Nobel-prize-winning economist: Neoliberalism is cactus
The ranks of neoliberal apostates are growing. One of the world’s highest-profile economists is the latest to highlight the failures of the free-market fundamentalists
Adopting this framework in The Road to Freedom, Stiglitz reserves his harshest criticisms for the free-market economists, conservative politicians, and business lobbying groups, who, over the past couple of generations, have used arguments about expanding freedom to promote policies that have benefitted rich and powerful interests at the expense of society at large. These policies have included giving tax cuts to wealthy individuals and big corporations, cutting social programs, starving public projects of investment, and liberating industrial and financial corporations from regulatory oversight. Among the ills that have resulted from this conservative agenda, Stiglitz identifies soaring inequality, environmental degradation, the entrenchment of corporate monopolies, the 2008 financial crisis, and the rise of dangerous right-wing populists like Donald Trump. These baleful outcomes weren’t ordained by any laws of nature or laws of economics, he says. Rather, they were “a matter of choice, a result of the rules and regulations that had governed our economy. They had been shaped by decades of neoliberalism, and it was neoliberalism that was at fault.”
John Cassidy in the New Yorker
First they ignore you. Then they ridicule you. And then they attack you and want to burn you. And then they build monuments to you.
Nicholas Klein, American trade union activist
It would be inaccurate to characterise Joseph Eugene Stiglitz as a neoliberal. Indeed, the first sentence of Wikipedia bio states he’s a “New Keynesian Economist”. (The bio goes on to list some of his achievements, such as stints at MIT, the University of Chicago, Cambridge, Oxford, Yale, Stanford, Princeton and Columbia, as well as a John Bates Clark Medal and Nobel Prize.)
Stiglitz was born 81 years ago and is the son of an insurance salesman. Possibly because of his relatively humble upbringing – at least compared to those who typically attend top-tier universities nowadays – he’s always been a blue-no-matter-who Democrat. That’s presumably why, despite his ideological inclinations, he used to be, shall we say, neoliberalism-adjacent.
While it was politicians of the Centre-Right who led the neoliberal revolution of the early 1980s, it was politicians of the Centre-Left – what used to be known as ‘Third Way’ types – who bedded it down in the 1990s. And there was perhaps no politician who was more important in embedding neoliberal policies than that charming sociopath Bill Clinton.
That’s a whole other article, but the relevant point is that Stiglitz agreed to chair President Clinton’s Council of Economic Advisers before serving as the World Bank’s senior vice president and chief economist. He also advised Obama, though I’m not sure he was particularly welcome at the White House after declaring the person who designed the post-GFC, ‘Too big to fail’ rescue plan was “either in the pocket of the banks or they’re incompetent”.
As an aside, I wonder if future historians will label Obama “the last neoliberal president” just as Chomsky famously called Nixon the last liberal one.
Hard to dismiss criticism
It’s challenging to paint Stiglitz as either intellectually unserious or a naïve, wild-eyed Marxist. And Stiglitz has just released a substantial tome arguing the increasing freedom of plutocrats and corporations to do as they please – Anglosphere societies have spent the last four decades untying the hands of the powerful in the hopes this would, eventually, lead to widespread prosperity – has had several unfortunate externalities.
In case you’re new to the blog, I’ll briefly list them: many millions of blue-collar workers thrown under the bus; the pauperisation of the middle class; absurdly expensive housing; out-of-control migration; wages for those in the middle and bottom stagnating while incomes for those at the top have increased exponentially and the financialisation of Anglosphere economies.
We’ve now seemingly reached the point where there is not even a lot of wealth or political power left to redistribute upwards. (As has been widely noted by those on both the Right and Left, it’s increasingly only the rich and corporations that can purchase property. As has been widely noted by those on the Left, when the interests of the plutocrats and the bulk of the populace diverge, it’s almost always the former who get their way.)
