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.
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.
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.
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.
In fact, Chomsky often argues most markets are not free because of the massive teams of trained psychologists who work in propaganda -- i.e. public relations, to try to ensure capitalism does not work correctly, by misinforming consumers and making sure they act irrationally, at odds with the healthy behavior of a market.
So yes, it's not capitalism, but idealized capitalism is a ridiculous impossible goal that doesn't really exist because the market incentivizes people with power to subvert and destroy functioning markets.
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.
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.
I hate how "regulations" and "deregulation" has been reduced to a word that you are either "for" or "against" based on your political affiliation. As if regulations are all either entirely good, or entirely bad. I mean c'mon, do you really believe there has never been a bad regulation?
Free markets tend to produce the most wealth. Some regulations are necessary to prevent market failures like monopolies, information asymmetry, etc. But otherwise they are just getting in the way and causing more damage than good.
Regulations are not going to create a middle class or create economic equality. They can only prevent certain abuses from happening, but you can't regulate "equality".
The reality is some portion of the population doesn't have very much economic value. It's crazy and inefficient to try to artificially increase their value by protecting their jobs from competition. Instead we should tax the wealth that capitalism creates, and redistribute it more fairly.
A truly free market has a price for contract killings--including, for instance, the current CEO of Bank of America, or the current chairman of the Fed, or someone like Bernie Madoff.
If the wealthy make a figurative "killing" abusing the poor, the poor turn around and make a literal killing. An unethical executive would have to hole up in a fortified compound and surround it with hired guns, just like a Mexican drug lord. That places limits on how much money you can make from antisocial behavior, simply because people stop voluntarily doing business with you.
All big business ends up being a variant of the Mafia, but there has to be some honor among thieves, otherwise gang wars break out and ruin the regular revenue streams for everyone.
Few people would actually be comfortable with a completely free market.
This is rather silly. You've altered the definition of "free market" to the scope of things on the market, rather than the regulation of the market itself.
Although some free marketers (and many others) argue that things like prostitution should be "liberated" from prohibition, that's generally tangential to the arguments.
Usually, legal arguments about what can be bought or sold are settled in social/political terms, economics isn't really all that relevant.
Most free market advocates (and lots of people who aren't particularly inclined that way ideologically, but who analyze impacts of policy rather than superficial forms) view prohibitions (and the associated enforcement) as just one form of imposition of regulatory costs on a transaction.
> Usually, legal arguments about what can be bought or sold are settled in social/political terms, economics isn't really all that relevant.
The difference between "social/political" and "economic" is superficial.
> The difference between "social/political" and "economic" is superficial.
If you're including all issues that have economic effects, perhaps I'd agree with you. But I'm talking about the decision-making process.
We don't decide whether global warming needs to be addressed using a profit-maximization algorithm. It's a moral question.
The same is true of slavery from the North's perspective in the US civil war. (You can make an economic argument for the south, but it's still a stretch) Fundamentally it's a moral/social/political question, that has tremendous economic effects.
----
I'd actually argue the contrary. There are almost no "economic" arguments when it comes to regulation. Any argument worth having is fundamentally moral or social.
* How much taxation is "fair"
* What level of economic inequality violates "justice"
> But I'm talking about the decision-making process.
So am I. The decision making process that goes into "social/political" things is pretty much economic.
> We don't decide whether global warming needs to be addressed using a profit-maximization algorithm.
Social/political decision making is aggregating individual efforts to maximize the world's alignment with each individual's own preferences.
There's no difference between this and economic decision making.
> It's a moral question.
"Morality" is just one subset of personal preferences against which people act to optimize. The distinction between it and other subsets of preferences (like "aesthetics", etc.) is arbitrary.
Even if we assume the extreme, almost cartoonish version of free market, in which every possible transaction is legal, that still doesn't mean the action itself has to be. So you could have a market for contract killings - but you'd still be imprisoned for actually killing.
In a cartoonishly free market, law frameworks are also commodities, not enforced monopolies. Law enforcement is a paid service; there are no tax revenues to support it.
If you hire the Morag Tong to murder your business rival--who has no friends or partners ready to avenge his untimely death--who will be the one to hire Sam and Max to play freelance police long enough to bring you to justice?
