Tag Archives: neoliberalism

We Need To Listen To Joseph Stiglitz

Joseph Stiglitz and Paul Krugman are my two favorite economists–probably because, despite both being Nobel Prize winners– both of them are able to explain their conclusions in language I can (mostly) understand, and because those conclusions usually strike me as eminently reasonable.

Stiglitz recently took on the neoliberalism that has characterized American governance since Reagan. Neoliberalism has been described as an economic system generally opposed to the provision or expansion of government safety nets, and highly skeptical of regulation, extensive government spending, and government-led countercyclical policy.

As Stiglitz notes,

On one side of the economic debate are those who believe in largely unfettered markets, in which companies are allowed to agglomerate market power or pollute or exploit. They believe firms should maximize shareholder value, doing whatever they can get away with, because bigger profits serve the common good.

The most famous 20th-century proponents of this low-tax/low-regulation shareholder-centric economy, often referred to as neoliberalism, are Milton Friedman and Friedrich Hayek. These Nobel Prize-winning economists took the idea beyond the economy, claiming this kind of economic system was necessary to achieve political freedom.
The strongest argument advanced by neoliberals is that economic freedom translates into political freedom. As Stiglitz points out, however, “not quite.”
We’ve now had four decades of the neoliberal “experiment,” beginning with Ronald Reagan and Margaret Thatcher. The results are clear. Neoliberalism expanded the freedom of corporations and billionaires to do as they will and amass huge fortunes, but it also exacted a steep price: the well-being and freedom of the rest of society…
Friedman and his acolytes failed to understand an essential feature of freedom: that there are two kinds, positive and negative; freedom to do and freedom from harm. “Free markets” alone fail to provide economic stability or security against the economic vagaries they create, let alone allow large fractions of the population to live up to their potential. Government is needed to deliver both. In doing so, government expands freedom in multiple ways.
Stiglitz’ basic argument is that the “Road to Serfdom” isn’t paved by governments that do too much; loss of freedom–serfdom– is a consequence of governing that does too little. He points out that populist nationalism poses a greater threat in countries like Israel, the Philippines and the United States than it does in in Sweden, Norway and Denmark. In those Scandinavian countries, high-quality public education, strong unemployment benefits and robust public health provide an economic floor that shields citizens from what he calls the “common American anxieties over how to pay for their children’s education or their medical bills.”
Discontent festers in places facing unaddressed economic stresses, where people feel a loss of control over their destinies; where too little is done to address unemployment, economic insecurity and inequality. This provides a fertile field for populist demagogues — who are in ample supply everywhere. In the United States, this has given us Donald Trump.
We care about freedom from hunger, unemployment and poverty — and, as FDR emphasized, freedom from fear. People with just enough to get by don’t have freedom — they do what they must to survive. And we need to focus on giving more people the freedom to live up to their potential, to flourish and to be creative. An agenda that would increase the number of children growing up in poverty or parents worrying about how they are going to pay for health care — necessary for the most basic freedom, the freedom to live — is not a freedom agenda.
Champions of the neoliberal order, moreover, too often fail to recognize that one person’s freedom is another’s unfreedom — or, as Isaiah Berlin put it, freedom for the wolves has often meant death to the sheep. Freedom to carry a gun might mean death to those who are gunned down in the mass killings that have become an almost daily occurrence in the United States. Freedom not to be vaccinated or wear masks might mean others lose the freedom to live.
Stiglitz provides examples of the various ways government regulation can enhance, rather than impede, individual freedom, and he ends by defining what he calls “progressive capitalism” (what I would call the “mixed economy.”) The goal of any economic system ought to be the creation of a broadly shared prosperity. The Isaiah Berlin quote captures the essential problem we face in today’s crony capitalist economy: we have a government that has been solicitous of the freedom and well-being of the wolves, and we’ve ignored the negative effects on the sheep.
Only government can (1) provide a social and political infrastructure accessible to all, and (2) prevent the wealthy and powerful from dominating and harming others. Neoliberalism fails on both counts.
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Follow The Money…

A recent diatribe posted to the progressive site Daily Kos made me think. It began with a recitation of the many indisputably negative elements of our current social and political environment.