Straws in the wind
Australia was unusual in that a Centre-Left government overturned the Keynesian consensus. While that government was led by Bob Hawke, Keating is credited with doing the heavy lifting in terms of privatising government enterprises, tearing down tariff walls, lowering tax rates on corporations and the wealthy and deregulating industries.
Until his surprise and final election victory in 1993, Keating devoted significant energy to winning over influential media figures. Famously, he called on Australia’s journalists to be “participants not voyeurs”, encouraging them to preach the gospel of neoliberalism economic rationalism. Almost all of them happily obliged.
That makes it particularly noteworthy that the doyen of Australian political journalism, who was very much a participant during the Hawke-Keating era, has also been issuing his own Stiglitz-like ‘neoliberalism is cooked’ pronouncements in recent times.
Here’s The Australian’s Paul Kelly in mid-April musing on the rising populist wave:
Financial Times economics editor Martin Wolf, in his recent book The Crisis of Democratic Capitalism, sees populism as driven primarily by economic failures and disappointment.
Wolf said: “People expect the economy to deliver reasonable levels of prosperity and opportunity to themselves and their children… Given the decades-long poor performance of real wages in America, Trump had a rich field of grievance to exploit – deindustrialisation, loss of manufacturing jobs to China, poor wages in the services economy, a flawed social contract, poor health and education delivery for the bottom 40 per cent, rising wealth inequality and the sheer arrogance of the capitalist class. As Wolf said, “To be poorer than expected is bad – to be poorer than expected and despised to boot is worse.”
While Kelly avers that populism still seems “limited to the fringes” in Australia, I suspect many Australians would find what he calls the “dilemma of the age” oddly familiar – “people feel they no longer control their own lives or their own fate but are hostage to bureaucrats, technology, edicts from elites and rules they never authorised”.
How about some Bismarckian Realpolitik?
By the end of the Keynesian era, everyone hated unions, or at least “irresponsible union leaders”, and wanted the balance of power to shift away from Labour and towards Capital. Four decades later, everybody hates “greedy, overpaid CEOs” and wants to see the balance of power shift away from Capital and back towards Labour.
Squishy centrist that I am, I’d humbly suggest that – rather than jumping from the fire of inequitable, atomising neoliberalism into the frying pan of bureaucratic, boondoggle-ridden, strike-prone 1970s-style social democracy (yes, I’m just old enough to remember it), we aim for a golden mean.
Usually, I’d be characteristically pessimistic about achieving a ‘gold mean’ society, but several of them – Denmark, Finland, Iceland, Norway, Sweden and Germany – have long existed. Contrary to popular belief on both the Left and Right, these countries aren’t socialist. On the contrary, they are all pretty business friendly. But Nordic and German governments have to continued to do what Anglosphere governments did during the Keynesian era – tax and spend, and give organised labour a seat at the table.
Speaking of Germany, in the 1870s, there was also a rising tide of public opinion that what we’d today call the 1% were living lives of obscene luxury while everybody else had their arsch hanging out of their Hosen. Bismarck periodically tried cracking down on the Socialists, but that only made them more popular. The Junker hardman then did something most unexpected. He declared himself a ‘practical socialist’ and threw the restive, povo masses a few bones, such as old age pensions and socialised health care.
When questioned about this fiscally irresponsible largesse by whatever the 1880s Teutonic equivalent of an AFR columnist was, he replied, “Whoever has pensions for his old age is far more easier to handle than one who has no such prospect. Look at the difference between a private servant in the chancellery or at court; the latter will put up with much more, because he has a pension to look forward to."
For four decades now, those at the top have been converting those in the middle and bottom from court servants to chancellery ones. As a result, many citizens of the Anglosphere feel they have no stake in their society and every reason to turn it upside down.
One last thing
After a long and eventful life, Bismarck died peacefully in his bed in 1898. Just under two decades later, his near contemporary Tsar Nicholas II was executed, along with his family, by Bolshevik revolutionaries.