Reader Juan provided a well-argued and provocatively-worded critique of so-called market fundamentalism yesterday that I thought would provide grist for thought and discussion. The main argument in favor of less regulated commerce, both domestically, in the form of deregulation, and internationally, via more liberal trade regimes, is that it generates higher growth. Juan argues that the results have been the reverse.
From Juan, in response to a comment in italics by reader DownSouth:
The one place I might disagree with you is to the question as to what high oil prices represent. Are they a further manifestation of market fundamentalism run amok? Or are they the antithesis of this, a refusal by non-OECD countries to participate in a market system that demands natural resources and agricultural products on the cheap?
If price of oils was determined by cost of production/supply/demand rather than trade in financial instruments, I would place more weight on ‘refusal to participate’. As it’s developed since 1987, it strikes me that the producing nations and major integrated oilcos’ abilities to move price has been substantially diminished.
Neo-liberal market fundamentalisms include financial opening and deregulation which, in different forms, were applied on a world scale right along with the theft of public goods through privatizations, et cet — a ‘grand’ global looting had been unleashed in a (partially directed) effort to overcome systemic crisis.
Here let me repeat something which I wrote elsewhere three months ago:
Between 1965 and 1973, the U.S. manufacturing sector’s rate of profit fell by 40%, a decline that worsened with the 1974-5 recession, was hit again by the severe early 80’s slump, began recovering in the 1990s but peaked in 1997, falling into 2003 since which there has been some rise but – in all cases over the last decades – never to pre-1965-73 levels.
Andrew Glyn considered the world to have been “suddenly projected from boom to crisis” with the first phase of above.
The failure of political Keynesianism, and then monetarist policies to ressurect rate of profit dovetailed with a ‘we don’t know what to do so lets try 19th c laissez-faire on a world scale’ set of policies demanded by the U.S., given voice by Reagan and Thatcher in her famous statement: ‘There Is No Alternative [to a worldwide free market]’, or TINA.
Borders to capital flow in all its manifestations had to be everywhere broken; state owned industries had to be privatized; poor fiscal management had to be tightened and almost everywhere on the backs of the working class and poor as needed social services were cut and cut again. Debt payments, no matter how great a percentage of export earnings, had to be made if a government were to expect future access to IMF and World Bank funds.
Neoclassical economists and their theories provided ideological justification; a sort of ‘we are all neoliberals now’ attitude infected world leaders until, in 1989, John Williamson coined the term ‘Washington Consensus’, which was very much not the consensus of those most subject to the various ‘shock therapies’.
So, how did the world do under this set of misguided fundamentalisms?
“Real global GDP growth averaged 4.9%a year in the Golden Age years from 1950 through 1973, but dropped to 3.4% annually in the unstable period between 1974 and1979. Dissatisfied with the instability, inflation, low profits and falling financial asset prices of the 1970s, advanced country elites pushed hard for a switch to a more business friendly political-economic system; global Neoliberalism was the result. World GDP growth averaged 3.3% a year in the early Neoliberal period of the 1980s, then slowed dramatically to 2.3% from 1990-99 as Neoliberalism strengthened, making the 1990s by far the slowest growth decade of the post war era.” (James Crotty)
As would be expected, the post-1973 annual growth rate of world real gross domestic investment fell substantially through 1996.
With the exception of parts of Asia, economic development throughout the world failed to gain traction, chronic excess capacity on one hand and credit fueled financial exuberance on the other.
Given the system’s inability to create employment so rapidly as required, a glut of labor and an expanding informal sectors as well. All the ‘better’ to intensify the international (and domestic) competition among workers, drive and hold wages down so also make consumer credit increasingly important to retention of living standards, no matter that this has been only another transfer to loan capital.
Average weekly earnings, constant 1982 dollars, for all private nonfarm workers in the U.S. peaked in 1972 at $331.59, falling to $257.95 in 1992 until ‘recovering’ to $277.57 in 2004 and likely having faltered again since then.
It is at least interesting that conditions of surplus labor, lower wages, deficit funding, tech innovations, etc, have not been able to generate another long wave expansionary phase. One might even suspect that finance has been ‘pumping’ too much from the real and that ‘long-felt unease’ is related to this.’
The primary contradictions which I’ve seen developing over the last number of decades have been:
1. the ending of national economies v. what can only be national states, a contradiction between economic mode of organization and national states.