Violence toward women and minorities has exploded. Armed militias tried to assassinate the Vice President and Speaker of the House in an attempted coup directed by the Republican President of the United States. They tried to kidnap and murder the Democratic governor of Michigan. They’re blowing up power substations from Oregon to the Carolinas. They’ve embedded themselves in DHS, police departments, and our military. They’re coordinating with fascists overseas.

“They” are the MAGA extremists, Neo-Nazis and Christian Nationalists who perpetrate most acts if domestic terrorism, and those who facilitate and/or excuse them.

The writer blamed all of this on “Reaganism” and the GOP, an accusation that vastly over-simplified the complexities of social outcomes. (That said, I agree that the rise of populism and the takeover of the Republican Party by radically Rightwing extremists Is hugely implicated.)

What caught my attention was the post’s reminder of a 1971 memorandum written to the U.S. Chamber of Commerce by former Supreme Court Justice Lewis Powell prior to his elevation to the Court. Historians and political scientists have noted the influence of that memorandum on businesses seeking to influence government policies in ways that would benefit their bottom lines.

Powell asserted that “leftists” — whom he defined as “middle class socialists and communist sympathizers” — had taken over the “government, universities, the Supreme Court, and our media.”

Current examples of the impotency of business, and of the near-contempt with which businessmen’s views are held, are the stampedes by politicians to support almost any legislation related to ‘consumerism’ or to the ‘environment….

Business must learn the lesson, long ago learned by labor and other self-interest groups. This is the lesson that political power is necessary; that such power must be assiduously cultivated; and that when necessary, it must be used aggressively and with determination — without embarrassment and without the reluctance which has been so characteristic of American business.

On the Court, Powell was part of the majority opinion in Buckley v Valeo–the decision equating money with speech and striking down legislation intended to limit the influence of money in political campaigns. The author of the post correctly noted that Buckley struck down “nearly a century of campaign finance legislation going all the way back to Teddy Roosevelt’s Tillman Act.”

It’s hard to argue with the post’s assertion that the Court “tripled down” on the equation of money and speech in Citizens United or with his assertion that between 1933 and 1981, pretty much everything that went right for middle-class Americans was the result of progressive policies: the right to unionize, unemployment insurance and workplace safety rules, Social Security and Medicare…

A top personal income tax rate between 74% and 91% throughout that period kept wages strong for working people and prevented the corrosive wealth inequality we see today. We didn’t get our first billionaire until after the Reagan revolution.

It’s easier to argue with the characterization of that period  as one of ” uninterrupted political and economic progress”–a description that conveniently  ignores much of the inequality and turmoil of those years–but the description of America after Buckley and Reagan is accurate:

Republican-leaning businesses bought up radio stations from coast-to-coast and put “conservative” talk radio into every town and city in America. Wealthy people began running for political office or supporting those politicians who’d do their bidding.

Conservative donors demanded rightwing economics and political science professors in universities across America. Rightwing think tanks and publishers were funded to support them. Billionaires founded a movement to pack our courts, including the Supreme Court.

The rise of neoliberalism has decimated the middle class and further enriched the wealthy. While I would quibble with details of the writer’s lengthy diatribe, I do echo his conclusion: we need to turn back to

the lessons of the New Deal and Great Society, embraced by presidents and politicians of both parties for a half-century, and rebuild our middle class and our democracy, along with our trust in each other.

The question, as always, is “how do we accomplish that?”

Thanks to the availability of huge amounts of money, a distinct minority of Americans  currently control many state governments, and is vastly over-represented in Congress. The money that has poured into the political system in the wake of Buckley has funded  sophisticated gerrymandering, misleading lobbying, and  overwhelming political influence via campaign contributions. It has supported the messaging that has drawn a variety of culture warriors, racists and their ilk to the GOP.

Perhaps it’s a failure of imagination, but unless the current iteration of the GOP suffers a crushing  electoral defeat–and soon–I don’t know how we begin to fix this.

