by From Nikolaos Karagiannis and Issue 94 RWER The practical use of the term “neoliberal” exploded in the 1990s, when it became closely associated with two developments. One of these was financial deregulation, which would culminate in the 2008 financial crash and in the still-lingering euro debacle. The second was economic hyper-globalization, which accelerated thanks to free flows of finance and to new, more ambitious types of trade agreements. Financialization and hyper-globalization have become the most overt manifestations of neoliberalism in today’s world.[1] That neoliberalism is a highly biased concept does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift towards markets from the 1980s on? Or that centre-left politicians –
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from Nikolaos Karagiannis and Issue 94 RWER
The practical use of the term “neoliberal” exploded in the 1990s, when it became closely associated with two developments. One of these was financial deregulation, which would culminate in the 2008 financial crash and in the still-lingering euro debacle. The second was economic hyper-globalization, which accelerated thanks to free flows of finance and to new, more ambitious types of trade agreements. Financialization and hyper-globalization have become the most overt manifestations of neoliberalism in today’s world.[1]
That neoliberalism is a highly biased concept does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift towards markets from the 1980s on? Or that centre-left politicians – Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatization, financial liberalization and individual enterprise? Much of contemporary policy discussions remain infused with free market principles. However, the looseness of the term neoliberalism also means that criticism of it often misses key points. The real trouble is that neoliberal economics shades too easily into ideology, constraining the choices that different countries appear to have and providing cookie-cutter solutions.[2]
However, neoliberalism decouples political liberalism from economic liberalism and promotes commoditization of everything and the needs of transnational corporations over those of individuals. A proper understanding of the economics that lie behind neoliberalism would allow us to identify – and to reject – ideology when it masquerades vexing contemporary realities: slim economic growth in general, limited job creation, massive production disparities, transnationalism, increasing socioeconomic inequalities and misery, asymmetry of economic and political power, and environmental degradation.
What, after all, are Western institutions? The size of the public sector in OECD countries varies, from a third of the economy in Korea to over 60% in Sweden and nearly 60% in Finland. In Iceland, 86% of workers are members of a trade union; the comparable number in Switzerland is just 16%. In the US, firms can fire workers almost at will. French labour laws have historically required employers to jump through many loops first. Stock markets have grown to a total value of nearly one-and-a-half times GDP in the US. In Germany, they are only a third as large, equivalent to just 50% of GDP.
What the history of both Keynesianism and neoliberalism shows is that it’s not enough to oppose a broken system. A coherent alternative has to be proposed. For Labour, the Democrats and the wider Left, the central task should be to develop an economic programme, a conscious attempt to design a new system, tailored to the demands of people for the 21st century. read more
[1] Karagiannis, N. and J. E. King (eds) (2019) A Modern Guide to State Intervention: Economic Policies for Growth and Sustainability, Cheltenham, UK & Northampton MA, USA: Edward Elgar (Modern Guides Series), pp. 1-6, October.
[2] Rodrik, D. (2017). “Rescuing Economics from Neoliberalism”, Boston Review, November 06. http://bostonreview.net/class-inequality/dani-rodrik-rescuing-economics-neoliberalism.