
The death of neoliberalism from within - musha68k
http://www.theguardian.com/commentisfree/2016/may/31/witnessing-death-neoliberalism-imf-economists
======
elgabogringo
Neoliberalism is not a school of economic thought. It's not an actual ideology
that anyone associates themselves with. It's a word without any concrete
meaning thrown around in order to avoid real discussion.

The free market is not failing. Current markets that are failing are hardly
"free." What is failing is a system of government regulation and control that
supports wall street and the rich at the expense of the middle class.

The governments and their federal banks created every single problem called
out in the article. To turn around, blame free-markets, and propose more
government as the solution is disgustingly disingenuous.

The IMF itself is not a proponent of the free market. It exists precisely to
support excess government spending and to bail rich bondholders who make
donations to politicians. Nothing lassiez faire about that.

The laissez faire solution to an overspending government would be bondholders
losing money, currency depreciating, and poor leaders being held accountable -
to which the IMF is diametrically opposed.

~~~
wfo
Of course it is an explicit ideology that many associate themselves with
(though not by name, since it's become something of a slur because it's so
obviously religious about the "free market" and hated because of this). It's
explained clearly in TFA.

Of course, the classic rabid libertarian answer -- any time any economic
failure happens, blame regulations. When we free the markets, and the markets
fail to provide anything we want (income equality, fairness, a middle class, a
healthy society) -- the obvious conclusion? The markets aren't free enough.
Deregulate, so the wealthy can make a killing abusing the poor more than they
already do.

~~~
icebraining
Noam Chomsky, that rabid right-wing libertarian:

 _What’s called the capitalist system is very far from any model of capitalism
or market. Take the fossil fuels industries: there was a recent study by the
IMF which tried to estimate the subsidy that energy corporations get from
governments. The total was colossal. I think it was around $5 trillion
annually. That’s got nothing to do with markets and capitalism._

[https://www.jacobinmag.com/2015/09/noam-chomsky-bernie-
sande...](https://www.jacobinmag.com/2015/09/noam-chomsky-bernie-sanders-
greece-tsipras-grexit-austerity-neoliberalism-protest/)

\--

The problem is that capitalists use the language of free markets, but are not
actually proponents of its wide application, just where it benefits them. Or
to put it more pithily: _capitalists don 't like capitalism_. So you get
localized deregulations and strong regulations (example [1]) where it benefits
them. But we should distinguish the cases.

[1] [http://www.wsj.com/articles/trade-groups-for-chemical-
firms-...](http://www.wsj.com/articles/trade-groups-for-chemical-firms-in-a-
twist-seek-more-u-s-regulation-1450348202)

~~~
bubbleRefuge
OMG. Very true. The hypocrisy is sickening and finally people are waking up to
it. For example, look at Paul Ryan. Tea Party, no-liberal , yada, yada, yada
comes from a privileged wealth family owning a construction business fed from
government contracts.

~~~
kiruwa
Uhm... no. Him being from a wealthy family is not an example of hypocrisy. Nor
is his family business being fed with government contracts. You've _badly_
misunderstood the issue if you think that's hypocrisy.

The question is... has he been a strong proponent of extra licensing
requirements for government contractors. Licensing requirements that his
family is able to easily handle, but will push out smaller competitors. That
would be hypocrisy.

Has he supported legislation against subcontracting or legislation that
artificially limits who the government (or private industry) can hire?

It's not hypocritical to offer services to the government. You're confusing
neoliberals with anarchists.

------
riphay
We're seeing more and more of these types of articles coming up, but they're
all talking about different aspects of the same issue: inability to share
growth with wide swaths of the population. In the west, our quality of life
has never been higher and products/services have never been cheaper. This has
been caused in large part by automation, lean manufacturing, globalization,
etc. and each one of these is net positive for society. The problem seems to
be that it's become difficult to share these gains with labour in the
classical sense; and our society, taxation system, social contract are all
based around this meaning of labour.