2. progressive expansion of fictitious capital v. the possibility of satisfying such claims, a ‘satisfying’ which depends upon a) global creation of surplus value and b) substitution of credit for a relative insufficiency of realized surplus value (profit). This has provided much of the ‘advanced’ world with what is no more than a superficial prosperity even as it has also helped undermined its real basis. The spectacle of finance hides too much.
3. In combination, the above two have generated greater class, ethnic, international and subnational tensions. The social relations of the world capital system have become quite strained, which is not to say that capitalism is ‘doomed’ but that its present form has become increasingly untenable and a ‘change in state’ is almost certainly unavoidable, in fact seems to be underway.
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why must global GDP growth be maximized in order for a global order to be considered a success? in spite of some well known ongoing wars, global violence has decreased since the 50’s while average life expectancy has gone up. if we measure economic orders strictly in economic terms then we miss the purpose of having an economic order in the first place.
and isn’t it possible that in the 60’s average weekly earnings in the US reached unsustainable levels on a relative basis? if we’re taking a global perspective of things, have the declines in the US been offset by gains elsewhere in the world, particularly in asia?
Here in Australia, the Neoliberal policies have actually worked quite well (with notable exceptions).
Australian GDP has performed exceptionally well since 1983 when economic reforms under a centre-left Labor government were begun. The main changes were:
* Floating of the Australian Dollar.
* Privatisation of many government run businesses (eg telecommunications, airlines, mines).
* Central Bank independence and an inflation target.
* Government bond rate setting by the market.
* Removal of many tariffs and subsidies – especially in agriculture.
* Low government debt levels (currently net government debt is negative)
* Reform of tax laws with the introduction of a National Goods and Services Tax.
* Compulsory retirement savings (Superannuation).
Not all of these have resulted in outstanding success but the general feeling is that Australia is “stronger” as a nation because of our economic wealth. Australia still has a lot of elements typical of a social democracy – universal health care and free public education.
Nevertheless, economic neoliberalism has not been a boon for Australia’s indigenous people (who are, after 25 years of economic reform, still at the bottom of the socioeconomic ladder) and has also resulted in some problems in university education. Income tax cuts in Australia have favoured the rich between 1996-2007 (when a conservative government was in power), which has led to income disparities (but at least no massive government deficits).
Another important thing is that Australia’s economic reform has been achieved without much influence from supply-side economics, which means that government spending and revenue has been handled (relatively) intelligently.
Typical analysis from economists: Make a wildly presumptious assertion, but–and here’s the key–do so in passing….Just throw this assertion in the argument, as if it’s a given and accepted by all “reasonable people”. Then, follow it up with heaps of abstraction.
This abstraction, of course, appeals to the Leftist Econ-Philosopher, because then he gets to put “neo” or “post” in front of words, which, until they became “neo-words” always managed to get the job done. Also, they get to engage in “adjectivism”—taking an adjective, sticking an “ism” at the end, so that a simple fleeting, descriptive word can become a thing, or more accurately, an object–typically of derision.
Juan writes:
“If price of oils was determined by cost of production/supply/demand rather than trade in financial instruments, I would place more weight on ‘refusal to participate’.”
When did this issue get settled?
According to Juan, the reason for the rise in the price of oils is an “either/or” proposition. This just isn’t true. The rest of his argument rests on this flawed premise.
Even if Juan recognized that both demand and speculation played a role, his argument—by his own admission—gets progressively weaker.
I’m not saying that speculation has had no role in the rise in oil. But please, stop with the blanket assertions that rely, coyly, on the premise that the role of demand is somehow negligible.
No matter how hard one tries to engage in this kind post-intellectualism, if the premise is flawed, the argument that follows shall remain in a perpetual state of “quasi-Keynesianist hegemonic fallaciousism.”
Juan,
First I want to thank you for the link to “OPEC Pricing Power.”
http://www.td.com/economics/special/db0608_oil.pdf
I printed it out and read the whole thing and found it to be a most thorough and enlightening analysis.
Now back to neo-liberalism. Carlos Fuentes, in his book A New Time for Mexico, gives a short history and analysis of how neo-liberalism played out in Mexico–of its introduction and slow build in the administration of Miguel de la Madrid (1982-88), its unbridled application under Carlos Salinas Gotiari (1988-1994) and the ensuing crash and financial caos of 1995. In response to your comments, I would like to offer some quotes from Fuentes:
“But foreign investment was concentrated mainly in stocks, bonds, and other short-term instruments: in the volatile and transitory paper economy. Only 15 percent of foreign investment went into the real economy, into the creation of factories, increased employment, and increased production.”