You're blaming government regulations! That's absurd given many people at this point have said that the deregulation of the 90's on the financial sector is what lead to much of our housing financial crisis, not to mention the widening pay gap.
Your comment might actually be a good representation of how Neoliberal ideas of deregulation will continue to flourish despite them hampering to middle and lower classes. People will just say it's different sorts of regulations causing the problem, going even further down that path...
EDIT:
What's scary to consider is the era of strong wage increases and financial regulation from the 50's to 80's only started by a cataclysmic event, the Great Depression. Given how many large corporations and well off people benefit from the current system it's hard to imagine how we will see real increase in financial regulation similar to the Glass–Steagall Legislation until something of similar magnitude happens.
Given climate change is only going to get worse, I guess a pretty big catastrophe coming our way and causing similar change soon-ish isn't that far fetched.
> You're blaming government regulations! That's absurd given many people at this point have said that
1) That's not actually what he said. He said that the regulatory apparatus is currently working to assist rent-seeking and pushing wealth to the "1%". Regulation has been used to protect the wealth of the wealthy from the consequences of a free market, at everyone else's expense.
2) Argument from consensus isn't actually a valid argument. Most of the people in your consensus have been journalists, not economists. (economists are mostly trying to get people to understand that the causes are way more complex than the journalists want to believe)
1) I'm discussing the narrative, the poster only cites over-regulation as a problem, which I haven't seen bail-outs called before. The language implies government rules are the problem.
2) Many notable economists actually blame deregulation, such as Alan Greenspan & the SEC [0]. I think the man who oversaw much of the deregulation while it was happening calling it a problem in hindsight is a pretty darn good indication.
Of course your right though in the sense it's many things happening together, and the finger can never be pointed at one person let alone one group of policies. Still many people see the increased volatility caused by that regulation as a pretty big part of the cause.
It's fine to protect the wealth that is value creating (like actual industry). What is happening is increasing protection of value transference sectors (banking, pure equities plays that are often tax free, Hollywood's intellectual property), combined with increasing pressure on value creation sectors (higher corporate income tax rates) on actual real income, especially for small business that does not have scale to participate in legal tax dodging schemes.
Per point 2, Greenspan is kind of the worst person to make that call. There's a very good argument that he explicitly allowed that deregulation and coupled it with a series of bailouts, resulting in the "Greenspan Put". This moral hazard was then combined with very cheap credit, all at his insistence. I'd take anything Greenspan has to say about the economy with a few metric tonnes of salt - as would many people who served on the Fed Board with him. The documentary 'Money for Nothing' is a great laymen's view on this.
Similarly, the SEC isn't a super credible economic source for several reasons. One being if you are smart enough to work at Goldmans you don't work at the SEC. It's pretty self-serving for the agency in charge of regulation to argue that de-regulation was harmful. Do you know the specific economists making this argument? I'm very skeptical until I see names, and then my skepticism decreases while reading the actual paper.
I would argue that deregulation was not the central issue - which was a rise in activities which circumvented regulation, like off-balance bank trading. Greenspan shielded these new fields from regulation, and the resulting over-leverage killed banks. In addition, overly cheap credit made these activities and mortgage in general overly attractive.
There is a lot of evidence for this view, mostly in the multitude of institutions and industries which all had problems simultaneously. You can view this as a coincidence or you can view it as industries responding to incentives set by Greenspan.
No, you're discussing your narrative... which doesn't have much to do with the post you replied to.
Greenspan is rather heavily implicated as one cause of the problems. But he's attempting to shift the blame to the political side, rather than the economic side he was responsible for. He may actually be right, but I wouldn't take his word for it just because he was there. He's joined by political hacks pretending to be economists (like Krugman), and a few genuine economists. But it's far from agreed-upon.
What's scary to consider is the era of strong wage increases and financial regulation from the 50's to 80's only started by a cataclysmic event, the Great Depression
The wealth of that period had a lot to do with the British mortgaging their global empire to the US in order to pay off their war debt from WWI and for the US bailing them out again in WWII. In exchange, the US received approximate hegemony over "the free world" and the disguised blessing of a scary enemy to unite their side.
