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