“It is worth recalling that the prefix neo is particularly well suited to this doctrine, which already had its chance in Latin America in the last century. Throughout the nineteenth century, Latin America followed the precepts of laissez-faire and the magic of the market, and its nations implemented policies geared toward exporting raw materials while importing capital and manufacutred goods. Powerful economic elites emerged from Mexico to Argentina. The hope was that the wealth accumulated at the top would sooner or later find its way down to the bottom. This did not happen. It has never happened. Instead, the wealth generated at the working base found its way up to the top and stayed there.”
“The straitjacket of extreme protectionism, subsidized consumption and production, captive markets, and lack of competitiveness needed to be loosened–and was. But in its stead came a demonization of national states, a delusional faith in the free play of market forces, and the cruel complacency of social Darwinism in lands of extreme hunger and need.”
“We now know that the shrinking or absense of the state ensures neither well-being nor order… The Mexican crisis and its Latin American repercussions should oblige us to open our eyes and realize that we are blinded only by seduction, convenience, or hypnotism. Peter Drucker, the apostle of the new economy of information, urges us to forget the neo-liberal illusion that the state must disappear. Modern capatilist societies (or postmodern, in the fashionable phrase) need neither more nor less government but better government.
“Neoliberal governments, in their purest Reaganite or Thatcherite manifestations, generated more expenditure and regulations than ever before in the United States and Great Britain and brought about the largest deficits in those countries’ history.”
“Financial capital has no national allegiance. It pursues its own interests, not those of the nations it visits.”
“Henry Kaufman of the Wall Street Journal notes that the analysists who guide banks, insurance companies, and mutual funds no longer consider the long term. Their professional bias leads them to look myopically only at the short term–at immediate, high-risk profits, which is why this capital is not productive… We are dealing with management funds that are uncontrollable, volatile, and enamored of the short term–enemies of productive investment…”
“As the Mexican congress debates the financial-aid package organized mainly by the U.S. government, Mexico is pledging to follow an economic policy that is precisely the one that led to the current situation: zero growth in the money supply, cuts in government spending, and more privitization. This is a renewed formula for disaster in a country that needs to stimulate growth even at the risk of inflation, as Brazil has done (though one need not go to the same extremes). Mexico has yet to learn the lesson that economists everywhere else have deduced from the crises perpetrated by the supply-side economics practiced during twelve years of Reagan, Bush and Thatcher: that to restrict money supply and spending during a recession leads to depression, not recovery.”
“Mexico’s nationalization of the oil industry caused the industrialized democracies to rise up against us; the subsequent boycott obliged Cardenas to sell oil to his logical enemies, the Nazi and Fascist powers… The renegotiation of the petroleum debt…was a decisive moment for the good-neighbor policy of Franklin D. Roosevelt. Beleagured by the interest groups that since 1821 had been demanding war against Mexico, invasion of Mexico, dismemberment of Mexico, suffocation of Mexico, Roosevelt courageously played the card of negotiation.”
“Mexico needed–and did not get–policies encouraging investment in activities that would further employment, wages, growth, and savings. Instead, the Salinas reforms provoked a flood of speculative, unregulated capital that did not go into productive areas.”
“Never has Mexico received as much foreign investment as it did during the Salinas years: almost $59 billion between January 1989 and September 1994, but of that enormous sum, almost 85 percent was speculative flight capital.”
