A reminder to myself on terminology

I’ve done a few posts here on the implications of the financial crisis for the ideological/political viewpoint often referred to as “neoliberalism”. Various people have objected to this as pejorative, but usually without offering a satisfactory alternative. I’m just starting a paper on the topic and looking over my old files, realised that I’ve previously used “economic liberalism” which seems much more satisfactory.

The crucial point it conveys is that economic liberals may or may not be liberal in the more general political sense – Pinochet is the most extreme example, but the extensive support he got from the Mont Pelerin society and from authoritarian economic liberals like Thatcher illustrates the point. Locally, the range of possibilities consistent with economic liberalism includes authoritarians like Howard and Downer as well as more broadly liberal positions such as those of John Hewson, Malcolm Turnbull and, to some extent, Peter Costello.

39 thoughts on “A reminder to myself on terminology

  1. TerjeP,

    I note that you have ignored the critical point in my post, that being that the NSW public explicitly rejected privatisation in the 1999 elections and have remained overwhelmingly opposed ever since. Furthermore, Iemma actually promised before the 2007 elections at electricity would not be privatised. During the actual election campaign no policy in support of privatisation was put to the electors.

    The fact that you evidently approve of Iemma’s and Costa’s subsequent efforts to privatise NSW’s electricity confirms my point that neoliberalism is indeed inimical to democracy.

    Regarding Margaret Thatcher‘s supposed popular mandate.

    In 1982, after the Pinochet-loving Hayek wrote to Thatcher suggesting that he emulate the Chilean dictator’s shock therapy policies, Thatcher responded:

    “I am sure you will agree that, in Britain with our democratic institutions and the need for a high degree of consent, some of the measures adopted in Chile are quite unacceptable. Our reform must be in line with the the traditions and our Constitution. At times the process may seem painfully slow.”(quoted by Naomi Klein in The Shock Doctrine (page 131)

    Indeed, it seemed that Thatcher was on her way out, but of course, as we all know, shortly after the Falklands War began, and rather than accept a negotiated settlement, she chose to sink the Belgrano needlessly killing hundreds of Argentinian sailors.

    This prolongation of the war saved Thatcher’s career and she was re-elected in 1983 as we know. However, the vote in those elections and the subsequent 1987 elections were not as overwhelming as we would be led to believe. In both elections, the combined votes of the Labour Party and Liberal and Social Democratic alliance (53.30%, 53.35%) actually exceed that of the Tories (45.98%, 46.24%)

    Had they not been saddled with the brain-dead first-past-the-post system and, instead had proportional representation or had an elected upper house as we have in Australia, their would have most probably been some constrain on Thatcher’s power.

    Furthermore, the elections were perverted, as they are in this country, by the insidious influence of Rupert Murdoch’s News Limited and the other corporate newsmedia.

    So, there is no conclusive evidence that Thatcher had overwhelming popular mandate for her policies.

    Certainly if the political processes not been so manipulated by Thatcher herself and the corporate newsmedia, the outcomes would have most likely been dramatically different.

    Even iff it can be said that Thatcher did obtain a popular mandate for her policies, then that is certainly not the case for anywhere else on the planet (with just possibly the brief arguable exception of Jeff Kennett’s Victoria).

    To get these policies implemented invariably required politicians to deceive their electors and manipulate the democratic processes, or worse, jail, torture and murder their opponents.

    Keating never obtained a popular mandate to deregulate the economy, privatise our retirement income or sell Qantas, the Commonwealth bank, etc.

    Without resort to such unconscionable means neo-liberalism would have, in all probability, exist only in Friedman’s conceptual models.

  2. If they think that economic freedom is so great its curious that they don’t plan to relocate their head offices to “freer” places like Afghanistan, Turkmenistan or Bangladesh, where the tax and GDP % for government spending is lowest, along with the services and quality of life. It seems to be a case of live as I say and not as I do.

    Tax isn’t the whole box and dice when it comes to economic freedom. A relatively stable currency and secure property rights are also important and possibly more important. Both entail good government more so than small government although a small government can readily achieve both if it is commited (just look at Hong Kong). Protecting property rights and maintaining a stable currency are not expensive activities although they do entail a little wisdom.