Given climate change is only going to get worse, I guess a pretty big catastrophe coming our way and causing similar change soon-ish isn't that far fetched.
Most human conflict is based on resource scarcity, fear of future resource scarcity, and/or fear of what others will do when faced with resource scarcity. This certainly applied to WWII. Even ideological/sectarian conflicts have fear of resource scarcity underpinning them.
I have encountered a few people who do argue that government regulation caused the economic crisis. It seems to be the dominant understanding in the conservative media in the United States, possibly elsewhere. The reasoning goes something like this: people in government wanted to redistribute wealth by building up impoverished minority communities, so they incentivized otherwise responsible banks to lend money to people who would not have qualified for loans and punished banks that did not meet certain minority quotas.
Banks responded to this pressure in the only way they could by giving out loans to minorities who then defaulted. Banks couldn't change the government initiatives, so they bundled bad loans with good to try to control the damage and save the economy, but too many minorities were irresponsible. The government then made the problem worse by adding even more regulation on banks, slowing the economic recovery and extending the recession.
I don't personally subscribe to this, but it does seem to have a lot of weight with a certain crowd. It's also used as an example of how minorities and government are the source of other problems in the country, so the only way we can solve the problem is through deregulation, giving more freedom to the financial industry, and ending any sort of affirmative action.
You may answer them by stating the fact that bank management committed fraud by making loans based on false appraisals and false documentation provided by borrowers and then selling these "assets" (with the help of corrupt ratings agencies) to uninformed institutional level investors . As intermediaries banks profit from the transaction fees. This is fraud plain and simple.
The public at large doesn't understand the banking system and how it is funded. Banks fund loans by creating deposits out of thin air. They don't loan money from their depositors. Because of this, they must be and are carefully regulated.
The banks further profited by investing their own money - something we then prohibited them from doing, as it made them far too risky. Essentially the banks had abnormally high returns, which is almost always a sign of high risk. The entire purpose of regulation is to force the banks to be boring, low-risk low-return options so they have a very low chance of failing. People seeking high-returns can then go to the stock market or hedge funds, which are much less likely to be 'too big to fail'.
The public is also unaware that nearly every substantial banking regulation was created as the result of a bubble, recession, or depression. We need strong bank regulations in order to prevent financial crises which can cause global depressions.
Throwing away regulations when everything is going well is much like throwing out all that error-handling code your application has built up over a decade. Sure, you get better performance initially...
What is bad about climate change? There might be more land with warm and mild climates. What is inherently bad about this? There were much bigger climate changes in the past, such as snowball earth era, when the entire earth was covered with ice and snow.
Massive increases in droughts which are already happening? Not to mention sure with the changes farming areas could get worse elsewhere and better other places like Greenland but we already have farms in those locations which were good 50 or 100 years ago, it takes time to adapt and there's no law saying things even out.
Not to mention when will the change stop? There isn't any indication it will stabilize in the near future meaning semi-unpredictable changes will continue to occur.
Also, living through the snowball earth era would have probably been awful for the human species. Sure life survived many apocalyptic events, no reason to think our species would survive when 99% of others couldn't.
Increase in temperature could actually increase agricultural output long term. Melting ice in Greenland and in Antarctica could provide the fresh water. Also, there's no fundamental reason why human population should increase indefinitely. Perhaps it will stabilize to an environmentally sustainable level. By the way Pangaea was mostly a desert due to it's smaller ratio of shoreline length to landmass. My main point is that I don't know which way is "better": global warming could be bad, or it could actually be good, or overall irrelevant (bad in some places, good in others). I do not know if anybody actually knows this.
To me there is an inherent contradiction in the concept of a 'free market'. They work very poorly unless there is protection of a number of market attributes.
One fundamental attribute is the protection of property rights - otherwise that market would be chaos and whoever could muster the most force could automatically take everyone else's property and destroy the 'free market.'
But the very act of 'protecting property rights' isn't as simple as just the enforcement of who owns what physical thing. There are fuzzy lines all over the place e.g. if I buy a beautiful plot of land to live on, and a neighbour sells their land for use as a garbage dump - how is that resolved?
