The end of neoliberalism?

Measured by the dollar amount involved, the nationalisation of the mortgage guarantors Fannie Mae and Freddie Mac, announced today by the Bush Administration, is the largest in history. No less than $5 trillion of assets and obligations have been taken over by the US government in one hit.

Of course, that debt had long been regarded as having an implicit government guarantee and the companies involved were quangos (in the original sense of quasi-NGOs) rather than genuine private firms. Fannie was a government agency privatised in the 1960s, and Freddie was created to provide competiion for Fannie. So even though the US government will now guarantee virtually all new mortgages, this is more an admission of existing reality than a big step towards socialism.

While the quasi-governmental status of Fannie and Freddie was always problematic, this wasn’t the reason for their failure. Rather, they were pushed to accept increasingly bad loans made by the private sector. And when their difficulties became acute, the most satisfactory solution, under normal conditions, would have been to formalise the government guarantee of the existing loan book, then put them into run-off mode, writing no new business. But given the failure of the private sector, that would, mean, in effect, making it impossible for anyone to write a mortgage contract.

The fact that the credit crisis has reached this point marks the failure of the central claim of the neoliberal program, namely that private capital markets, free from intrusive government regulation, can enable individuals and households to handle the risks they face more flexibly and efficiently than a social-democratic welfare state.

In the boom that created this crisis, every part of the financial system (retail banks and mortgage businesses, major Wall Street banks, the financial engineers who designed new securitisation assets, investment funds, ratings agencies and bond insurers) had a major role to play. All have failed miserably, even though most will get to keep the rich rewards they received when things were going well.

Further update As various commentators point out, the failure here is one of actually existing neoliberalism. The “unknown ideal” of a perfect free market system remains pure and unsullied by empirical experience.

More seriously, the significance of the event is not in the marginal change in the status of Fannie and Freddie from quasi-private to quasi-public, but in the abandonment of the pretence that the normal operations of financial markets are capable of cleaning up the mess they have created, even with the liberal helpings of public money that have already been dished out.

157 thoughts on “The end of neoliberalism?

  1. “…could you also provide a list of ‘free market’ successes of the 1920’s, which, as we all know led to such boundless happiness, prosperity, peace and harmony through the 1930’s and 1940’s?”

    Don’t forget the 1900s, 1950s, 1960s, 1970s, 1980s, 1990s and 2000s, and of course much of the 19th century (in the obvious places). As you suggest, the existence of “government somewhere in the Universe” does not change the essence of the free market/capitalist system that prevailed during those periods – periods that saw astonishing social and technological advances. A list of all those developments would be pretty long, and I doubt Terje has the time to write it. Perhaps you could ask him to write a list of the successes of non-free societies?

    BBB

  2. BBB,

    I was asking TerjeP for a list in order to test his hypothesis. All too often, what is claimed as evidence of the success of neo-liberal economic policies turn out to have been due to other causes, for example, the much ballyhooed economic miracle of Chilean dictator Pinochet turn out in fact to be precisely the consequence of him having abandoned the Chicago Boys’ policy prescriptions. (See http://www.citizen.org/documents/chilealternatives.pdf)

    When what we were told were free market economic booms go bust, the market fundamentalists will, as we have observed here, retrospectively discover that they were, all along, marred, in some way, by government intervention.

    I would suggest to you that from an overall longer term global perspective, the 1950’s, 1960’s, 1970’s, 1980’s, 1990’s and 2000’s were very far from an example of unqualified success of the free-market system. To the extent that free market has succeeded it has been at the expense of destruction of humankind’s unsustainable consumption of its natural capital. Note, for example, how the growth in economic output, even if we accept the seriously flawed measures such as the GDP, correlates very closely with our consumption of our finite non-renewable petroleum reserves. On top of that we need to consider the exhaustion of fresh water reserves, (notably in the Murray Darling basin, where as we all remember, water trading was going to make everything hunks dory), the destruction of rainforests, the exahaustion of fisheries, etc, etc.

    Let’s not also forget how many of the Third World have been impoverished as a result of IMF dictated free market reforms. These include Mexican farmers whose livelihoods were destroyed after the Mexican markets were flooded with subsidised US corn as a consequence of the NAFTA agreement. These have been added to the 1 billion (by 2004) living in shanty towns across the globe.

    Of course as liveliheoods were being destroyed, the GDP measures, that neoliberals love to cite, went up in these countries as while they measure wages paid in Third World sweat shops, they had never took into acccount the economic activities of these farmers.

  3. The neo-liberals procrastinated free market reform but never practised it. A true free market does not require any regulation. Hard to imagine he ! In fact what we saw and continue to see is managed market regulation by our economically poorly informed governments. Freddie and Fannie always had an implicit guarantee from the government (now proven) which brought about the delinquent lending behaviour of lending institutions ie. the governments implicit guarantee brought about the delinquent mindset in our lenders.

    Free trade agreement are another example of managed market regulation. The documents usually hundreds of pages long, whereas one page would suffice for a FREE trade agreement.