My sense is that the author is not happy with what he calls “neo-liberal market fundamentalism”. I’m not an economist, so I don’t if there’s a specific definition that captures the essence of that label. Yves defined the author’s theme as the flawed perspective of those being “…in favor of less regulated commerce, both domestically, in the form of deregulation, and internationally, via more liberal trade regimes, is that it generates higher growth. Juan argues that the results have been the reverse…”
Although the author scored some valid points, the problem I had was that there was no specific alternative solution presented. In addition, I had serious questions about a few of the basic premises presented as fact. Such as
“Real global GDP growth averaged 4.9%a year in the Golden Age years from 1950 through 1973, but dropped to 3.4% annually in the unstable period between 1974 and1979. Dissatisfied with the instability, inflation, low profits and falling financial asset prices of the 1970s, advanced country elites pushed hard for a switch to a more business friendly political-economic system; global Neoliberalism was the result. World GDP growth averaged 3.3% a year in the early Neoliberal period of the 1980s, then slowed dramatically to 2.3% from 1990-99 as Neoliberalism strengthened, making the 1990s by far the slowest growth decade of the post war era.” (James Crotty)
I’m not sure what source as a basis for the GDP %’s listed above-but- let’s assume the numbers were accurate anyway. Some questions- what countries were included in the denominator? To what degree were nations as a group actually de-regulating and opening up their economies? (There’s a big difference between Reagan and Thatcher’s talking the talk and other countries actually committing completely to walking the walk.) How did the GDP volume change over the years? If we assume that world GDP had increased significantly during the years in question and the percentage reduction in GDP indicates failure, then along then same lines, a company like CISCO was also a failure since its present rate of revenue increase is probably only a fraction of what it was during its start-up years. Clearly, there’s room for re-evaluating certain of the conclusions stated in the article.
My sense (although I’m not sure about this) is that the author was not in favor of a complete termination of “Neoliberal market fundamentalism” as he called it. Instead, he may have been making a strong case for more regulation and oversight in certain sectors (finance) with which I’d be in 100% agreement. If that’s the case, it might not be a bad idea if regulators promote a “systems approach” paradigm, as has been suggested by this blog in the past, before implementing new rules and regulations.
If by some chance, the author instead was implying a return to an overly regulated command and control hierarchy, one would need look no further than the benefits achieved in the US when Ma Bell was broken up into AT&T and the eight Baby Bells. Had that market not been de-regulated and the break-up not occurred, the only innovation we probably would have experienced in telecommunications industry since that time would have been an increasing choice of landline telephones from basic black to different shades of black.
Just a couple of notes on how the financial sector has exploded in the United States over the last 40 years:
First, a chart, “US financials as a percentage of market cap,” which can be found here…
http://bigpicture.typepad.com/comments/2008/06/read-it-here–1.html
and
From the Federal Reserve, outstanding debt of domestic financial sectors has grown from $209.8 billion in 1973 to $15,945.7 billion in 2008.
http://www.federalreserve.gov/releases/z1/Current/z1r-2.pdf
I have been torn by this question. Torn between my own self interests and what the moral obligation that a citizen of the U.S. has to the rest of the world.
When all is said and done, I have to come down on an old saying, “All ism’s are bad”. Their is no Utopia on earth and their will never be one.
Blow back will occur just as it occurred after the Wilson era.
I would imagine that the pain to the world will be more severe this time.
Anybody that thinks that they can change the world to be a better place should usually start by changing the way they live their lives and not come up with another scheme to create Utopia.
Addendum:
I would also like to point out that Woodrow Wilson was a renowned Neoliberal thinker. It is almost ironic how his era was followed by the great depression. It would seem that we are bound to relive the mistakes of the past.
In reading this the first thing that dawned on me was the two working assumptions that are unquestioned.
1. That global economic growth is both desirable and obtainable;
2. That all would be different were (had) the global economic system had some regulatory management kept in place to prevent the “Washington Consensus” from developing, thus allowing for that continued growth and expansion.
Perhaps it is the very need for continued growth and expansion that is the root of a deeper set of problems, and any notion of doing it differently without first addressing the grow or die (god) fundamentalism is at the heart of the problem.
I also note a contradiction in the thinking here. On the one hand, the author points to a glut of labor (meaning too many people) yet on the other points to overcapacity. As is typical of such scenarios, the solution is to increase consumption (along with higher wages and fully employment of all those people who constitute a glut of labor) thus the need for growth and expansion.
So lets assume that growth and expansion were to occur to increase global consumption and thus resolve the overcapacity problem. Where would that then leave us?
At risk of sounding overly simplistic, the problem with such thinking is that it reflects upon the world as one with humanity at its core. It is this human-centric egoism that the real problem lies. At the current level of production, consumption and human population levels, there are limits to growth (remember that phrase?). Yes, nature does present limits, and not attending to these limits has consequences – for which climate change represents the severity of what is essentially a crisis of over population/production/consumption.
