Neoliberal economic have always seemed to me only ever half a theory with the half that did exist being dysfunctional if not dangerous. It is directly responsible for the worst economic crisis in nearly a hundred years (and one that is still ongoing) yet some governments and people still seem to believe in this mad ideology and I wonder why?
The reason why I claim neoliberalism is only half an economic theory is because it doesn’t seem to have a mechanism for dealing with economic crashes. And the reason why the bit that does exist is bad is because it makes the likelihood of crashes not only more inevitable but also seems to work toward making them more severe. That is why whenever a crash does happen, Keynesian ideas are used to try and undo the damage neoliberal ideas and polices have created. The problem is that Keynesian ideas are not emergency measures, if they are used only to stop the economic ship from capsizing only then to be pushed aside so neoliberalism can once again take over the tiller, then we get the worst of all possible systems, and just means the ship sinks more slowly. It could be said that in fact neoliberalism depends on emergency Keynesianism (it even occurs to me that maybe that is the missing half of the theory). But not only is it a bad theory in practice it only ever seems to serve the interests of wealth and not the majority of the people. It is a system where in the main the profits of a boom go to those at the top but where the losses of a bust become the burden of those in the middle and at the bottom.
Here is another view of neoliberalism - http://www.guardian.co.uk/commentisfree/2011/aug/04/neoliberalism-zombie-action-phone-hacking
Yo Balbus………I just watched the U-Tube video of Billy Joel’s “Allentown” It deals artfully with the prospect of not doing as well as the previous generations parents. But do we really want to lay all of that on to The Government. Will government undertake to guaranty and hold harmless from economic crashes? Or a Successful mechanism for dealing with economic crashes. It seems that they have tried very hard since the Great Depression to come up with ideas to promote wealth. Our crash was so big because we have a two-face economy that incorporates both neoliberal and keneysian ideas into managing the economy. I’m sorry,. Keneysian concepts like: unemployment insurance, housing assistance , nutrition plans, public works projects, Govvy guaranteed mortgages, public education, military contracting go on all of the time in good economies and bad. The US has had deficit spending most of the time since Nixon. Part of the reason we are all hurting is that Goverment spending has exceeded our ability to pay for it under the current tax structure. Agreed here wholeheartedly Yes……….. in a general way, in Western Nations, anything done for the good of The State is going to benefit the wealthy of that state to a disproportionate amount. We have to get past that tho and insure that our taxation and spending policies are fair sustainable and in line with each other.
Neoliberalism is not dead because I feel that most of us agree that "if we all were healthy and happy people with money then the world would be peaceful" is bull shit. But some idealists feel that we can just use money to solve problems that the system of money and currency has created. We are trying to create a "Utopia" with money, which is far from perfect, trying to hold up the infrastructure.
Here is an edited version of something I posted a couple of years back. * Utopia, no just Keynes We can contain it somewhat, Yes, everyone wants a better society, but please do not tell me that you will be bringing me utopia. Please do not tell me that you can prevent bankruptcies or tame the business cycle. This is Piney’s word from another thread but I thought it needed its own. Let’s think about it Can the business cycle be tamed; well many think its effects can be alleviated, softened so that the effects are not as bad for most people. There are Keynesian-ish ways to do that, now what follows is very basic and based on stuff I leant over twenty years ago but let me see… In the up period the government pays off its debts incurred in the low period and possibly its stakes in some industries and business it nationalised or bought in the low period. In the low period the government is then in a position to put money into the system and nationalise or buy up viable businesses that have got into trouble. In low periods the interest rate would be set low to simulate growth and in up periods set higher to curtail a run away market (people save if interest rates are high, low interest rates in up periods only encourage the accumulation of debt) Same with taxes in low periods it would be set low for most people and businesses to stimulate growth and in up periods set higher to pay off state debt and get such things as businesses to pay for those infrastructural requirements they might need to conduct their business (e.g. roads, public transport, education etc). In low periods infrastructural needs might be paid for directly by government to increase employment (and wages in the system) and to have the structures in place for recovery. Also taxes in the up period on wealth can be used to curtail excessive risk, if people at the top are so well cushioned against any fall, they are likely to take risk if they know that if they go wrong they will not really suffer but if things go right they get even greater wealth. It also is a means of distributing the gains of an up period more equitably. Supposed ‘trickle down’ doesn’t exist it is much better to have a healthy and wealthy middle and low class than a super rich upper class, because they make up to 90-99 percent of the population and buy the ‘normal’ goods and services. At the same time regulation is used to try and keep any crisis contained, such as putting up firewalls between various parts of the financial sector, so that a failure in one can bring down another (look at the Glass-Steagall Act). Keeping normal depositors cash away from the speculators. It might not be utopia but it seems a lot better and saner than what neoliberal ideas have got us into. ** Now neoliberals advocates mostly of the right didn’t and don’t like Keynesianism. They’re against any government involvement in the invisible hand of the markets. In fact they don’t seem to like government at all. They thought regulation held back new and innovative financial methods. And there were also arguments that taxes should be low all the time and that interest rates should be low even in booms to keep growth going. They contended that huge payouts in bonuses, perks and above all tax breaks going to those at the top were only what was due and not that the gains of the up were mainly going to a few, while the wages of the middle and low stagnated or fell in real terms. And those huge annual bonuses didn’t lead to people taking risks especial among people that could survive and live in luxury even if the risk blow up or sank (see the example in the next post). And that there was little to worry about because the ‘new’ economic model they were pushing was able to take on any ‘shock’ and survive. This led to the idea among some that