So when someone criticizes that its not the 'free market' that failing, I think that's partially right and partially wrong. What often fails is our many rules (i.e. regulation) to try and build this abstraction of a 'free market', but when someone says the free market isn't failing because it can't because of gov't regulation - well .. this is wrong too, because without some form of framework of regulation (formal or informal) I don't believe you'd find any stable large scale free markets.
The other issue here is when people say 'free markets', I think they unconsciously mean efficient free markets. And then there are a number of other attributes that really need to be there in the abstraction for it to work (e.g. reasonable information equity between sellers/buyers).
> 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.
Then why do IMF economists refer to it as a real thing that the IMF actually practiced?
>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.
Then why is the IMF's usual advice to almost all countries to cut "excess" government spending on social programs while privatizing the kinds of revenue-making national resources/firms that keep the government from having to tax too much?
Exactly. This is merely more gamesmanship for the long con.
What do you do when vocal critics of your policies seem to be gaining steam? Agree with them! Use their ill defined terminology to label the failures not intrinsic to your plans as the "bad" things, say you won't do them anymore, and double down on your true ideology.
The real tell here is there is no mention of the economic colonialism of Africa and Asia. No mention of Iraq, Libya, Yemen, ISIS, etc. etc.
As an aside, I think a lot of commenters on this thread don't seem to realize you can be a proponent of government regulation and still criticize the crappy (some would say purposefully crappy) job that's being done in their name.
Markets don't exist without States. You cannot have a market without a State, and therefore you cannot have a "free market". They don't exists. The idea that there is or can be a free market is one of the great myths of our civilization (along with the idea that humans started out with barter based economies. We didn't. The earliest economies in human history were based around credit).
I highly recommend the book Debt: The First 5000 Years. It's pretty life changing.
1) Tribes/Feudal Lords ARE government, albeit often not effective/efficient government.
2) You'll find that in an anarchy situation, mysteriously there is some market governing force...like a tribe, or guilds, or even just a shared understanding of how the market/society is to function. Even mob justice is a sort of governance, and the definition of what the mob will allow before uprising is the law of the land...
3) While there are markets in conflict zones, they aren't free markets. Free markets by definition require things like homogeneous products and perfect information. Perfect information has never existed in a conflict zone, and it never will.
4) In order for a market which approaches "free" to exist, there must be some governing entity to setup and enforce rules of trade, fund basic infrastructure which the market relies upon, provide peace which minimizes volatility for the market, etc. Even the staunchest of free market economists have made this point for centuries. Adam Smith and Friedman both are very much in favor of governments in some fashion or another.
I guess you could say that markets exist without governments, but they certainly aren't efficient ones.
> Free markets by definition require things like homogeneous products and perfect information. Perfect information has never existed in a conflict zone, and it never will.
This is so absolutely wrong that I'm curious from which reference you got it from.
The very reason free markets work is because of heterogeneous products, allowing for competition, and for the fact that perfect information does not exist.
In a free market each actor only needs the information necessary to run his enterprise, contrary to a centrally planned economy such as a totalitarian state or today's central banks, which require (and think they have) perfect information, leading to bubbles, poverty, chaos.
I'm conflating free markets with perfectly competitive markets. If that's incorrect, I apologize - still learning econ. Really, I'm saying that the closer a market is to a perfectly competitive market or at least a monopolistic competitive market, the closer to a free market it is.
In my head this makes intuitive sense as clearly oligopolies and monopolies aren't free markets. If free market refers exclusively to non-centrally planned market then my understanding is very flawed.
I thought the entire point was that with heterogeneous products, there is less competition, as the goods are subtly different - enough so that sometimes they are actually in separate markets. Companies who are seeking to minimize competition typically do all they can to differentiate their product - that's marketing 101. In a monopolistic competition, there is heterogeneity, but it's curtailed by a homogeneous demand between these options - e.g. restaurants.
As for perfect information, I should clarify I'm talking only about price information on the part of the consumer. Without listed prices, its hard to make rational decisions. A combat zone doesn't have good information available on prices, which could vary greatly between locales.
If you look at markets with low profit margins, they tend to have homogeneous products with perfect information on prices - for instance, commodity markets. As the best possible outcome for consumers is for a market to have zero profits but competition to drive costs down. And I know that perfectly competitive markets are only theoretical, but I'd argue that the concept of a free market is only theoretical as well.