    Austrian economics shows how regulated markets destroy our freedoms. What needs to be understood is that free markets represent freedom for individuals, property rights and free social and economic interaction amongst individuals who make the most efficient decisions.These individuals acting in their own best interests benefit from good decisions and pay for bad ones.

    Wars would be unlikely in a true free market as they are functions of nationalism, governments and religions not individuals. Let me put it this way, individuals don’t cause war, which costs money, most government can’t afford without taxing us or printing it.

    To conclude free markets do not exist, we mostly have the “like to be looked after” mindset. A true free market would not create booms and busts and would not have created what will be a prolonged credit crisis. Government guarantees,regulation and fiat money to pay for government promises and wars, caused it.

    Don’t blame Free Market economics but you can blame the poor economic managers yes the Neo-liberals. If I ran my household the way they did I would be broke and that would hurt. But were is the hurt in the irresponsible economics of our governments.

  4. dagget,
    Have you read 1984 recently? It seems you have remembered the vocabulary well. Regulation is freedom, success is failure and increased income is poverty – although I do not think that even Orwell would have come up with IMF is NAFTA. Do we get any doubleplusungood next?

  5. The Oklahoman newspaper commented that in the debate between glass half empty and glass half full, Buffett is “glass cracked�.

  6. its funny andrew, you throw a lot of labels at everyone,
    but you are clearly the most ideological person on this blog,

    doesnt battering someone with cartoonish 1984 concepts seem a bit limp to you

  7. Oh, I don’t know smiths. Daggett gives him a pretty good run for his money: blaming the free market for Hitler, blaming the free market for government intervention in corn production and generally refusing to accept that free markets can achieve any good without a corresponding bad depletion of ‘natural capital’.

    BBB

  8. Bingo Bango Boingo, where have free markets achieved “good without a corresponding bad depletion of ‘natural capital’”?

    It’s a claim I would not even contemplate making about mixed or socialist economies as they have operated thus far.

  9. daggett, a few comments up you had a go at neoliberals with this sentence: “I would have thought that ‘neo-liberal purist’ would have been an accurate label for someone who, as each new catastrophe of what the rest of us regard as the ‘free market’ system unfolds, pleads that the system is, in fact, tainted by the existence of government somewhere in the Universe”. At first glance you seem to regard present circumstances as consisting of “the free market system”. But now it seems that the term ‘free market’ is to be reserved for hitherto unknown states of government-free bliss, and instead a new concept of ‘mixed economy’ is introduced. I must be misreading you, so let’s just get first things first. Do you think Australia is a free market or a mixed economy (mixed, I presume, means consisting of private enterprise but also various instances of government intervention)?

    Proceeding on the assumption that a ‘free market’ means, as you initially suggested, places like Australia, I would say the answer to your question in 108 is “everywhere”. The damage caused to the environment pales into insignificance when compared to the improvement in human livings standards (but that’s just me – maybe I value trees, etc. less than others, certainly you). The ‘bad’ of the former does not correspond to the ‘good’ of the latter. This is most definitely not to say that environmental issues are of no consequence. They are of central importance. And you’ll not find many neoliberals for whom unrestrained and unlimited exploitation of the natural world is acceptable. Of course a great deal of the damage could have been remedied by creating new property rights (avoiding tragedies of the commons, etc.).

    I don’t agree that taking things out of the ground, such as petroleum, is in itself a ‘depletion’ of anything, since in those cases, in effect, capitalism creates the resource by making it useful (iron ore, for another example, does very little for anyone when it is left in the ground).

    Cheers
    BBB

  10. interesting proposal that ‘improvement in living standards’ in Australia proceeds from a ‘free market’. Improvement since when? The aboriginals had a very low material living standard indeed, but it took the British Empire and a continental genocide to turn things around here and ‘create resources by making them useful’. you can’t get much further from the ‘free market’ than that.

  11. Shorter gerard: Quick, look over there! Genocide!

    You’ll have to flick the switch to ‘coherent’ if we are to proceed any further.

    BBB

  12. could we get over this “shorter ” snark that’s taken hold on this blog? it’s pretty pathetic and immature frankly.

    what’s not coherent anyway? the point is that you’re trying to claim Australia’s high living standards is by virtue of the ‘free market’, totally ignoring the main factor involved in creating Australia’s wealth: British Imperial policy. quite typical of the make-believe view of history that is typical of market-fundamentalists.

  13. Happy to drop the ‘shorter’ stuff.

    But really, this British imperial policy stuff is beyond weird: “Australia was founded by British imperialists, therefore the free market does not create wealth in Australia.” That’s not coherent in the slightest.

    BBB

  14. it only seems weird to you because you’re not accustomed to thinking about the actual foundations of your beloved ‘free market’. I’m not saying that market forces don’t create wealth in Australia but it’s pretty unrealistic to put down Australia’s prosperity to the ‘free market’. Minus the coercive power of the British State Australia would be a hunter-gatherer economy. Forget about any mining boom or sheep’s back. Capitalism in general evolved hand in hand with the power of the European State. It can’t exist without the State and it creates a false dichotomy when you counterpose the two. The actual debate with regard to neoliberalism is on whether the State has any other role except to protect the priveledges of private wealth.