    If tommorrow we introduced a 100% tax rate on incomes over $20,000 and made the first $20,000 free of tax we would soon get a very small economy. However we would get an extremely small amount of tax revenue due to non-compliance or sheer non-production. Under such a situation the tax revenue as a percent of GDP may be quite tiny even whilst the real tax burden is quite massive. Revenue to GDP ratios are not overly useful indications of the tax burden and are even less useful as proxies for economic freedom.

    Most of the post soviet nations that have slashed tax rates (eg Estonia and more recently Russia) have managed to increase their revenue. In fact Russia slashed taxes precisely because they previously had a revenue crisis and like any good policy it actually achieved it’s objective. Even with a very low flat tax Russia has a higher tax revenue to GDP ratio (36%) than Australia (30%). And whilst low tax Hong Kong has a low ratio revenue to GDP ratio (13%) I would rather live in Hong Kong than Russia and many advocates of economic liberalism also clearly choose to live there.

  3. Keating never obtained a popular mandate to deregulate the economy, privatise our retirement income or sell Qantas, the Commonwealth bank, etc.

    No but the Hawke / Keating team was elected again and again. You can’t on the one hand complain that economic liberalism is undemocratic and then disown the economic liberals that are democratically elected. It would seem that you only like democracy when the outcome is what you want. Which seems quite undemocratic on your part. You can’t expect economic liberals to sell their ideas via democratic systems that don’t exist. However if you’re merely advocating more direct democracy then even as an economic liberal I’d agree in many instances. Which is why I started the “Citizens Power of Veto” cause on facebook:-

    http://apps.facebook.com/causes/43536?m=037d6aea&recruiter_id=6758475

    And you won’t find me arguing in favour of first past the post or other second rate democratic systems. Economic liberals will still sell their wares even if democracy is made more perfect. Bring it on I say.

    A new WorldPublicOpinion.org poll of 21 nations around the world finds that large majorities in every country say their government should be responsible for ensuring that citizens can meet their basic needs for food, healthcare, and education.

    On average, across all countries polled, nine in 10 say that their government has the responsibility to ensure access to food, healthcare, and education.

    It is hard to disagree with the idea that people should have food, healthcare and education. I would vote for such a proposition. Even whilst believing that the best way to have such things is to remove excessive regulations, excessive taxes and to privatise farms, hospitals and schools. When people say they want governments to provide these things they are merely saying what they want their leaders to focus on. It does not mean they want the farms nationalised.

  4. p.s. Find me some examples where a party advocated general tax hikes and got elected against an opponent that didn’t. Obama got elected whilst promising tax cuts for the majority. Keys in New Zealand got elected whilst promision tax cuts. Rudd got elected promising tax cuts. People may hate privatisation but they love tax cuts. L-O-V-E.

  5. I see few small grains of truth and logical argument in TerjeP’s recent posts.

    I glad to see at least TerjeP supports direct democracy, even though, if adopted, it would almost certainly kill off for good any prospects for the further privatisation of publicly owned assets.

    I am also glad to see that TerjeP agrees with me that first-past-the-post is an undemocratic voting system. It bewilders me how many otherwise sensible and logical people see nothing wrong with first-past-past. (The discussion here may be of interest.)

    Nevertheless, he has again dodged the main issues, in my opinion, including the privatisation of NSW’s electricity assets without any electoral mandate to do so and against overwhelming public opposition.

    In regard to Keating’s supposed popular mandate to implement neo-liberal policies, we need to cast our mind back to those years to remind ourselves of the context in which he achieved his reactionary anti-Labor so-called ‘reforms’.

    The floating of the dollar and other measures to remove regulation of the financial sector came as a complete surprise to the Australian public shortly after the 1983 elections and were never publicly debated in any sense until after the event.

    In subsequent years Hawke and Keating got back into office again and again by brazenly telling the Australian public that if they weren’t prepared to cop his pro-business shock treatment then they would have to cop the alternative of the even more aggressively pro-business opposition.

    Had Keating any commitment to the principle of democracy, it would have occurred to him that the Australian public were entitled to more choice than two variants of neo-liberalism, but like nearly all proponents of neo-liberalism, he does not.

    In the 1986 elections Howard put an extreme program of a fire sale of assets to the public and was roundly beaten.

    Nevertheless as Kevin Morgan notes in “Caught in no-man’s land” of Sring 2004:

    “… the ALP’s privatisation frenzy … saw nine of the twelve public enterprises that were on John Howard’s 1986 privatisation hit list sold over the seven year period to 1996.”