The IMF is a lender of last resort. Governments aren't forced to utilize them, and evidence shows that currency devaluation is often a better strategy.
Having unfavorable terms, as you've described, makes the bitter pill of devaluation look a little sweeter.
But in response to your question, I'm not sure how it's not free market. Can you describe specifically what doesn't get covered from the "it's not forced lending" argument?
One government overspends, gets bailed out by a quasi-government entity that is funded by other governments. This is government intervention in currency in debt markets, by definition not laissez faire.
You seem confused. neoliberalism is a term used to critique what certain people told us they were doing. The term is Very Necessary to understand the United States right now. But don't take my word for it!
Ah! You see, you have entered into a disagreement amongst them!
Plenty of neoliberals, aka folks who think competition is the best and that competition brings out the best in everything, still believe that you still have to first organize markets and make sure they are competitive, i.e. It is not the natural state of things in each and every realm of life.
Hand-wavy editorials about economic busts always come across half-baked and incoherent when they blame the "free market."
Inequality remains a massive red herring. Instead we should be concerned about the absolute standard of living and the level of corporate-government corruption.
Inequality isn't a red herring - not IMO. It's the natural outcome of our fed policies, which have existed largely to recapitalize banks. They've hampered growth (hitting the middle class) while causing asset inflation (and how owns assets? The rich.) So inequality is real, but not for the reasons most think.
Don't want to have a back-and-forth about inequality. But at it's most basic level, what does it matter to me if someone else has lots of money/wealth? As long as they can't buy off government officials either through lobbying or cash bribes, then I don't care.
Also, large and growing inequality is usually a symptom of a more deeper issue in an economy. Pushing to "fix inequality" is just patching a symptom, and proposed solutions usually involve giving more power to the state (which is probably the root of the inequality problem).
And modern "inequality" in Western economies is nothing compared to what it was in the past, hence my comment about absolute standard of living. Historically, inequality meant that the aristocracy rode around in carriages while the peasants walked barefoot. Now, the rich have fancy cars / jets, and the "poor" have cheap cars. But everyone has cars! (or access to mass transit for most Europeans -- I'm coming from a US-centric view).
Absolute standard of living has increased to an unbelievable level: 200 years ago, we worked outside on farms doing back-breaking labor from sunup to sundown. Now, a vanishingly small proportion works the farms, and even the tractors are air-conditioned. And absolute standard of living continues to rise for much of the world.
So what if there's inequality? We are so much better off than we have ever been, in absolute terms.
Agree 100%... Inequality is an issue in this case because it's coming at the expense of the middle class...
As you point out, current increases in inequality are symptoms of a bigger problem. The bigger problem (Govt debt, Fed money printing, and bank bailouts) needs to be addressed.
Trying to address inequality without tackling the root cause will do little - in most cases, since the "solutions" are more harmful govt/fed interventions, it will just make inequality worse.
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.
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.
>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.
Economies are based around scarcity. In the fictional economies of Sci-Fi like Star Trek, there is no scarcity. If you can replicate a Rembrandt, atom by atom, it essentially loses its value.
Today is all about me creating something, convincing you that you need it, and getting enough "yous" to contribute that I make enough to produce said thing. When you really start to break it down, money is like the Ghz speed of a processor or the Calorie measure used to measure energy in food. It's a poor measure of worth. We see people with millions of money, just because they convinced some poor smoo their life wouldn't be complete without this shitty knife.
If you believe in Glenn Renolds version of reality (Army of Davids), technology is what will level the scale. But he wrote that a decade ago and it hasn't really held true. There are Kickstarters and crowd-funding, but it's all still based around the same failing model.
We need some pretty big technological breakthroughs: truly mastering the atom. Right now we can only blow shit up (and by we I mean the ones with the money, resources and power to build atomic bombs) or generate power by breaking apart that atom to boil and pressurize water.
Humanity needs to solve the energy problem: both producing large amounts of power in non-polluting ways and storing power more efficiently.