  15. BBB (@ #109) wrote: “… And you’ll not find many neoliberals for whom unrestrained and unlimited exploitation of the natural world is acceptable.”

    Well, then, you won’t have any difficulty giving examples of neo-liberals speaking out against rainforest destruction, will you?

    And you will, no doubt, also be able to tell us about all the neo-liberals out there who are loudly objecting to the Queensland Government’s plans to triple Queensland’s coal exports by 2030?

    BBB wrote:

    I don’t agree that taking things out of the ground, such as petroleum, is in itself a ‘depletion’ of anything, since in those cases, in effect, capitalism creates the resource by making it useful (iron ore, for another example, does very little for anyone when it is left in the ground).

    Most of what has been taken out of the ground over the past century is now in landfill. All the skyscrapers that are scarring Brisbane’s skyline are predicted to last as little as 40 years.

    The raw materials, from which all those things were made, won’t be available to future generations, and our capacity to recycle what is now in landfill, or the material contained within skyscrapers, which will become increasingly structurally unsound as time progresses, will be constrained by our lack of fossil fuel energy, which is now being profligately wasted by the global ‘free market’ system.

    Allowing market forces, and not collective human intelligence, to determine how these finite resources are used is reckless and amounts to the theft of wealth, which rightly belongs to all future generations, as well as this one, by an astonishingly cynical, selfish and greedy minority within this generation.

  16. “Allowing market forces, and not collective human intelligence…”

    Ummm, we are in different universes I’m afraid.

    BBB

  17. “I’m not saying that market forces don’t create wealth in Australia but it’s pretty unrealistic to put down Australia’s prosperity to the ‘free market’. Minus the coercive power of the British State Australia would be a hunter-gatherer economy.”

    Yes but I have taken daggett’s advice on this. You should too. When assessing the extraordoinary achievements of the free market you shouldn’t “plead that the system is, in fact, tainted by the existence of government somewhere in the Universe”.

    But you are right. There can be no true free market without a functioning state. Of course, that belief was a feature of 18th and 19th century classical liberalism. Neoliberalism continues the tradition (see, for example, the Washington Consensus statement above). I’m not sure why you think that anyone believes neoliberalism to be anarchism or libertarianism (which I think is the only charitable explanation for your accusation that I have set up a dichotomy of the free market and the existence of a state).

    BBB

  18. BBB wrote (@ #116): “Ummm, we are in different universes I’m afraid.”

    At least I happen to live in the same Universe as the 79% of NSW public opinion which opposed the privatisation of its electricity assets.

  19. Yeah, the unions’ misleading campaign was pretty effective, huh? You can’t really blame the people when self-interested lobby groups betray the public’s trust though.

    BBB

  20. I’m not sure why you think that anyone believes neoliberalism to be anarchism or libertarianism…

    well! why would I think that? I don’t think you can separate neoliberalism from rightwing so-called “libertarianism”. It is a coherent and superficially attractive idology promoted by a massively well-funded complex of Anglo-American Think Tanks. Its objective is to reverse the social-democratic gains of the twentieth century. They aren’t opposed to the existence of a state, but their ideal is a state that does as little as possible beyond the protection of private wealth.

  21. No, no, double no. Once again, Wikipedia delivers on this:

    “The term libertarian has also been used to define neoliberals. But there are key differences between the two groups. Libertarians believe in reducing government to a very minimal role (in the United States, commonly those roles enumerated in the US Constitution) or eliminating government altogether. Though they often work to eliminate government programs that designed to redistribute income, neoliberals do not seek to drastically reduce government, as government is a key institution in maintaining the conditions for wealth accumulation. Neoliberals may seek to invest in healthcare and education, if these benefit the regional capital accumulation strategy, or they may seek to invest heavily in incarceration, policing, and defense industry to maximize capital accumulation.”

    BBB

  22. Oh, and as for “superficially attractive”, look no further than daggett’s touching faith in government (in his universe, known as “collective human intelligence”) to responsibly dish out resources to the citizenry. Perhaps it appeals to him because it flatters his ego. In any case, it is a prescription for the absolute rule of a cynical, selfish and greedy minority and for human misery on a massive scale.

    BBB

  23. Though they often work to eliminate government programs that designed to redistribute income, neoliberals do not seek to drastically reduce government, as government is a key institution in maintaining the conditions for wealth accumulation.

    you’re parsing terms in a prety meaningless way, but that sentence makes my point. neoliberals believe that the only role of government is maintaining the conditions for the accumulation of private wealth. it is a prescription for the absolute rule of a cynical, selfish and greedy minority and for human misery on a massive scale. any true libertarian would find neoliberalism abhorrent.

  24. Far out you are confused. One minute neoliberalism and libertarianism are indistinguishable – they cannot be ‘separated’ – the next minute pure libertarians find neoliberalism abhorrent (mostly true, by the way).

    “Neoliberals believe that the only role of government is maintaining the conditions for the accumulation of private wealth.”

    No, that is not the only proper role, but clearly it is one of the most important. To put it another way, government policy that makes people poorer is unlikely to be good.

