Neoliberalism Assumption, a critique--jk

Globalization, Neoliberalism, Corporatism--jk
Neoliberalism Assumption, a critique--jk
BANKS BLOODLESS COUP: global financial--Brown
Neoliberalism exposed, a sales tool of the globalizers--jk
Iran Opposes Globalization--Chomsky


The replacing of academic-economics with ruling-class economics

Webster dictionary,  “Neoliberalism:  a modern politico-economic theory favouring free trade, privatization, minimal government intervention in business, reduced public expenditure on social services, etc.”  The version of neoliberalism examined below is the type contained in the free-trade agreements.  It is a neoliberalism that affects policies, for it is pushed by the globalizing corporations. 

Like the Divine Right of Kings, Papal Infallibility, bring peace and stability (used by military dictators who fail to mention their reign of terror), Neoliberalism is as equally ludicrous.

Basic assumptions:  1) that the market place undisturbed will go into a tight equilibrium around the fair price (reflecting costs and modest profits), thus deregulation benefits the people by promoting value.   2) That investors and consumers will natural seek to make the best choices, and in a free market accurate information will be widely distributed.   3)  That market bubbles and crashes are a result of distortions of this process brought on by interventions by the governments.  4).  That on comparing a government-ran business to a private corporate ran business, the result of competition and the drive for profits will in an undistorted market place always produce superior results for the consumers for the latter type of enterprise.  Thus neoliberals argue it would be better if private corporations took over the role of government.  5)  That a global economy without the distortion of government regulations will bring increasing prosperity throughout the world.  6)  Neoliberalism has been has been accepted by most economists over interventionist Keynesian economics, and thus neoliberal economics ought to be rigorously applied. 


1)     PREMISE:  that the market operates efficiently to determine fair price, and thus in the long-term deregulation benefits the people.  REBUTTAL: Bubbles, such as the recent housing collapse, prove that assumption false.   Deregulation of banking has produced a series of bubbles and collapses.  In their drive for greater profits, banking expands debt, and excess funds end up in speculative investments.  Examples include the 3 major bubbles prior to the Great Depression (land speculation in LA and South Florida, wheat farming, and stock market).  It brought on the recklessness under Reagan which led to the S&L collapse, the, and recent housing price collapse.  Deregulation permitted 5 energy companies to conspire to fix prices which lead to an over 6 fold increase in the cost of electricity in California.  Monopoly laws were enacted for good reasons, but in our corporatist state they are seldom enforced.  The market place operates not to create value, but to maximize profits.     

2)     PREMISE:  that investors and consumers make wise choices based on accurate information.   REBUTTAL:  Numerous corporate failures such as with Enron and Washington Mutual prove that investors don’t dig deep enough to arrive at an accurate assessment of the soundness of their investments.  Pertinent information is often not public.   Matters starting with Reagan got significantly worse; today over 1/4th of SEC corporate fillings are eventually corrected due to gross accounting errors.  Secondly the stock selection is in part a social phenomenon:  certain areas of investment become heated for a while, such as gold, stocks, property, and then cool down.   In the drive for profits drug companies hide serious side effects and distort the merits of their drugs.  A group of independent researchers found that the typical positive distortion was 32% for anti-depressant drugs, when published results were compared to the raw data.  Comparative information normally is not made available, not by the manufacturers.  Consider the case of AA batteries.     

3)     PREMISE:  that market crashes and bubble are caused by government intervention in the market place.  Such intervention, they claim, distorts the natural working of the market.  Thus in the long term the economy suffers.  REBUTTAL:  in the world of large corporations, since the end of the 18th century, the market place was not efficient.  As Baran and Sweezy in their classic Monopoly Capitalism point out, the one thing that large corporations don’t want to compete over is price. Their goal is to increase profits, and so they conspire to promote this end.  Regulations are needed to bring competition into the market place, to protect the environment, to improve the conditions for workers, to assure a living wage, and to assure safety for consumers.  Government intervention under the New Deal of Roosevelt’s administration brought growth and prosperity.  It was dismantled beginning with the Nixon administration.  The results deregulation we are living with.  Moreover, with the development of the corporatist state, current government regulations are made excessively onerous so as to justify their eventually removal. 