When I see articles about: \- Austerity, \- Wage growth, \- Universal basic
income, \- Death of middle class, \- Rise of right-wing parties, \- Anti-free
trade lobbying, \- Donald Trump and Bernie Sanders; I read all of them with
same lens. I know my knowledge of economics is medium at best, but I'm
starting to look twice at ideas such as UBI. Maybe there needs to be a rethink
of the Western social contract around labour.

~~~
ethbro
The biggest problem, when I look at the American labor market, is that it
seems physically unjust.

The sweat of a person's brow and the wear and tear on their body should have
some intrinsic value above and beyond what the market will bear.

That someone working as a farm hand, mover, framer, or roofer gets paid a
pittance compared to what I earn for sitting in a climate controlled office,
moving my fingers, and thinking? I can't reconcile that with any definition of
"fair."

UBI is perhaps one way to address this. Wealth transfer to increase robotics
usage and physical mechanization / automation application is perhaps another.

But no one should end up with a broken body at 65 just because we stopped
aspiring to do better by each other.

~~~
eli_gottlieb
>That someone working as a farm hand, mover, framer, or roofer gets paid a
pittance compared to what I earn for sitting in a climate controlled office,
moving my fingers, and thinking? I can't reconcile that with any definition of
"fair."

We all know manual labor isn't that productive, so there's an upper limit on
how much the laborer can be paid (the marginal productivity). The problem is
the exploitation: the wages unorganized workers receive are far, far below
their marginal productivity.

------
tim333
The article seems a bit vague as to what it means by neoliberalism. It seems
to mean the belief that unregulated free markets won't go wrong which I'm not
sure anyone really had. Some bits seem to work OK like letting people trade
goods and services and some lead to problems like German banks lending to
property speculators in Greece and then wanting to be bailed out when the
whole thing tanks. The latter was more straight dumb than anything else, at
least with hindsight. I'm not sure there's anyone saying I'm a neoliberal and
funding the Greek bubble was a good idea. It's a bit of a strawman.

------
dragonwriter
Related to this, I've separately submitted the actual IMF paper [0] referenced
(but not linked, the link goes to a Financial Times story about the report) in
the article, which has more depth than the somewhat broader-but-fuzzier
Guardian article.

[0]
[https://news.ycombinator.com/item?id=11831092](https://news.ycombinator.com/item?id=11831092)

------
rwmj
[http://stumblingandmumbling.typepad.com/stumbling_and_mumbli...](http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/04/over-
estimating-neoliberialism.html) points out that "neoliberalism" isn't a thing,
ie. not a coherent philosophy. It's just a name for ad hoc greed by many
diverse individuals.

~~~
fulafel
well argued opposing view: [http://www.perc.org.uk/project_posts/the-
difficulty-of-neoli...](http://www.perc.org.uk/project_posts/the-difficulty-
of-neoliberalism/)

"The reason ‘neoliberalism’ appears to defy easy definition (especially to
those with an orthodox training in economics or policy science) is that it
refers to a necessarily interdisciplinary, colonising process. It is not about
the use of markets or competition to solve narrowly economic problems, but
about extending them to address fundamental problems of modernity – a
sociological concept if ever there was one. For the same reasons, it remains
endlessly incomplete, pushing the boundaries of economic rationality into more
and more new territories."

------
lucozade
Somewhat tangentially, I wonder if the kind of misrepresentation* present in
this article is going to get better or worse in the future.

The fact that, in a lot of cases, it's trivial to go read the source [0] makes
me feel that it should dwindle. However, it seems that, with the substantial
increase in content available, having more strident views is required to be
heard.

* by misrepresentation I mean that the article was by no means a denial of "neo-liberalism". It was generally very positive about free market economics but looked at 2 niche areas and concluded that 1) short term capital controls may sometimes be worth doing and 2) deficit reduction isn't that valuable in very prosperous countries but is in weaker economies. Not quite what Mr Chakrabortty said it said.

[0]
[http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm](http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm)

------
lewis500
I am glad the author cites Red Plenty. That is a really excellent book that I
think a lot of HN readers would like. It really takes you into frame of mind
since lost, with poignance and good characters.

It is important to note we live in an age of diminished expectations not just
for what capitalism can do but for what government can do, too. Thus, I'm not
sure if the fact neoliberalism is disappointing actually means we need a new
system.

Do we need bigger government, than the current trend, in the US? The
government is projected to grow quite a lot as is. We spend more and more
money on education and health care every year, with disappointing results.
Look at the Medicaid experiment in Oregon: Finkelstein et al (2015) find very
little positive health impacts. Obamacare has cut the number of uninsured, but
I would guess its impact on actual health will turn out to be very mild.
Access to health care and spending on health care are not very much correlated
with health outcomes, as the more costly health care is based on deliberate
obfuscation or sloppy statistics or promises meager gains (e.g., slightly
shrinking a tumor) in the first place. Neither charter schools, on average,
nor public school reforms seem to have helped close the opportunity gap much.
The Iraq/Afghanistan wars cost like $2 trillion. Many of the largest public
pension plans around the US do not have enough assets to make ends meet, even
counting on delusional 7 percent returns! Prisons exploded, and nobody seems
happy with that. That land-use regulation has become baroque and suffocating
shakedown is something I don't think I need to convince anyone in the Bay of.
The best cars are made in non-union shops (e.g., tesla and all the new
southern factories).

It is interesting that things generally are moving slowly on all fronts, but I
don't think that's necessarily a reason to change course. If you are stuck in
a slow left lane of traffic, it doesn't necessarily mean you should get in the
right lane.

------
doctorcroc
The big question then is what replaces laissez faire economics and how? How do
we take the best of the free market while ensuring that governments and public
sectors are also robust? I feel like software and technology must have a huge
role here, but don't know enough to be able to point out specific solutions.