Humanity needs to truly master the atom: to be able to manipulate atoms with a reasonable amount of energy to easily synthesize things (3D and chemical printers on steroids)
Humanity needs to move beyond money. Once you eliminate scarcity, money will essentially become worthless; an archaic idea.
This might all seem crazy and well beyond even the realm of what's possible. But I really feel like if it's not, humanity may only have another 3,000 ~ 5,000 years left. It's pretty much the simulation theory argument: we either continue to evolve and develop to the point where we could partially simulate enough of our world that the simulations would be self away (feel real) ... or we go extinct... Even if we go back and fourth between the stone age due to war/conflict ... eventually one of those two outcomes is inevitable.
I really feel if humanity is here 5,000 from now, money will be an ancient concept that people will have difficult comprehending.
Forget about the content of the articles and instead look at the themes.
The current system is fundamentally broken and levers that governments have to "fix" things aren't working as they (claim to) want.
Everyone is looking for someone to blame instead of debugging what's there and seeing if there is a way to change things before they go (more) catastrophic.
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.
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.
"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."
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.
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.
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.
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.
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.
The consequences are only painful for certain parties/demographics. Others reap the benefits of change. (If we're going to continue speaking in these broad generalities.)
It's important to remember that "free market" does NOT mean "no regulation". A market inherently requires regulations (i.e. contracts, trademarks, currency policy, etc). Even Adam Smith knew this. [0]http://economistsview.typepad.com/economistsview/2010/03/ada...
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.
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.
> 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)
I think the reference to neoliberalism is in the motivation and direction for policy changes in those institutions in recent years, rather than the institutions themselves being neoliberal.
Is that _really_ the best examples he can come up with? Why not military support structures or privatized municipal services? I'm not sure two examples is sufficient to hold up his claims anyways, but the ones he chose were terrible.
Looking through the link, Davies seems to be arguing that even applying metrics to measure performance is somehow 'neoliberal'. He badly misreads Hayek (enjoying a bit of pointless psuedo-psychoanalysis), rather than reading or understanding the man's arguments.
Whenever anyone attempts to tell you that one group in particular was responsible for the US housing crisis, you can safely assume you're dealing with political ideologue. Davies falls completely into that category.
There appears to be this baseline assumption in certain leftist circles that "capitalism is based in greed, we see greed in western capitalist systems, therefore all examples of greed are due to capitalism". This would be a laughable syllogism if so many otherwise intelligent people didn't seem to take it seriously. Most of his "examples" are springing from this rather absurd belief.
Well that's the point: neoliberalism is when you start trying to push market-capitalist dynamics into domains people view, both traditionally and normatively, as not appropriate for those dynamics.
For instance, if you agree with the statement, "Students are not customers and should not be able to dictate to professors", you are saying something that is actually directly opposed to neoliberalism. You are saying that society needs to use material resources to create a space of non-market relations, and needs to withdraw resources from existing efforts to transform that space in the image of consumer markets.
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.
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"
> 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.
My interpretation: neo-liberals have tried to bring market forces to bear on the NHS and Universities - and this is the 'overreach' he is referring to. i.e. the fault isn't with the author - it's with those with overly expansive interpretations of market economics.
I'd say your right about the author of the study (which I am not going to waste time reading) and his NHS/Uni examples - but wrong about the author of the editorial - because it's definitely an editorial, not a piece of reporting.
Applying free market principles to government run services that should be government run like health care, schools -- where profit and efficiency are not goals is neoliberal.
This is another case of people discussing articles they didn't read.
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
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.
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)
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.
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.
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.
'Some of the poorest people in the world are becoming significantly less poor, according to a groundbreaking academic study which has taken a new approach to measuring deprivation. The report, by Oxford University's poverty and human development initiative, predicts that countries among the most impoverished in the world could see acute poverty eradicated within 20 years if they continue at present rates.'
Why is this happening? Because our world has enabled people to trade with each other; that's another term for capitalism. As Tim Worsfall has put it: 'Choice, consumers, consumption, these are not things to be disdained from the comfort of an Islington eyrie, they are the entire damn point of having a society or an economy in the first place.'
The basic problem with your view: Today one can literally go from kindergarten to becoming a graduate student seeking a Ph.D., without ever hearing a vision of the world that conflicts with the vision of the left.
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.