    BBB

  25. well as you know there are different takes on the word libertarian. A lot of rightwingers call themselves ‘libertarian’, but apart from the ‘useful idiots’ who actually believe this stuff, it’s really just a cover story for what rightwing governments always do – use the Government as a tool of the wealthy. there is an obvious logical disconnect, the most apparent manifestation of which is the monstrously huge U.S. deficit.

    This should be abhorrent to a real libertarian, in the original humanist sense of the term. this term was commonly used to describe the socialist-anarchist tendency that was counterposed to Leninism, especially in Europe of the early twentieth century. but in postwar America the term has been appropriated by the Ayn Rand brigade, and a collection of wealthy privately funded Think Tanks, which promote “New Right” ideology, which, whatever you want to call it, has come to be associated with the term ‘libertarian’. Its an organized movement with an organized philosophy, its aim has been to reverse the social-democratic reforms of the mid-twentieth century, in short, to limit human rights to negative rights only. they don’t care if changes to government policies make people poorer as long as there is no ‘redistribution’ of income. in the parts of the world where their policies have been put into practice they’ve caused human misery on a massive scale.

  26. BBB wrote (@ #119): “Yeah, the unions’ misleading campaign was pretty effective, huh?”

    Of course it was, BBB.

    But, happily, in the Universe you inhabit, it all turned out for the best.

    Unlike in my Universe, the people were smarter and understood that Iemma, Costa and all those investment bankers behind them only wanted the best for them. They knew that because they had been told that in the newspapers, on the radio, on television and on the Internet over and over again for the last 3 decades.

    However, as the government was just about to sell their electricity generators, some of the people in your Universe started to become fooled or confused by the unions’ misinformation campaign. Luckily, at the last minute, a very expensive government information campaign was able to bring all those people back to their senses, and they were able to sell off their generators and everybody lived happily ever after.

  27. gerard, it also makes perfect sense for capital accumulation to the be the central purpose of neoliberalism, since the accumulation of capital is basically the only thing that can lift real wages for workers as a whole in the long run.

    BBB

  28. In my Universe, in which the 2nd law of thermodynamics, that is, the tendency for the disorder, or entropy, of any closed system to increase, applies, capital, in the broader sense, isn’t accumulated, except as the result of natural and geological forces converting solar energy into stored chemical energy in fossil fuels.

    In the past three centuries, what has been called “the accumulation of capital” has been no more than the conversion of that capital mostly into waste – waste energy, pollution and landfill – and a small amount of useful capital in other forms – buildings, factories, bridges, cars, ships and other artifacts. Even most of the latter only ends up as landfill after time. To visualise the natural capital that has been consumed to create that wealth, just examine any of the many graphs illustrating the consumption of oil, coal, copper, etc. The areas depicted on the graphs represent the amount of finite non-renewable resources which have been mined or extracted, and which won’t be available to future generations.

    It’s pretty clear that the accumulation of wealth, that the free market ideologues who frequent this site (some of whom appear to have either left us or lost their voices) would have us accept is due to the inherent superiority of the capitalist economic system, would not have occurred if that natural capital had not been available in the first place.

    If we stupidly continue to allow those resources to be exhausted as those ideologues constantly exhort us to, we will very quickly learn, to our cost, that the claimed performance of the free market won’t endure once those resources are gone.

  29. “In the past three centuries, what has been called “the accumulation of capitalâ€? has been no more than the conversion of that capital mostly into waste – waste energy, pollution and landfill – and a small amount of useful capital in other forms – buildings, factories, bridges, cars, ships and other artifacts. ”

    In aggregate, this is probably right. What a deal though! Capitalism can be wasteful with energy over three centuries and still massively improve the human condition. And of course energy-intensity tends to drop as the free market does its work. The ‘small-amount’ is a little misleading because it is only true relatively. In historical terms, the wealth generated by modern capitalism is astonishing.

    “It’s pretty clear that the accumulation of wealth, that the free market ideologues who frequent this site (some of whom appear to have either left us or lost their voices) would have us accept is due to the inherent superiority of the capitalist economic system, would not have occurred if that natural capital had not been available in the first place.”

    In other words, capitalism wouldn’t exist if the world didn’t exist. Well spotted. Of course, in the brave new world of daggett’s proposed Universe, government-based ‘collective human intelligence’ will bring into existence forms of wealth not dependent on the laws of physics and chemistry. You seem to fighting a battle with no one. The conversion of natural resources is a given. The argument is which method is best at doing that. The shocking energy-waste and pollution records of the 20th century’s communist states are strong evidence that a ‘collective human intelligence’ that is not a market is the very worst method.

    “The areas depicted on the graphs represent the amount of finite non-renewable resources which have been mined or extracted, and which won’t be available to future generations.”

    Quite right, let’s leave it all in the ground for ‘future generations’. Of course, if any future generation is the least bit responsible, it will leave all the resources to further future generations. Ultimately, the very last generation will have lots and lots of natural resources, which will be fantastic. “But think of our children! And our children’s children!”. Government isn’t even smart enough to efficiently distribute all resources to the people who are alive today, and now you want it to responsibly dish out resources on a long-term inter-generational basis? Talk about naive.