So where does this leave us? In search of something that works not from the assumption of constant growth and expansion, but sustainability. That will be the challenge to humanity in the near and far future, and it is one we will be addressing no matter what our assumptions are of the good life.
Annonymus at 10:14 A.M.,
The breakup of the AT&T monopoly is the perfect example of what good government in action looks like. It did not entail the complete abrogation of regulation as free market revisionists would have us to believe.
One can read about the entire history here…
http://www.ieee.org/portal/cms_docs_iportals/iportals/aboutus/history_center/yurcik.pdf
but the crucial element is this:
“Judge Greene held that as long as the RBOCs have a monopoly in the local loop they will be regulated.”
Contrast the way the AT&T breakup was handled in the U.S. to what happened in Mexico with the government’s divestiture of the national phone company. In Mexico it was a free market fundamentalist’s wet dream. Absolutely no regulation. And as a result, for the same call in the U.S. that you pay 5 cents a minute, we in Mexico pay 25 cents a minute. And the guy who engineered the buyout, Carlos Slim, is now one of the third richest men on the planet. His wealth represents 14% of Mexico’s annual GNP, as opposed to that of Bill Gates, which represents less than 1/2 of one percent of U.S. GNP.
Also of great interest is how the free market zealots of the Reagan administration tried to undermine the judicial proceedings against AT&T. The case began under Carter but the decision was not handed down until Regan had occupied the White House:
“The U.S. DOJ versus AT&T antitrust case was filed in October 1974 by Attorney General William Saxbe, an aging former Senator from Ohio… Saxbe filed the case without even consulting with then-President Ford. Within the Department of Justice a succession of antitrust chiefs handled the case until 1981 (Thomas Kauper, John Shenefield, Sanford Litvack, and William Baxter). The Attorney General in 1981 was William French Smith who was recused from the AT&T case because he was a past Board Member of Pacific Telephone. Reagan’s designated number-two man at DOJ, Deputy Attorney General Edward Schmults, was also recused because of law firm dealings with AT&T. This made the then newly appointed Antitrust Chief, William Baxter, the top ranking Government official directing the case. William Baxter was an eccentric Stanford University Law Professor who had not addressed a court in session for about 20 years. Baxter considered himself an economist although he had no formal training as such. Baxter’s nomination and the disqualification of his superiors created an ironic situation. Baxter had publicly argued that no one company should be able to integrate regulated and unregulated divisions of its business because it could use the ‘safe’ profits from its regulated side to subsidize the price of unregulated products (a cross-subsidy). Reagan’s closest advisors including William
French Smith, Edwin Meese (Counselor), Malcolm Baldridge (Commerce Secretary), and
Casper Weinberger (Defense Secretary) believed unequivocally that the DOJ’s case
against AT&T should be dismissed. This created a situation that if AT&T sympathizers in the Reagan inner circle were going to intervene, they would have to quickly go through or around Baxter. Baxter would have none of this and stated before a press conference staged to announce the case, ‘The case is perfectly sound…and I intend to litigate it to
the eyeballs.’ “
The assault by the Reagan administration against Judge Greene continued after he handed down his judgment, but Greene, against all odds, somehow managed to prevail, and the benefits to everyday Americans are manifold, as this excerpt from a consumer advocate web page illustrates:
“January 1, 2004
It was 20 years ago that AT&T, the once-mighty ‘Ma Bell,’ was broken up on the order of Judge Harold H. Greene of the U.S. District Court in Washington, D.C.”
“Since the break-up, consumers have had a staggering array of choices for local and long-distance phone service, they’ve been able to buy their own telephones, hook up fax machines, modems and other devices and they’ve been presented with a multitude of new services, including cellular service, DSL and even Internet and cable-based telephony.”
“All this choice is no doubt what Judge Greene, who died four years ago, would have wanted. His ruling, after all, was based on a finding that AT&T had such a stranglehold on all aspects of the telephone business that newcomers like MCI weren’t able to compete on a ‘level playing field,’ a phrase that has since become a standard verse in every lobbyists’ litany.”
http://www.consumeraffairs.com/news04/att20.html
……correction……
The correct address for “OPEC Pricing Power” is as follows…
http://www.oxfordenergy.org/pdfs/WPM31.pdf
…not the address I mistakenly gave above.
Well, asking “deliver the goods” is a stupid question in the aggregate.
What matters is what goods have been delivered to whom.