    In 1993 after explicitly promising not to fully privatise the half-privatised Commonwealth Bank, Keating went ahead and did it anyway. Also he promised not to privatise Telstra, but has since given his moral support on at least two occasions I can recall to the Howard Government’s moves to fully privatise Telstra on two occasions since then, so we can judge from that how sincere was that promise made by Keating in 1993.

    It is only through such deceit and manipulation (or worse, in the case of Chile, Argentina, Brazil, Bolivia, Russia, Iraq, Poland, the United States, South Africa, etc.) is it possible for the goals of neo-liberalism to be realised.

    Of course, Keating, together with two other former failed Labor political leaders, Bob Carr and Barrie Unsworth gave their full support to Iemma’s attempt to fully privatise NSW’s electricity earlier this year.

  6. there are plenty of left liberal/anarchist/libertarian types who would argue that the people John is defining his term against are not economically liberal at all. Most notably Dean Baker. Crony capitalism, state granted monopolies and other market distortions of all sorts have flourished under the neo- or economic liberals.

  7. Daggett,

    Floating the dollar was not in my view a pro-market reform. Hong Kong uses open market operations to rigidly fix it’s currency to the US dollar and it is in my view no less a free market solution than Australias floating currency and targeted interest rates. So long as the governments of a nation dictate the nature and form of the currency and monopolise the creation of currency then no monetary policy is a free market solution (Hong Kong, like Scotland does at least allow private currency). I would argue (and in fact if you follow me around the blogosphere you will see that I often do) that given a government created currency as used in nations today, targeting the exchange rate (as suggested by the likes of economists such as Steve Hanke) is in many circumstances a far better solution than targeting interest rates or money supply measures such as M1s M2s etc. The whole shift towards targeting interest rates and allowing currencies to float is an ugly Keynesian invention.

    If we look back in hindsight Australia gained very little from floating the Australian dollar. If we had stayed fixed to the US dollar we would have broken the back of inflation sooner and we would enjoyed cheaper capital. In fact I’d support a move back to a fixed exchange rate target with the US dollar (without capital controls) in a snap.

    If we take a lead from classical liberals such as Karl Marx or Adam Smith then we would be using open market operations to fix the currency to gold. Or even better we would let the private sector do it as they did in Australia all the way up until 1910. And there would be a very quick path to a single stable international currency if national governments abandoned their currency businesses entirely.

    In terms of the democratic question I don’t ever expect the players within the democratic game to concede anything to their ideological enemies merely for the sake of being democratic. The most we can expect is that they respect the democratic rules as they exist and perhaps occasionally make some minor pro-democratic reforms. Politicians almost universally believe they know better than the people which is precisely why they centralise control in their own hands. If they trusted the people to organise their own affairs and make their own decisions and form relationships as they saw fit then they would be both more democratic and more economically liberal. They would also tax us less and let us decide for ourselves what we expend our efforts on.

    In some areas I do however think we should be less democratic. Switzerland does not allow immigrants to become citizens (and hense voters) until they have been resident for ten years. So long as such individuals are given civil rights I don’t see much merit in being quick to hand over political rights such as voting. So if we moved in the direction of Switzerland in this regard I’d be sympathetic (Howard moved us a little bit in this direction for his own reasons). I’d also be sympathetic to a lot of the direct democracy initiatives used in Switzerland.

  8. Thanks, THR.

    In fact, many polls have found that most members of the public would prefer increased taxes if it were to lead to more public services.

    At every recent election since at least 1993, Labor has been corralled, most often willingly on the part of its leaders, by the rabidly anti-tax corporate newsmedia, into adopting seemingly populist low tax policies. Once this has happened, any real debate is virtually impossible.

    So, the proposition that Australian voters automatically favour lower taxes has not been fairly tested for many decades.

    Everything in TerjeP’s most recent post seems at least reasonable.

    Having said that, I nevertheless believe that TerjeP has still avoided the key political question of the recent three and a half decades, that is, the imposition of political programs in most countries across the globe which have transferred wealth from the poor, the public sector and future generations into the pockets of the globalised elites with the ‘free market’ ideology he supports having been used as the justification.

    This has everywhere necessitated at least the subversion of democratic institutions or outright repression and murder.