~~~
maxerickson
I think free markets are fine.

We just need a huge revaluation of capital. Downwards.

~~~
kaoD
Isn't the "death of neoliberalism from within" just the market adjusting
itself? I think the situation completely fits what free markets propose.

The problem is not that the system isn't working but rather that it is working
too well and we're witnessing the painful consequences of self-adjusting
markets.

Self-regulation is cool on paper but in the end we're talking about real
people suffering real consequences and, even if the system is adjusting
itself, the slowness of "the markets" to realize capital has to trickle down
for them to survive (and the resistance of the current capital holders to do
so) is producing a lost generation (at best) in the transition.

Of course, the fact that nations (the entities supposed to backpressure the
power of capital accumulation) are underlyingly controlled by the very same
people not interested in changes to the status quo isn't helping at all.

The system is working as advertised. The society just wasn't told what it all
really meant.

~~~
kiruwa
The more severe problem is that there is a rather strong argument being made
by the "Mises brand of neoliberal" that the primary cause of these problems is
the lack of neoliberalism in the central-banking world.

Their argument is essentially that the economy-wide boom/bust paradigm is
driven by the motivations of the central banks. Normally individual industries
and companies would experience fluctuation, but it would not be nearly as
damaging without the central banks attempting to 'synchronize' the economy.

------
EGreg
Reminds me of this:
[http://m.youtube.com/watch?v=qOP2V_np2c0](http://m.youtube.com/watch?v=qOP2V_np2c0)

I personally believe it is all the automation and outsourcing that is changing
the fundamentals and causing a drop in the demand for human labor - thus
undermining our trusty wage-based mechanisms to get money to the masses, who
then spend it back on necessities. The drop in demand means less investment
and lending. So the money supply shrinks.

The "Great Depression" was coined as a term by Hoover because it sounded
calmer than the term commonly used at the time: FINANCIAL PANIC.

A lot of it was caused by automation leading to overproduction by farmers
while simultaneously laying off their workers. It took years to build up a
manufacturing economy, and it helped that after WW2 the USA had no
competitors. So we became #1.

------
joshuaheard
The author correlates low growth with high inequality, that is, the money is
being held at the top and if only it were redistributed to the middle, the
growth floodgates would open.

But look where else the growth is: emerging markets in the developing
countries. So, the rich are not taking from the middle class, the middle class
is losing its value to the developing countries. As low-friction information
gets to developing countries, they are able to supplant the western middle
class in the manufacturing and service sectors. This problem will be
exacerbated as western businesses continue to automate.

The solution here is not protectionism or the stricter regulation of markets,
but is for the western middle class to adapt to the changing paradigm. How to
do that is the essential policy question.

------
kiruwa
> Two British examples [of neoliberalism], suggests Will Davies – author of
> the Limits of Neoliberalism – would be the NHS and universities “where
> classrooms are being transformed into supermarkets”.

Without taking a bit of Davies' argument into the article, that seems to badly
undercut the argument. I'm not sure I can imagine a segment of society less
neoliberal than either of them. (particularly by comparison to other western
democracies)

~~~
elgabogringo
Exactly, there's nothing free-market about government run Health Care or
Schools.

This is another case of people using words they don't understand.

