 7)

23-things-they-don-t-tell-you-about-capitalismThese telling extracts from Ha-Joon Chang‘s 23 Things They Don’t Tell You About Capitalism come from ‘Thing 7’ (p.63-5):

“Contrary to what is commonly believed, the performance of developing countries in the period of state-led development was superior to what they have achieved during the subsequent period of market-oriented reform. There were some spectacular failures of state intervention, but most of these countries grew much faster, with more equitable income distribution and far fewer financial crises, during the ‘bad old days’ than they have done in the period of market-oriented reforms. Moreover, it is also not true that almost all rich countries have become rich through free-market policies. The truth is more or less the opposite. With only a few exceptions, all of today’s rich countries, including Britain and the US – the supposed homes of free trade and free markets – have become rich through the combinations of protectionism, subsidies and other policies that today they advise the developing countries not to adopt. Free-market policies have made few countries rich so far and they will make few rich in the future.”

To illustrate the above, a brief country case study:

“[This] country’s trade policy has literally been the most protectionist in the world for the last few decades, with an average industrial tariff rate at 40-55 per cent. The majority of the population cannot vote, and vote-buying and electoral fraud are widespread. Corruption is rampant, with political parties selling government jobs to their financial backers. The country has never recruited a single civil servant through an open, competitive process. Its public finances are precarious, with records of government loan defaults that worry foreign investors. Especially in the banking sector, foreigners are prohibited from becoming directors while foreign shareholders cannot even exercise their voting rights unless they are resident in the country. It does not have a competition law, permitting cartels and other forms of monopoly to grow unchecked. Its protection of intellectual property rights is patchy, particularly marred by its refusal to protect foreigners’ copyrights…

…[the country described above]…is the USA, around 1880…one of the fastest-growing – and rapidly becoming one of the richest – countries in the world…[following] policy recipes that go almost totally against today’s neo-liberal free-market orthodoxy.”