    I believe that any ‘free market’ proponent who sincerely upheld the principles of democracy would have been appalled at what had been done in his/her name and would have publicly taken his/her distance from those actions.

    That would include the privatisaton, without any popular mandate, of NSW’s electricity assets now being enacted by Government of Nathan Rees and the previous failed attempt by Costa and Iemma.

    In regard to the Swiss citizenship laws which require prospective citizens to have lived there for at least 10 years: As you may know by now, I oppose mass immigration as an effective denial of the rights of current inhabitants in countries such as Tibet, West Papua, and nearly all the anglophone countries of the world.

    So, the Swiss insistence on new citizens having had to live there for at least 10 years seems reasonable at least until such time as the world population stabilises and the level of overall immigration is dramatically reduced.

    In Australia, immigration has obviously resulted in the denial of many in this generation of a right taken for granted in previous generations, that is, the right to secure affordable shelter.

    That is the precise effect intended and anticipated by the property lobby which stridently advocates practically unlimited immigration in the face of all the problems that it has caused in addition to housing hyper-inflation – congested traffic, water crises, strained power, health and eduction infrastructure, etc.

  9. daggett says “In fact, many polls have found that most members of the public would prefer increased taxes if it were to lead to more public services.”

    Yes, but it’s something of a loaded, meaningless question because it assumes as a given something that is highly debatable (that higher taxes will necessarily lead to better services and general wellbeing). Anyone who believes higher taxes will lead to better services might want to phone a friend or relative living in Gordon Brown’s Britain, and see how that’s been working out for them until now.

    Of course if you ask people whether they are prepared to wear any kind of cost, the question of what benefits will result will make some difference to the answer. So if you simply promise that the said cost will deliver real benefits, regardless of whether it actually will in the real world, then you are far more likely to get a positive response to a simple polling question.

    The other problem is that there is a big difference between answering in the affirmative to an opinion poll and actually going into the ballot box and voting for higher taxes.

    “So, the proposition that Australian voters automatically favour lower taxes has not been fairly tested for many decades.”

    I think the proposition was fairly tested in the 1998 federal election and the results were pretty conclusive. Labor’s vote firmed among those socio-economic groups likely to get the bigger tax breaks from its policy, while the Coalition’s vote held up among those likely to pay less under the Coalition policy. Not many people were clammering to vote for whoever would hike their taxes.

  10. So, the proposition that Australian voters automatically favour lower taxes has not been fairly tested for many decades.

    I’d be happy to have it properly tested. I’d be happy to have at every election a major party advocating across the board tax increases and another advocating across the board tax cuts. I don’t much care which role goes to Labor and with to the Liberals but it would be refreshing to have the option laid out as a clear choice. As it stands both majors usually ask us some variation of “do you want people of type X to pay more tax whilst people of type Y pay less?”.

  11. Nick K wrote:

    Yes, but it’s something of a loaded, meaningless question …

    How is it ‘loaded’ to ask people would they be prepared to contribute extra money in return for extra Government services?

    What is loaded is the puerile standard of discussion of the issue of taxes by almost all of the newsmedia and by most of this country’s political leaders, in particular by our simpleton one-dimensional former national treasurer Peter Costello.

    These discussions almost invariably assume that the community derived no benefit whatsoever from taxation. I can never recall any reporting of tax ever posing the question of what services we would have to forgo as a result of taxes being cut or what additional services could be provided if taxes were to be raised. If we were to follow this thinking to its logical end, there should be no taxes whatsoever.

    Nick K continued:

    … because it assumes as a given something that is highly debatable (that higher taxes will necessarily lead to better services and general wellbeing). ….

    This is no more than Nick K’s unsubstantiated ideological prejudice. He expects us to accept that government provision of services is necessarily less efficient than the provision of the same services by private corporations. In fact, the shambolic state of the privatised US medical system, the most expensive in the world in comparison to those of the UK and Europe is striking confirmation that the reverse is most likely true. I suggest that Kick K view look at Michael Moore’s Sicko to see how blind unreasoning ideology in the service of greedy parasitic private medical insurers in the United States is condemning many Americans to death or chronic ill-health.

    Nick K continued:

    … So if you simply promise that the said cost will deliver real benefits, regardless of whether it actually will in the real world, then you are far more likely to get a positive response to a simple polling question.

    Nick K is assuming that, because the poll results aren’t in accord with his own ideological prejudices, that the respondents can’t think for themselves.