~~~
URSpider94
As a general rule, I'd be very cautious before assuming that a columnist for
The Economist doesn't understand what he is talking about. You may disagree
with his conclusions, but that's a different matter.

What I believe he's talking about is the introduction of free market dynamics
to schools and single-payer health care, two institutions that have been
resolutely socialist (in the classical sense of the word) for a long, long
time. His belief is that these "modernizations" are destroying the
institutions.

~~~
elgabogringo
The author of the editorial is from the guardian, not the Economist.

The individual using the NHS/Schools as examples was the IMF author, not the
editorial writer.

I never said either didn't understand economics. I said he didn't understand
some of the words he was using. I was referring to the use of "neoliberalism"
& "laissez faire"

~~~
dragonwriter
> The author of the editorial is from the guardian, not the Economist.

True.

> The individual using the NHS/Schools as examples was the IMF author, not the
> editorial writer.

False. The NHS/Schools example comes (as is explicitly stated in the Guardian
piece) from Will Davies, author of _The Limits of Neoliberalism_ , a
completely separate work from the IMF report.

------
puranjay
the thing about capitalism is that capitalism has no ideology, only the profit
motive (nothing wrong with that)

if tomorrow the capitalists of the world were to figure out that communism is
more profitable and efficient for conducting business, they would change their
ideology accordingly.

capitalism can't die because capitalism is innate to human beings; it is
infinitely adaptable and flexible

~~~
wfo
Profit motive above all else is literally the prototypical example of an
ideology, just not one that most people would publicly espouse.

~~~
vixen99
No, it's one that everyone and all life espouses. All human interactions are
transactions which express this 'ideology' as you misleadingly call it. Eric
Berne understood this in 'Games People Play'. You transact because you get
value; you profit. Only dead people don't transact which is why we dispose of
their bodies. The profit motive is why we're alive and why evolution of life
on this planet has arisen. It's deep within our genes.

~~~
wfo
A beautifully expressed fundamentalist ideology; you are incapable of even
comprehending that there exist views other than your own.

------
emblem21
We are witnessing the death of the hypervisor (global banking), not the
virtual machine (nation-state agreements) or the underlying operating system
(cultural norms) or the underlying hardware. (nature)

------
areyoucrazy
Communists have been saying neoliberalism(nonsense term, which serves as an
insult)/capitalism is going to fall, but it ain't happening. It's stronger
than ever. They're like Christians expecting rapture.

~~~
djsumdog
Are you serious? Capitalism has been failing most of this planet! You just
don't think it's failing because you live in a mid-to-high income nation. One
day those nations will run out of others to have war with and steal from. The
earth has a lot of resources, but it's finite. This will all end one day.

~~~
generj
That is so very far removed from the historical reality.

Look up a chart of Global real GDP/capita over time. You may suspect that all
this wealth goes to the wealthy (unlikely even from a historical perspective,
look at all the servants Bill Gates doesn't have that even a slightly well-off
English family would have). If you think this, you can lookup a chart of
GDP/capita growth per country across the world. Failing this, there are charts
with real GDP growth split across income levels (though not for all
countries).

Failures in capitalism are usually a failure in governance. It's no surprise
at all that countries with repressive or unstable regimes have the worst
economies. Many countries which were once poor are now rich - even over the
lifespan of people still living. The Asian tigers went from terrible
conditions to skyscrapers in less than 30-40 years. People's grandchildren
could expect to make 7 to 8 times as much as their grandparents.

Every country is better off today than it was in the 1500s, 1600s, 1700s,
1800s, and the start of the 1900s. Wars are less frequent for almost the
entire globe.

You have a failed understanding of economics. We don't compete/steal from
others when our quality of living goes up. Instead, we raise the quality of
living of others. Look at China: when they started making our consumer goods,
many people's quality of living went from mud huts to apartment high-rises
with Starbucks downstairs. And we didn't really lose out - on average, we
found new types of jobs, mostly service jobs, which it turns out we can do
more productively than we could produce consumer goods.

Look, the Earth has many more resources than we are currently using. We could
produce food for the world with only a tiny fraction of the world's irrigated
land. If we run low on a particular resource, we will pivot past that rarity
with engineering, both social and physical. Malthusian predictions have thus
far all failed spectacularly. In fact, the more population we have, the more
specialized we can be, and the better off we are. It's not theory - it's what
history has shown us, over and over again, across the world.