    BBB

  30. BBB wrote, “In other words, capitalism wouldn’t exist if the world didn’t exist.”

    I don’t remember trying to argue that.

    Clearly the world was in existence before all the natural capital, now being exploited by capitalism, was discovered.

    I was pointing out that what when TerjeP (@ #61) claimed that “the the neoliberal project … has delivered in spades” he was not taking into account a lot of factors, including the destruction of our natural capital.

    Also, I am still waiting for TerjeP to provide a list of the claimed achievements of neo-liberalism so that his claims can be tested.

    I don’t quite see how it necessarily follows that if we don’t accept the pathological neo-liberal rejection of any government intervention in the economy, that it necessarily follows that we therefore embrace Stalinist gulag ‘socialism’. If anyone wants to read a very good article about the shortcomings of the Soviet Union in regard to the environment, I commend the article (20 pages) by Sandy Irvine “Trotsky’s Biggest Blindspot”.

  31. the fact is that neoliberal policies have been everywhere correllated with lower growth in real wages

  32. Yes I think neoliberal ideas in practice in China (e.g. decollectivisation of the countryside, dismantling of government production quotas, the re-introduction of privatised means of production, phased withdrawal of state resource allocations, reform of state-owned enterprises so that profits can be retained, progressive relaxation of trade barriers, a re-opening to foreign capital, etc.) have smashed real wages growth to pieces. The Chinese are being starved in ever-increasing numbers. And in any case any market-based improvement is in fact tainted by the existence of a Communist Party somewhere so I am inclined to put any gains (which I do not concede) down to socialism rather than capitalism.

    Seriously though, by all means critique the shock therapy method. It has its downsides. However, to reference botched second- and third-world development efforts of the late-twentieth century,and then go on to assert neoliberal policies are everywhere correlated with lower growth in real wages, is to wander aimlessly into nut-bar territory. The historical sweep of modern Western civilsation is firmly set against you. Moreover, the least neoliberal places have historically achieved the least (I have been asked not to mention them by name). The real clowns are the un-nuanced ones who think ‘neoliberalism’ means ‘what happened in Russia and South America’. I count you among those clowns (sorry).

    Now a sizable portion of Teh Australian Left has woken up to this, which is why they are now so keen to laud and appropriate the neoliberal achievements of the Hawke/Keating governments. Those governments were far more worthy of the name neoliberal than the acutely disappointing Howard government. Would that Teh Left were correct more often.

    BBB

  33. BBB,

    Good work on the comments — all very reasonable stuff — but I think you’re missing the bigger picture. You are arguing with what seem to be genuine honest-to-god socialists. These are the kind of people who want to socialise industry, the kind of people who think “Trotsky’s biggest blindspot” was environmental policy. These people shouldn’t be argued with, they should be cherished as living historical artifacts. Treat them the same way you would treat a primitive tribesman, or a feudalist, or someone who worships the Roman gods.

  34. Joseph Clark (@ #133),

    I mentioned Sandy Irvine’s “Trotsky’s biggest blindspotâ€? as response to BBB (@ #129) writing:

    The shocking energy-waste and pollution records of the 20th century’s communist states are strong evidence that a ‘collective human intelligence’ that is not a market is the very worst method.

    I referred to the article to demonstrate that I was, indeed, aware that the Soviet system had gravely serious environmental problems. Irvine focussed the article on Trotsky in order to point out that Stalin’s poor environmental policies, in fact, owed a lot to the environmental myopia of Trotsky and a lot of other early 20th century socialists.

    This environmental myopia has unfortunately been demonstrated in the late 20th century by the majority of socialists. As a consequence, they have – and some still do – support population growth, infinite economic grwoth and high immigration. Many of my online arguments are with such people.

    If you happen to know of an article or a book which better explains these issues than Sandy Irvine does, then please let me know.

    Also, whether you or BBB choose to argue with me, “cherish” me as a “living historical artifact”, or ignore me altogether is fine by me.

  35. Yes this has gone on for a while, huh? Hope springs eternal…

    I do want to get the bottom of one thing though, and that is the ‘leave it in the ground for future generations’ stuff. The relevant passage is this:

    “Allowing market forces, and not collective human intelligence, to determine how these finite resources are used is reckless and amounts to the theft of wealth, which rightly belongs to all future generations…”

    So, daggett, what is the proposed government process by which natural resources are divided fairly between the present generation and all future generations? You must have thought about this at length to be so emphatic about it.

    BBB

  36. BBB, I see that you have politely declined to take Joseph Clark’s advice.

    There is no simple answer, but Rex Connor’s plans in 1974 to make Australia energy self-sufficient by buying back the farm and to end the Australian Government’s encouragement of population growth. As we all know that came to grief largely thanks to Rupert Murdoch’s vicious vendetta against Rex Connor and the whole Whitlam Labor government, which is why we are in the mes we are in today.

    If somewhat similar plans for energy self-sufficiency and population stability of Nixon and Carter had not been scrapped by Reagan, the U.S. would also not be in the mess it is in today.