    I simply don’t follow Nick K’s logic about the 1998 elections. It is true that the iniquitous Goods and Services Tax was rejected by the electorate in spite of a lavish taxpayer-funded propaganda campaign in favour of the GST, but I don’t recall any rational debate being held as to whether or not the community would be prepared to pay higher taxes in return for better services.

    I am glad to see that TerjeP, at least favours the kind of fair debate over the issue of taxes that has not been held for at least many decades. I think that, if such a debate were ever to occur, both TerjeP and Nick K would find themselves in a small minority.

  12. “I simply don’t follow Nick K’s logic about the 1998 elections. It is true that the iniquitous Goods and Services Tax was rejected by the electorate in spite of a lavish taxpayer-funded propaganda campaign in favour of the GST, but I don’t recall any rational debate being held as to whether or not the community would be prepared to pay higher taxes in return for better services.”

    This is remarkably ironic in view of everything else you have claimed. According to you, the government wasted taxpayers money on a propaganda campaign instead of spending the money on worthwhile things that would make us a better society. And the electorate was reluctant to embrace a new tax. Kind of confirms everything I have been saying. Governments waste money. And the electorate is reluctant to support paying more tax. I rest my case.

    I know many people will probably argue that it was just that the GST is not progressive enough, or whatever, or that if there was a more progressive tax it would be supported. But that is just another way of saying that people really want someone else to pay the higher taxes, but individuals aren’t prepared to foot higher taxes themselves.

    As I said, people in 1998 voted for the party that they thought would deliver them personally lower taxes, not more tax.

    The other thing is that if you believe people are prepared to pay more tax, but they were reluctant to accept the GST, then it begs the question of exactly what taxes are people happy to wear. Higher property taxes, stamp duties, more income tax, death duties, higher petrol tax? If anyone wants to run for office on this platform, feel free to test the theory.

    “I suggest that Kick K view look at Michael Moore’s Sicko to see how blind unreasoning ideology in the service of greedy parasitic private medical insurers in the United States is condemning many Americans to death or chronic ill-health.”

    I’m astounded that anyone would cite Michael Moore as some kind of objective authority, especially on a site like this which is dedicated to serious policy analysis. This would be like me referring to Rush Limbaugh, Ann Coulter or Stan Zemanek as some sort of authority to prove my case. I would be laughed off this forum in no time.

    I really have no interest in dealing with recycled Michael Moore talking points.

  13. “but I don’t recall any rational debate being held as to whether or not the community would be prepared to pay higher taxes in return for better services. [in relation to GST]”

    Actually Daggett, there was a great deal of debate on precisely that. The government constantly claimed that the existing revenue base was inadequate to fund government services into the future, and that people needed to accept a broader revenue base. It seems people were reluctant to accept that.

    The thing about the whole GST debate that I found amusing is that it was often those who are more likely to support European levels of government expenditure who most strongly oppose European taxes.

    What other option is there? IMF bailouts?

  14. Nick K,

    The Howard Government spent tens of millions of taxpayers dollars on misleading pro-GST propaganda before the 1998 election campaign. Liberal MP Paul Zammit resigned from the committee examining tax ‘reform’ because it refused to seriously consider any proposals other than the GST. The 1998 elections were called before Parliament had a chance to scrutinise the GST election. Some of the claimes made about the GST by Howrd during the cours of the elections campaign were subsequently found by Senate committee to have been untrue. I wrote about all that here.

    And you consider that a proper debate on taxes?!

    As it turned out Howard lost the popular two-party preferred vote 48.5% to 51.5% in the house of Reps,but still managed to win enough seats to form Government, so he got through his retrograde tax anyway.

    In a sense you are right, when you write that less well off people want people higher incomes to pay their taxes for them.

    That’s the way (more or less) that our society ran until the commencement of the neo-liberal economic counter-revolution in the 1970’s. That is how it was possible to prived to a much greater extent than is possible today opportunities and decent services to all. Personally, I would prefer to alter the economy so that worthless bludgers running most of our companies are paid a lot less to begin with so that a graduated tax scale is not necessary.

    Nick K wrote, “I really have no interest in dealing with recycled Michael Moore talking points”.

    Good.

    Then keep your head in the sand and keep telling yourself about how fantastically US citizens have been cared for by its fabulous ‘free market’ medical system.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s