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How The World Really Works…

A few days ago, a reader sent me a link to this article by Rutger Bregman from the now-defunct publication, Correspondent. It’s important.

His premise is that the world is in the midst of the biggest social shakeup since the second world war–one that will mark the end of neoliberalism, and see the emergence of far more  robust government.

As evidence of this impending change, the article quoted a 2020 editorial from the British-based Financial Times.

The Financial Times is the world’s leading business daily and, let’s be honest, not exactly a progressive publication. It’s read by the richest and most powerful players in global politics and finance. Every month, it puts out a magazine supplement unabashedly titled “How to Spend It” about yachts and mansions and watches and cars.

But on this memorable Saturday morning in April, that paper published this:

“Radical reforms – reversing the prevailing policy direction of the last four decades – will need to be put on the table. Governments will have to accept a more active role in the economy. They must see public services as investments rather than liabilities, and look for ways to make labour markets less insecure. Redistribution will again be on the agenda; the privileges of the elderly and wealthy in question. Policies until recently considered eccentric, such as basic income and wealth taxes, will have to be in the mix.”

Bregman points out that economic changes don’t emerge “out of the blue,” noting that there had been a time – some 70 years ago – that defenders of free market capitalism  were the radicals. The system we have now (if you can dignify it by calling it a system) began as a small think-tank established in the Swiss village of Mont Pèlerin by self-proclaimed “neoliberals” like Friedrich Hayek and Milton Friedman.

Friedman memorably wrote that “Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”

The thesis of the article is that economic crises of the 1970s ushered in neoliberalism (the ideas that were “lying around”) and a series of current crises–beginning with the fall of Lehman Brothers in 2008 and extending through COVID-19– will trigger changes based on the very different ideas that are now “lying around.”

Unlike the 2008 crash, the coronavirus crisis has a clear cause. Where most of us had no clue what “collateralised debt obligations” or “credit default swaps” were, we all know what a virus is. And whereas after 2008 reckless bankers tended to shift the blame to debtors, that trick won’t wash today.

But the most important distinction between 2008 and now? The intellectual groundwork. The ideas that are lying around. If Friedman was right and a crisis makes the unthinkable inevitable, then this time around history may well take a very different turn.

The new ideas have been planted by economists like Piketty and Zucman (example:Zucman and Saez’s “How the Rich Dodge Taxes and How to Make Them Pay”). And then there’s Mariana Mazzucato, who wroteThe Entrepreneurial State.

Mazzucato demonstrates that not only education and healthcare and garbage collection and mail delivery start with the government, but also real, bankable innovations. Take the iPhone. Every sliver of technology that makes the iPhone a smartphone instead of a stupidphone (internet, GPS, touchscreen, battery, hard drive, voice recognition) was developed by researchers on a government payroll.

And what applies to Apple applies equally to other tech giants. Google? Received a fat government grant to develop a search engine. Tesla? Was scrambling for investors until the US Department of Energy handed over $465m. (Elon Musk has been a grant guzzler from the start, with three of his companies – Tesla, SpaceX, and SolarCity – having received a combined total of almost $5bn in taxpayer money.) ….

But maybe the example that best makes Mazzucato’s case is the pharmaceutical industry. Almost every medical breakthrough starts in publicly funded laboratories. Pharmaceutical giants like Roche and Pfizer mostly just buy up patents and market old medicines under new brands, and then use the profits to pay dividends and buy back shares (great for driving up stock prices). All of which has enabled annual shareholder payments by the 27 biggest pharmaceutical companies to multiply fourfold since 2000.

The article ends with an explanation of the Overton Window–and how it has shifted.

If there was one dogma that defined neoliberalism, it’s that most people are selfish. And it’s from that cynical view of human nature that all the rest followed – the privatisation, the growing inequality, and the erosion of the public sphere.

Now a space has opened up for a different, more realistic view of human nature: that humankind has evolved to cooperate. It’s from that conviction that all the rest can follow – a government based on trust, a tax system rooted in solidarity, and the sustainable investments needed to secure our future. And all this just in time to be prepared for the biggest test of this century, our pandemic in slow motion – climate change.

You really need to read the entire article.

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