As to that, from an important point of view it has delivered twice:
* The elites of many countries have seen their wealth, income and lifestyles and their security improve a lot over the past 30 years.
* The parasitical exploitation by 90% of the populations of many first world countries of their superiors in the top 10% has decreased over the same 30 years, and less resources and rewards have been wasted on them, and their security has decreased and subservience improved.
If one believes that the top 10% are deserving producers and the bottom of the barrel 90% of many first world countries are undeserving parasites, both are very good outcomes.
After all, on a farm what matters is reducing the cost of keeping the cattle and improving the standards of living of the farmer.
Asking questions about the success of a given policy mindset *must* be related to the distributional impact.
Downsouth: “The breakup of the AT&T monopoly is the perfect example of what good government in action looks like. It did not entail the complete abrogation of regulation as free market revisionists would have us to believe.”
Agreed. Thanks for a recap of the AT&T breakup. In this instance, the Feds were acting appropriately in the capacity as a referee by establish a playing field where numerous teams could compete. They were not attempting to participate in the game itself by arbitrarily stepping in and deciding which teams don’t deserve to lose -think BSC bailout.
I’m of the opionion we need some additional regulation(especially regarding the CRA’s) but we need more monitoring and enforcement of current laws regulations. Why were the IB’s allowed to transfer all those assets and liabilities to the SIV’s when, with the benefit of 20/20 hindsight, it’s clear the IB’s were still on the hook. Think of Harvey Pitt’s refusal to take action against the Big 4 early in this decade until the media attention following Spitzer’s successes as NY AG, forced Pitt to take action. New rules and regs won’t mean anything if they’re not enforced.
However, I’m still not sure what the author of the piece presented by Yves, was suggesting as the best alternative.
Nick Beams on wsws.org has been providing a more coherent explanation for the contradictions Juan states for years.
mat,
I used GDP as one metric simply because it has been used by those who had promised such glowing results. (Stiglitz has had a few things to say on this).
The decline in constant dollar wages here was not only here. Think, if you care, about the very high rates of inflation throughout so much of the ‘developing’ world during most of the period, or the slumps in Europe and Japan, or the Asian Crisis. Then there has also been technological displacement as relatively more advanced means of production were put in place: same or greater mass of capital requiring relatively fewer workers to produce a greater quantity of goods/services. To which should be added the general weakness of labor unions, especially those which were/are not independent but state controlled.
Broadening and deepening of real market(s) has much to do with the process of transforming independent producers into wage workers; contradiction arises between the number of employees required and the number ‘coming on stream’. Mike Davis’ 2006 book, Planet of Slums, speaks to this with quite a bit of hard data from which one can begin to understand that ‘immiserizing growth’ need not be only terms of trade related. IOW, there are systemic ‘limits to growth’ unrelated to environmental constraints.
Heck, we get to see some of these right up on the surface with every recession…some tend to be cumulative and lead into at least fairly evident discontinuities and transitional phases in the form of the capital system.
Dan Duncan.
The term ‘neo-liberal’ is not my invention. ‘Neo’ has been used to differentiate/connect the last decades with the period of 19th c. liberalism. With emphasis on the individual and near denial of the social (without which there would be no ‘individual’), it fed into, and came to be fed by, neoclassic economics’ dependence on axioms of methodological individualism and instrumentalism, a dependence which has prevented it from ever properly integrating macro and micro but provided fallacies of composition and ideologies.
You are correct, I did pose price of oil as an ‘either/or’ in an attempt to emphasize the change in regime which placed financial markets at its center, which is certainly nothing I haven’t written about before and hasn’t been pointed out for years. Once again, check it out and I’m sure you will arrive at an understanding that these prices are only (real) ‘market related’.
anon 10:14,
GDP data sourced from:
Angus Maddison. The World Economy: A Millennial Perspective (Paris: OECD Development Center, 2001).
United Nations, World Economic Survey (New York: United Nations), various issues.
Though often ignored, no one seriously denies the post-WWII curve.
one salient oversight,
My observations are somewhat dated, since I last lived in Oz in 2004, but I thought Australia had achieved a good balance between social safety nets and market-based activities. One can quibble plenty about the particulars (don’t get me started on the GST….) but the overall mix was about right.