  37. However, to reference botched second- and third-world development efforts of the late-twentieth century,and then go on to assert neoliberal policies are everywhere correlated with lower growth in real wages, is to wander aimlessly into nut-bar territory.

    In the first world, growth in real wages has been slower since the 70s than before the 70s. Economic growth in general has been slower. That is why the postwar decades of Keynesian social-democracy are called the “Golden Years” of economic history.

    Almost all the wages growth in the third world has occured in East Asia, where Neoliberal “roll back the State” policies were avoided. Instead their governments undertook large scale economic planning.

    In every part of the world where Neoliberalism has been implemented in the third world it has totally failed to alleviate poverty and has resulted in worse economic performance than in the 50s and 60s before Neoliberalism took over. In Russia the Neoliberal experiment was so bad it created nostalgia for the days of Stalin.

    I think there’s a lot of dancing around terms here. On the one hand, you think it’s clownish to describe the economic catastophies imposed by the IMF/World Bank on various second and third world countries in the 80s and 90s as “Neoliberal”. But everybody knows that’s EXACTLY what “Neoliberalâ€? means.

    And then, you go and start calling “Deng Xiaoping Thought” neoliberal!

    You’re trying to run from the scene of the crime, actual Neoliberalism as it was practice during its ascendency, when starry-eyed Milton Friedman acolytes dominated the world’s development agencies. You KNOW what we’re talking about here – the New Right – banging “the Road to Surfdom” up and saying “the government that governs best governs least”. The mass-produced doctrine of the Cato Institute, the American Enterprise Institute, the Heritage Foundation, The Fraser Institute, the Centre for Independent Studies etc. The “Chicago School” of economics. Privatization, deregulation, welfare reform. You don’t want to own the total, utter failure of this ideology, so you pretend not to know what Neoliberal means – except “the opposite of North Koreaâ€?.

    And LOL, hiding behind China! A one-party “People’s” State almost as far removed from Neoliberalism as you can get, ruled by the Communist Party that marshals armies of millions of peasant laborers to build enormous new planned cities out of bog, regulates internal movement, controls currency exchanges, has every worker belong to a Communist Party controlled labor union, has huge taxes on imported goods, has a massive state-owned, party-controlled education program (incliding recitation of the works of Marx and Lenin, Mao and Deng Xiaoping and Jiang’s “Three Represents”), an enormous military-industrial base of technological research and state-owned high-tech companies. The communist party legally owns all the land and hundreds of thousands of businesses from small village enterprises to enormous huge banks that subsidize hundreds of thousands of private businesses to sovereign wealth funds controlling billions in the assets and securities of various countries. Does that sound “neoliberal” to you? Sure they’ve done some real ‘Neoliberal” things, like destroying the healthcare system so that if you turn up in the emergency room without cash-in-hand you can bleed on the floor and nobody will help you. Or privatizing housing, which has left housing prices totally impossible for the next generation of Chinese. or laying off millions of workers, or ruthlessly crushing independent peasant or worker organizations. But the Chinese government knows it can only go so far, or it will be overthrown. There have actually been thousands of protests in the countryside in recent years, which prompted Hu Jintao to declare a massive government spending program known as the “New Socialist Countrysideâ€?. Does that sound Neoliberal to you? at least the Chinese are not living under true Neoliberalism like the wretched people of the Philippines, and other countries where the IMF has held sway. China owes its success to doing things differently from the countries that had things the IMF’s way. They had the Russian experience to educate them. You seem to think that because money and a market in goods and services exists “somewhere in the world” that you can call it “Neoliberal”. That’s nut-bars!

    Now let’s be honest – did you read Klein’s book? The book describes the movement in great detail and the way you are pretending not to know what Neoliberal means makes me think you didn’t read the book at all. The “Chicago Boys” program of Actual (as opposed to “Deng”) Neoliberalism was centered around Milton Friedman and other ideological luminaries of the Mont Pelarin Society. It was strongly involved with the coup in Chile and the cruel economic policies that were imposed on Latin America during its period of Rightwing military dictatorship. Through Reagan and Thatcher it blossomed into a political movement replete with its own canon of works and industry of serious scholars. Policies were introduced to strip back the social-democratic gains of the post-War years and “roll back” State. What was the result? A huge expansion of the financial sector and growth in profits, but for ordinary people it has meant slower rates of wage growth, more and more debt and a reduction of entitlements. But contrary to all the ideological hoo-ha, the State continued to grow. But it did mean what it said for countries in the second and third world, where the Bretton Woods institutions, taken over by New Right “Neoliberals”, were able to put their beliefs into practice.

    These countries had their markets forcibly opened to subsidized agricultural goods from the first world, which drove millions of impoverished peasants into the sprawling shanty-towns that encircle every major third world city. Far from thinking that the State should supply these unfortunates with water – Neoliberalism has prescribed that their water should be privatized! It’s different in China, where the State distributed land to farmers in the country while constructing mind-bogglingly huge housing projects and distributing houses connected with electricity and water to the urban population, and which established large industrial enterprises protected from foreign competition and still employs millions. Not that I am singing China’s praises but that is why China is not full of the lawless, impoverished slums that exist in other 3rd world cities.