4)   PREMISE:  That government ran business are always less efficient than private corporate business, and the consumer bares this burden.  REBUTTAL:  This is plainly false, though corporate media paints a rosy picture of our healthcare system; it is the most inefficient and expensive.  A 1999 UN study ranked it 42nd.  Cost is nearly twice that of the UK, yet we are behind them in life expectancy and infant mortality.  Private insurance for example eats up 35 cents on every dollar.  There are numerous other examples of the failure of private corporations to deliver superior results.  For example none of the best universities (Harvard, UCLA, Yale, Stanford, Oxford) as to quality of education are ran by the state or set up as private institution.   Moreover, externalities such as from pollution and costs from work-place induced diseases such as black lung of miners and brown lung of cotton-mill workers are not borne by private sector.   

5)    An application of neoliberal deregulation will bring prosperity on a global scale.  REBUTTAL:  this clearly hasn’t happened, though their media paints a rosy picture.  Deregulations have in nations after nation has brought economic crisis, and lower wages.  In its 40 years since the Chile experiment, no nation has benefited when measured by median income.  No nation has fully recovered from the crisis that ensues following deregulation.  Greg Palast in Armed Madhouse pages 152-166 describes the neoliberal failure.  A second point is that the benefits of regulation have been repeatedly demonstrated.  On point are the policies of Franklin Roosevelt which brought the US out of the Great Depression by 1937 by applying Keynesian economics.  (Neoliberals have spun these events, by claiming that WWII brought us out, see GDP graph above.)  Moreover, even if one accepts their distorted analysis and conclusion, it doesn’t support the claim that government intervention causes economic instability.  First, the war preparation is a government intervention that caused prosperity.  Historians agree that this intervention made possible the rapid and successful shift from a civilian economy to a war-time economy.  Secondly there was very little intervention under President Hoover, and conditions deteriorated, manufacturing fell to 50% of its peak in 1929.  Deregulation has in nation after nation entailed, counter to democratic goals, a pyramiding of wealth and power and a reduction in purchasing power for the bottom 90%. As Naomi Klein points out in “The Shock Doctrine” it is exactly what the neoliberals want:  more for themselves at the expense of everyone else (paraphrasing Adam Smith quote below).  Neoliberalism has not brought improved living conditions to the bottom 90%.   The interventions when not hobbled by corporate influences have operated to build a socially just society with a national purpose and assure a living wage.   Neoliberalism fails to account for the distortion caused by monopolies, for they inflate the cost of goods for they don’t compete over price.  In the U.S. the pharmaceutical industry account for 17% of GDP and finance sector 44% of GDP.   Neoliberalism also fails to account for the casino like activities of finances.  The neoliberal theory exists as though there has no history of monopoly capitalism with price gouging, corporations poisoning the environment, foods, unhealthful and dangerous conditions in the work place, and the selling of snake-oil as drugs.  They push for deregulation of commerce and banking for the sake of profits, and profits has no conscience.  Neoliberalism is the bull shit economics loved by the global corporations.  Neoliberal economics serves them well.  As my father would say, “never trust the ruling class.”

“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind”--Adam Smith. 

Adam Smith was not the father of neoliberalism.  His first concerned was for the plight of the common man.  Because of a venal government in England in the mid-1700s, he favored no intervention as a way to limit the amount of harm.  Government intervention was consistently for some special, paying interest, and this he stated always increased the cost of consumer goods, which Smith lamented as being a burden on the working class.  Smith supported the Enlightenment, a liberal movement which challenged the existing order.  He and his friend David Hume were predecessors of the utilitarianism an ethics developed by Jeremy Bentham. The following passage is from a 1939 lecture by the conservative economist Lionel Robins given at the London School of Economics.  The quote in style and flavor exposes the misuse of Adam Smith’s economics:  Popular writing in this connection is far below the zero of knowledge or common decency.  On this plain not only is any real knowledge of the classical writers nonexistent, but their place has been taken by a set of mythological figures passing by the same names, but not infrequently invested with attitudes almost the exact reverse which the originals adopted.  These dummies are very malignant creatures indeed.  They are the tools or lackeys of the capitalist exploiters.  (I think that has the authentic stylistic flavor.)  They are extremely indifferent to the well-being of the working classes.  Hence when a writer today wishes to present his own point of view in a special favorable setting, he has only to point to these constructs with the attitude of these reprehensible people and the desired effect is produced.  You’d be surprised how many well-known authors who have resorted to this device.”