However, there are huge differences between Australia and the US. One is that Australia is committed to being a middle class society (for instance, considerable hue and cry when CEOs get pay that is a far less out of line with worker wages than here). Second is that unions still have power, and as a result, worker rights are much better protected (for instance, the minimum wage is considerably higher in relative terms and adjusted more frequently). Third is that Australians as a whole are far more community-minded (and I don’t know whether this is separate or related, but far more interested and informed about politics). Fourth is they never got a dose of the Reagan/Thatcher “government is bad” prescription. I had the feeling, based on community meetings I attended in Sydney’s Eastern Suburbs (an upscale area) that people liked having the government provide service and accepted being taxed for them. A shockingly adult attitude.
Annonymous at 4:45 PM said:
“…think BSC bailout.”
My favorite example: the corn-ethanol susidies.
Anyway, as Carlos Fuentes asked, are “we fatally caught between the Chicago Boys and the Marx Brothers: savage, unrestricted capitalism or inefficient, centralized bureaucratic socialism?”
In many ways the preachers of the right and the preachers of the left aren’t all that different. Hugo Chavez and Ronald Reagan provide the perfect example. In both we have populist demagogues who pander/pandered to the public’s propensity for wishful thinking. This characterization of Reagan give you some pause? If so, consider these comments by the veteran polster Daniel Yankelovich concerning the “right-wing populist”:
“In the Reagan years after the severe recession from 1981 to 1983, Americans went on a prolonged mental holiday. They were encouraged to do so by Mr. Reagan’s own wishful thinking, which seemed to bring good times to the country. Opinion polls showed that once one got beyond the first superficial questions, people realized it was not possible to lower taxes, vastly increase defense expenditures, and balance the budget all at the same time. But Ronald Reagan was president. He accepted the responsibility. He said what people desperately wanted to hear after so many years of increased taxes, stagflation, divisiveness over the war in Vietnam, and social policies that deeply troubled average Americans.”
I suppose recent events are suddenly bringing home to more thoughtful Americans the harsh truth about their native land–its staggering indebtedness, the national failure to address the energy issue, its power that has shown itself impotent, and are desperately attempting to discover at what point reality was exchanged for illusion.
Sorry haven’t spent to much time thinking through but what jumps out is the rise in corporate profits to time higha. Liberalization has been about increasing margins and feeding the ever expanding appetite for growth. This is basically a tear out from confessions of an economic hitman. No doubt the debt explosion has been a disaster. Each decade takes more and more debt to create an incremental dollar of gdp. But what is the solution? I it industrialization? Is it tarriffs? Is not oil going up a stealth tarriff? Is our trade balance really improvong? the analysis is a bit rear view.a more interesting analysis would be ideas about how we fix slash restructure
don,
I do not assume “That global economic growth is both desirable and obtainable” but do ‘assume’ that capital(ism) is an historically particular system of production not for production’s sake but profit and accumulation, that this is also an inherent drive to expand as though there are no limits, and that production/consumption is not an equilibrium relation but one of contradiction in which overproduction of means of production must episodically take place, giving rise to masses of unemployed capital next to which stand unemployed people and that no amount of ‘fine tuning’ can prevent this but at very most, mitigate.
anon, 5:06 PM
Yes, Nick has been writing about these contradictions for years, so has Juan and many other people. The first clear statement of that between global economy and national states which I’m aware of was written in 1914.
Yves,
I agree with everything you say. There is a very small minority of “government is bad” people around but that sort of thinking hasn’t affected the policies of either the Coalition or the ALP.
I would probably say that Australia managed to reform itself in those areas that mattered, while leaving essential government services as a safety net (which is a social democratic ideal).
Australia’s reform process is hardly perfect, but I think it could serve as an example of where neoliberalism got it right.
(BTW I am very much from the Social Democratic / Ordoliberalism economic mindset. This means that I see room for some good government services alongside a free market economy)
To Juan’s response at 5:06:
I must admit, I am befuddled. I honestly cannot tell if you have a very good sense of humor and you are engaging in a little parody of yourself…or if you took a writing class from the Derrida School.
Seriously, though–this single sentence that you wrote:
“With emphasis on the individual and near denial of the social (without which there would be no ‘individual’), it fed into, and came to be fed by, neoclassic economics’ dependence on axioms of methodological individualism and instrumentalism, a dependence which has prevented it from ever properly integrating macro and micro but provided fallacies of composition and ideologies.”
…is worthy of an Onion article. Funny stuff!