    Perhaps the silliest thing about calling Deng’s China Neoliberalism is that the post-Mao reforms in China began with the agricultural land being equitably distributed to the peasants for their own use. In most countries that have not undergone a communist revolution, such as in Latin America and India, land and wealth remain highly concentrated. Neoliberalism has been adamently opposed to land reform – even government welfare is considered too ‘redistributive’.

    Neoliberalism doesn’t mean “markets”. Social-democracy has no problem with “markets”. Neoliberalism means that the State should involve itself as little in the economy as possible – i.e. it’s duty is to protect private wealth, and to protect nothing else. If people want to survive they must rent themselves out. Since the 1970s, wherever Neoliberalism has been put into practice, it has failed. The numbers bear this out – lower world economic growth, lower growth in real wages in the first world, no growth or negative growth in the second/third world, which experienced pure Neoliberalism. The World Bank has admitted the complete failure of its own policies.

    I thought we’ve already gone through how the economic policies of successful Asian countries differ from the “Washington Consensus” formula, which has actually been imposed on a huge number of poor countries and has had universally terrible outcomes. You know that “Shock Therapyâ€? has been a catastrophe so you pretend that it isn’t what Neoliberal means. But that’s exactly what it means. You sound like those old Trotskyists saying “Communism has never been tried, so we don’t know if it would work or notâ€?. Ironically the one place you try to claim for a success is a Communist State which avoided the Washington Consensus – just like every successful economy in the West or East has avoided it.

    Rich countries all became rich by following policies very different from those that the Washington Consensus imposed on poor countries. Every single successful economy in the world has had a powerful interventionist State that planned extensively, not emerged out of the magic of the “free market”. Most of the technologies that have shaped the twentieth century came out of the State sector. A large interventionist State is the best way to avoid economic risk. The Right wants to destroy Welfare but as the latest financial crisis reveals, they can’t live without it.

  38. It’s funny, I didn’t think there was anyone left who thought China’s recent successes were all down to socialist planning. I even made a joke of it by compiling a list of things that the Chinese government ceded to private interests. And then you made a joke of yourself.

    BBB

  39. BBB’s example of China (@ #132), presumably provided as an example of neo-liberalism “deliver(ing) in spades” as claimed by TerjeP (@ #60) seems not to stood have up very well to scrutiny (@ #137).

    That no one else has responded to my challenge (@ #100) to provide any other example to substantiate TerjeP’s claim seems highly suspicious to me.

    What growth in real wages?

    Gerard’s overall excellent contribution (@ #137) does, nevertheless, have some flaws. As one example, I think that gerard’s acceptance that neo-liberalism has resulted in “growth in real wages”, even if it was lower than what would have been possible if government intervention policies had persisted, gives far more credit to neo-liberalism than it deserves.

    If we had truly experienced any persistent and substantial growth in real wages since the 1980’s then our circumstances would be truly wonderful today.

    However, I hotly dispute the validity of measures of inflation and economic prosperity, particularly the (per capita) GDP, from which that conclusion is drawn.

    If we are consuming more and have second and third family cars, are we truly better off today, if we accomplish less with all those extra material goods than we could one or two generations ago?

    If some of us can afford to buy an elaborate high-tech home security system, are they truly better off than, when, a generation ago, they could not afford one, but also did not need one?

    Dozens more examples could be provided, but for now I will quote a comment in response to an article Living standards and our material prosperity I wrote for Online Opinion on 6 Sep 07:

    Am I (and I suspect others) better off than my parents 40 years ago? No. On a comparative scale I have far fewer benefits than they did then. More importantly, they agree with this.

    China

    Whether we attribute China’s economic growth to neo-liberalism or state intervention or a combination of the two, anyone who grasps the physical limits of the planet, the laws of physics and who understands ecology should appreciate that it is a catastrophe for both the Chinese people and the planet.

    All those supposed ‘experts’ who, in past years, held out glittering visions of unbounded prosperity that the growth of India and China would bring to the rest of us, somehow did not see what should have been obvious to a high school student, that is, that those economies would consume the same finite natural resources that the rest of the world needed. Should they have been be surprised that petroleum now costs around $140 per barrel, when it was at around the $40 per barrel mark before the Chinese economy expanded?

    Whether or not we could have done anything to prevent this at least the supposed ‘experts’ owed it to the rest of us to provide a realistic prediction of how the economic growth of China and India would affect the rest of us.

    Chinese economic growth (in addition to the destructive economic activity in the established industrial economies) is trashing its own environment as well as the world’s. If their ecology is destroyed and our finite global stock of natural resources are exhausted, the wealth we now see in China’s economy see will quickly evaporate.

  40. BBB, the joke is that you call the Chinese economy ‘neoliberal’. If that’s the case then the term has lost all meaning. I’ve explained what it means and there are many books on the subject. You pretend not to understand, and say that ‘neoliberalism’ means any place where there’s a market and private business in existence. But if that were the case then there would be no difference between ‘neoliberalism’ and social democracy or Keynesianism, which also involves markets, money and private enterprise.

    but there is a difference and it’s a very ugly difference and you obviously can’t defend it so you refuse to acknowledge it.