having a huge national debt during an up period was ok because there wouldn’t be a ‘down’. Of course if a down turn came and a bail out was needed it would vastly balloon that debt. This happened in many countries, for some it was ideological for others cynical vote fixing but the idea behind it were the same neoliberal garbage that said (as Gordon Brown put it) had ended the cycle of boom and bust. In the US the Bush jr administration cut taxes (mainly of the rich) and started two very costly wars when the ‘bust’ came they were already in a financial fix. But the US has been in a financial problem for years. (see the other post below). Some encouraged the idea that if things went wrong the market would sort it out, companies or banks would just go to the wall and the taxpayers wouldn’t need to bail them out. Thhey did this in an age when mergers were taking place that create ever larger companies (mergers often fuelled on debt). Many people pointed out (and were ridiculed or dismissed) that at some point in a crisis a government might have to step in or watch the whole financial system go down the tubes. Of course the logical conclusion of neoliberal ideas would seem to say let it go. Although it’s a bit hard to pick up the pieces again if their theories turn out to be wrong and people are fighting to death over a tin of beans in a burnt out Wal-mart. The original is here http://www.hipforums.com/newforums/showthread.php?t=328353
Here is the example I mentioned in the last post - The case of James (Jimmy) Cayne, who seemed to prefer playing bridge and golf to running Bears Stearns although he got a salary of $200,000 dollars to supposedly do it along with huge bonuses. Well on paper he was worth in the region of 900 million and I believe he was 384th in the Forbes list of rich Americans. But then Bears needed Fed help and JPMorgan Chase was found to snap it up and Cayne cashed in his Bears stock at a rather low price and supposedly only made 60 million or so. But as the New York Times noted even with the ‘loss’ he wasn’t liable to go hungry, in fact “he has certainly accumulated enough to live out his retirement years in comfort”. There is the other investments such as the Plaza hotel apartments he brought for $28 million. So lets see - According to US social security the average wage for Americans in 2006 was around 38,651, and remember there are a hell of a lot of people on lower, but lets round it up to 40,000 for convenience. So if someone didn’t spend any of their wages and lived off air then it would take them a hundred years, 100 years, to make just 4,million, so it would take them just seven hundred years 700, to raise the 28 million Jimmy paid for his flats and only 1500 years to raise the 60 million he got for his shares. So an average American would have had to have begun working in the reign of the dark age Frankish king Clovis, well over 1000 years before America was even discovered to reach the amount that Jimmy made in one day. To save up 4 billion, which only gets you to 268th place in the Forbes rich list (With a billion being I believe in money terms 100,000,000) the average worker would only take 10,000 years, about from the end of the last ice age. My point is that while neoliberal advocates sold their brands of economics to the general population as a panacea, some type of elixir of eternal wealth, many actually knew of the risks. But it is very possible that if those risks had been explained then many of things that were so very beneficial to the economic elites would not have taken place or been allowed (such as the huge hikes in top executive pay the bonus culture and the lowering of the top band tax rates). I mean there was meant to be a trickle down that never came and there was meant to be a economic stability that just evaporated. Both of these things were the shortcomings and risks within the neoliberal ideology but the criticisms were dismissed by the advocates.
Rot set in earlier remember Eisenhower’s warning about the Military Industrial complex? But I’d say it goes back to the turn the US decide to take at the end of WWII, it messed up the Betton Wood deal and began the Cold War and wars even cold ones are expensive. Both led to the belief amoung many Americans that the US was ‘exceptional’ and wasn't bound by normal rules. Neoliberal ideas fitted in well with those attitudes it is also a belief based on the idea that it is ‘exceptional’ and not bound by normal economic rules.
So… Basically (and it is very basic) – you suck money in during an up and pump it out money during a down. But neoliberalism lead to the belief among many governments that you can pump money out in an up because an up will never end However when it did inevitably end the found the financial cupboard bare. Basically (and it is very basic) – governments had to take on the debts of the private sector (with emergency Keynes ‘bailouts’) ballooning public debt and then once the private sector thought it was safe it turned on the governments crying that their debt was way too high and demanding that politicians use neoliberalism to ‘fix’ things. The ‘fix’ being the cutting of ‘public’ spending (but seemingly no rises in top rate tax). But in a turn down you need wages in the system cut spending and you decrease the number of wages, people don’t spend, shops don’t sell and cut orders and lay off workers factories cut production and lay off workers, less wages in the system, more people don’t spend the shops go bust and lay off workers, the factory goes bust and lays off workers, less wages in the system… The point being that the public debt crisis is just a continuation of the private debt crisis. For example the money being pumped into Greece to prop it up isn’t going there to help the Greek people (who will be paying for it with a big fall in their quality of life) but to save all those in the financial sector who own Greek debt (including German banks). It is fear of another financial sector crash that is behind it. The same with ‘quantitative easing’ the new money didn’t go to people it went into bank vaults to try and make them more stable. There are a lot well financed people out there pushing the message that it all the fault of government and a lot of them (if not all of them) have a neoliberal agenda. We need to see what the problem is before we can beginning making things better but until we throw out the neoliberal money changers out of the temple that is not going to happen.
A great teacher, economist and philosopher Alexander Chamberlain whose teachings I've been following for quite a while now emphasizes the meaning of love in all social and economic interactions. He says that the supporters of the extreme neoliberalist view often tend to forget the human factor and the so-called "soft values". Without these, it's only the cold capital that matters and that is of no use for the vast majority of humankind. However I'm appalled by this discussion, which suppresses the creative potential of every individual by treating everyone as if they were just a mass subject, not feeling and thinking individuals with their unique goals and needs. This intellectual atmosphere is not fertile for any kind of innovative activity. -Caroline
