From the Sydney Morning Herald:
Neo-liberals' economic policy just a get-rich-quicker fraud
This is not the result of chance. The rise in the fortunes of the super-rich is the direct result of policies. Here are a few: the reduction of tax rates and tax enforcement; governments' refusal to recoup a decent share of revenues from minerals and land; the privatisation of public assets and the creation of a toll-booth economy; wage liberalisation and the destruction of collective bargaining.
The policies that made the global monarchs so rich are the policies squeezing everyone else. This is not what the theory predicted. Friedrich Hayek, Milton Friedman and their disciples - in a thousand business schools, the International Monetary Fund, the World Bank, the Organisation for Economic Co-operation and Development and just about every modern government - have argued that the less governments tax the rich, defend workers and redistribute wealth, the more prosperous everyone will be. Any attempt to reduce inequality would damage the efficiency of the market, impeding the rising tide that lifts all boats. The apostles have conducted a 30-year global experiment, and the results are in. Total failure.
Before I go on, I should point out that I don't believe perpetual economic growth is either sustainable or desirable. But if growth is your aim - an aim to which every government claims to subscribe - you couldn't make a bigger mess of it than by releasing the super-rich from the constraints of democracy.
AdvertisementLast year's annual report by the UN Conference on Trade and Development should have been an obituary for the neo-liberal model developed by Hayek and Friedman and their disciples. It shows unequivocally that their policies have created the opposite outcomes to those they predicted. As neo-liberal policies (cutting taxes for the rich, privatising state assets, deregulating labour, reducing social security) began to bite from the 1980s onwards, growth rates started to fall and unemployment to rise.
The remarkable growth in the rich nations during the '50s, '60s and '70s was made possible by the destruction of the wealth and power of the elite, as a result of the 1930s Depression and World War II. Their embarrassment gave the other 99 per cent an unprecedented chance to demand redistribution, state spending and social security, all of which stimulated demand.
Neo-liberalism was an attempt to turn back these reforms. Lavishly funded by millionaires, its advocates were amazingly successful - politically. Economically they flopped.
Throughout the OECD countries taxation has become more regressive: the rich pay less, the poor pay more. The result, the neo-liberals claimed, would be that economic efficiency and investment would rise, enriching everyone. The opposite occurred. As taxes on the rich and on business diminished, the spending power of both the state and poorer people fell - and demand contracted. The result was that investment rates declined, in step with companies' expectations of growth.
The neo-liberals also insisted that unrestrained inequality in incomes and flexible wages would reduce unemployment. But throughout the rich world both inequality and unemployment have soared. The recent jump in unemployment in most developed countries - worse than in any previous recession of the past three decades - was preceded by the lowest level of wages as a share of gross domestic product since World War II. Bang goes the theory. It failed for the same obvious reason: low wages suppress demand, which suppresses employment.
As wages stagnated, people supplemented their income with debt. Rising debt fed the deregulated banks, with consequences of which we are all aware. The greater inequality becomes, the UN report finds, the less stable the economy and the lower its rates of growth. The policies with which neo-liberal governments seek to reduce their deficits and stimulate their economies are counterproductive.
''Relearning some old lessons about fairness and participation,'' the UN says, ''is the only way to eventually overcome the crisis and pursue a path of sustainable economic development.''
As I say, I have no dog in this race, except a belief that no one, in this sea of riches, should have to be poor. But staring dumbfounded at the lessons unlearned in Britain, Europe and the US, it strikes me that the entire structure of neo-liberal thought is a fraud. The demands of the ultra-rich have been dressed up as sophisticated economic theory and applied regardless of the outcome. The complete failure of this world-scale experiment is no impediment to its repetition. This has nothing to do with economics. It has everything to do with power.
Guardian News & Media
Every so often an article comes along that just says everything better than I can say it, and this is one of those. What I want see now is what (if anything) is going to be done about it . . . . . .