  41. dagget @ 139 – I think you’ll find that the ‘experts’ who failed to point out the problems with unbounded growth (particularly when India and China got in on the act) are the same ones who poo-pooed the Club of Rome’s work.

  42. Yes dagget obviously the world cannot sustain everybody living by first world standards – and China’s rise is going to put increasing pressure on the resources of our world civilization. but one cannot really tell the Chinese to ease off their growth so that we can continue to enjoy cheap petrol etc. In a sense, they are doing more than most other 3rd world countries are for the environment by imposing the One Child Policy – which is another example of how remote China is from Neoliberalism, with a State so interventionist it controls the number of children people can have (a policy that has actually done a huge amount to raise living standards).

  43. Gerard (@ #142),

    It is in no-one’s interest, neither the Chinese, nor ourselves, that the Chinese continue their economic growth.

    We have to do whatever it takes to convince the Chinese to reduce their consumption of natural resources.

    If that means that we in Australia, the U.S., Canada, the U.K., etc, agree to limit our own consumption of natural resources, then that is what we must do. Most of all the obscene profligate consumption by the beneficiaries of the neo-liberal counter-revolution since 1973 has to end.

    Of course that won’t be politically easy, but we have to decide: are we resolved to make a serious attempt to fix the problem or aren’t we?

    If we decide we aren’t then our life-support system faces certain destruction within decades if not years.

    If we could manage, in a previous era to have acceptable (and I would argue better) standards of living whilst consuming natural resources at a much lower rate, then we should be able to do so again.

    But first we have to throw off the shackles of neo-liberal orthodoxy, so that we can make rational choices, as a society, how to make use of what resources we have.

  44. daggett and gerard,

    I hope it’s not too late to distance myself from my earlier comments and offer assistance in the upcoming revolution you propose. Due to my shameful past associations I believe I can be useful rounding up the freedom-loving counter-revolutionaries who seek to undermine your glorious plans.

  45. “BBB, the joke is that you call the Chinese economy ‘neoliberal’.”

    LOL, what a lie! No, I’ve said that neoliberal ideas about private (ie. non-government) control of the means of production, trade and FDI have gradually been put into practice in China, to the benefit of millions. For the particularly slow-witted, I will paraphrase from my own comment above: “Notwithstanding these changes, in some areas [China] remained (and still remains) a seriously non-neoliberal economy. But it is no answer to the proposition: ‘Neoliberal reforms helped create wealth in [China]’ to say: ‘But [China] is not a perfectly neoliberal country’”.

    gerard, the kind of debating trick you’ve just employed is usually a sign that the speaker’s argument is running out of intellectual puff. I’m not surprised.

    As for the differences between neoliberalism and social democracy, on the vast spectrum of political economy they are not so far apart. The social democrats unashamedly acknowledge the superiority of markets as an allocator of resources in huge swathes of any economy. Social democracy therefore necessarily operates within the global capitalist system. That is why socialists believe social democrats to be traitorous collaborators.

    BBB

  46. Joseph Clarke, Bingo Bango Boingo,

    You are both comic geniuses.

    How paranoid of myself to imagine that our society had been tied down under the shackles of “neo-liberal orthodoxy”.

    Of course I should have realised that governments are completely free, at all points, to consider all possible courses of action, whether or not they conform to neo-liberal economic theory.

    For example, should the government consider spending a little more of today’s budgetary surplus in order to prevent a future environmental deficit, say, in the Murray Darling Basin, I am sure that the corporate sector and their newsmedia would allow the discussion of this to proceed calmly.

    Note how measured and considered was the newsmedia during the electricity privatisation debate. They certainly could not stand accused of having hysterically villified political opponents to privatisation, including NSW Opposition Leader Barry O’Farrell, on the basis of neo-liberal theory in order to stampede the NSW public into acceptance of privatisation.

    I am confident had Rudd decided not to match Costello’s promised tax cuts prior to the 2007 elections that the corporate newsmedia would have given Rudd a fair hearing.

    BBB, your wit, as well as your ability to read my mind, has knocked me flat. Now that my views of social democrats being “traitorous collaborators” has been held up before all for ridicule, I don’t know how I will be able to bring myself to show my face on this forum any more.

  47. My apologies, BBB.

    I had become accustomed to have my political views misconstrued in order to jhave them held up to ridicule.

    I can be critical of “Social Democratic” politicians but I don’t tar them all with the same brush.

    There are unsophisticated types who don’t grasp the complexities of our political and economic circumstances, but I don’t believe I am one of them.

  48. daggett,

    With all good humour and respect, the fact that the modest electricity privatisation plans in NSW have not caused a strong political backlash is because the argument against them is particularly weak. You may not see it that way, but the majority do.

    And you should be more honest to BBB’s jibe. You may rightly see people like me as heretics to your beliefs, but consistency demands you also damn social democrats who hold any of the values you so despise.

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