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The Grauniad Needs to Die Soon

George Monbiot is shilling for the glorious red future again. This isn't the first time he's written about neoliberalism this year, so I guess this is on his mind a fair bit. He even did a video for Verso on the subject. Having read David Harvey's book on the same subject I am disinclined to humor any nonsense about neoliberalism anymore than I am about cultural Marxism.

~ a. neoliberal laundry ~

1. Monetarism in central bank policy
2. Privatization of lots of government organisations
3. Deregulation of many or all industries
4. Tax decreases as absolute quantities
5. Re-balancing of labor laws to be more than 50% in favor of employers
6. Decrease in funding for or abolition of state welfare benefits

Did I miss anything?

To what extent have the countries of the world implemented these policy changes since 1970? Well, Chile managed all six but went back to a 50/50 split in labour law when Pinochet was ousted. So that's one country.

The USA did 1 and 4 from the late 70's and, on-and-off, through the 80's and early 90's, before reversing on 4 in the late 90's. So a little less than 2 out of 6.

The UK was bullier but was transitioning from a fairly Fabian policy mix, meaning there were a lot of very stupid examples of state-directed industries (automobile manufacturing, coal extraction, jet engine manufacturing, telecommunications) meaning the UK economy was considerably more nationalized in 1979 than that of any other First World nation at the time, and boy howdy did it show.

Hell, in France in 1982 Francois Mitterand embraced monetarism instead of Keynesianism, but at the very same time moved away from the other five points on the list! How do I count that? 0.5 out of 6?

Canada, India and Sweden all saw big liberalizations in the early nineties, but this was a move from Third Way Socialism/Fabianism to Social Democracy, so they don't qualify as neoliberal poster-children either.

Ultimately only 2 countries on Earth qualify as neoliberal from 1970 to 2010; Botswana & Chile. That's it. Let's compare the economic performance of Botswana against that of South Africa and Zimbabwe, and let's compare the economic performance of Chile against that of Argentina, Brazil and Venezuela.

~ b. straw man is best man ~

{1} Neoliberalism sees competition as the defining characteristic of human relations. {2} It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. {3} It maintains that “the market” delivers benefits that could never be achieved by planning.
1. There is no version of liberalism in the world that encourages anyone to see society as mainly competitive. Forgetting political philosophy a moment and digressing back into econ, in practice markets involve more co-operation through trade than they do competition through racing to entice potential trade partners.

2. Commercial marketplaces mediated by prices are considerably more responsive than political marketplaces mediated by votes. All one really needs to do is consider these two approaches applied to the same good or service.

If I want a car, say a Ford Mondeo, it would probably make more sense for me to hand over a certain quantity of tokens I previously received in exchange for my labour than to vote for the model of car - the model with the most votes will be the only one made - that will be produced and distributed to me and everybody else on the car waiting list.

3. If we remove the word 'neoliberalism' and swap in the phase 'free-market economics' then I guess I agree with just this claim.

~ c. principles ~

{1} Freedom from trade unions and collective bargaining means the freedom to suppress wages. {2} Freedom from regulation means the freedom to poison rivers, {3}  endanger workers, {4} charge iniquitous rates of interest {5} and design exotic financial instruments. {6} Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty.
1. Strictly speaking it's the freedom to let wages move to their relative equilibrium points. I say relative because obviously no market finds literal equilibrium in practice. The reason I'm a free-marketeer is that free markets are reliably better than plausible alternatives, not because they're perfect.

2. There is already a decent measure of evidence showing that natural resources are treated with more respect when they are privately owned than when they are not.

3. Free markets don't endanger workers by dint of being economically free - certain forms of work are dangerous because of their form, and people either accept or reject that danger. We all have the power of exit to another deal.

McCloskey demonstrates at some length that it was not regulations that did the heavy lifting of making workplaces safer in the second-half of the 19th Century, but rather the increasing affordability of basic safety measures that resulted from increasing productivity.

4. There is no such thing as a literally iniquitous rate of interest unless the person charging it is completely sure of their return. That is not generally the case except when a return has been backstopped by the state.

5. The mortgage-backed-security is not that complicated actually. The elaborations upon it are the kind of thing that a bank acting without a guarantee of bail-out from the state would almost certainty avoid, or if not, would go extinct.

Sans government support this is what would have happened, and other big or small banks would have gobbled up the market shares of the stricken institutions.

6. I'd be interested to hear about a social program that actually lifted somebody out of poverty rather than simply making their poverty easier to bare and stick with. Also when the author said 'distribution' what they meant was 'redistribution'.

~ d. history ~

The UK used to have nationalized steel, railway, utilities, garbage collection, oil and gas exploration and drilling, telecoms, aerospace, and automobile manufacture. These all went private, and to one extent or another also to the market, though the extent is awfully small in the case of garbage collection, with residential garbage collection services purchased by local councils, not homeowners. The result is better garbage collection than pretty much anywhere else in Europe or the Americas, but still not strictly a free market of the sort that Monbiot fears.

{1} The privatisation or marketisation of public services such as {2} energy, water, trains, {3} health, education, roads and prisons has enabled corporations to set up tollbooths in front of essential assets
{4} and charge rent, either to citizens or to government, for their use.
1. There has been very little of this in the UK since the 80's and the results of the past privatizations have been beneficial in terms of real prices and service quality - I'm thinking in particular of British Gas, British Petroleum, British Steel and British Telecom, though with the exception of British Petroleum there are important provisos about the degree of privatization and marketization.

2. The privatization of these three was partial in the sense that the services are privately owned and provided, but the government regulatory regime includes price controls and government vetting of any attempt to build infrastructure or buy or sell existing infrastructure, or indeed to buy competitors. That's pretty much that.

3. The true privatisation of these four ain't actually happened at all. That's pretty much that.

4. See e. {1} below.

~ e. rent & interest ~

Rent and interest are two responses to risk and uncertainty when lending something you control to somebody else. This is why both practices are ubiquitous. I doubt Monbiot or Sayer are trying to make absolutist "rent & interest are theft" arguments. I suspect their game is more contextual, that they both just really like Fabian Socialism. Y'know, the kind that underpinned the Indian economic model from 1947 to 1991.

{1} Rent is another term for unearned income. When you pay an inflated price for a train ticket, only part of the fare compensates the operators for the money they spend on fuel, wages, rolling stock and other outlays. The rest reflects the fact that they have you over a barrel.

1. Rent is income from giving somebody else the use of a resource that you own on the understanding that you don't know you will get it back as you'd like it. Thus the rate you charge will exceed your immediate costs of maintenance as a barrier to insure against damage. It's really that simple.
Financialisation, as Andrew Sayer notes in Why We Can’t Afford the Rich, has had a similar impact. {2} “Like rent,” he argues, “interest is ... unearned income that accrues without any effort”. As the poor become poorer and the rich become richer, the rich acquire increasing control over another crucial asset: money. {3} Interest payments, overwhelmingly, are a transfer of money from the poor to the rich. {4} As property prices and the withdrawal of state funding load people with debt (think of the switch from student grants to student loans), the banks and their executives clean up.
2. Interest is something that Eugen von Bohm-Bawerk addressed in two treatises, Capital and Interest followed by The Positive Theory of Capital. The former lines up theory after theory, offering each in its strongest form before explaining why it's inadequate. Positive Theory expounds Bohm-Bawerk's theory of interest, called the pure time preference theory of interest, where time preference is the degree to which you prefer a given good or service or situation in the present to the same good or service or situation in the future.

Among the theories exploded in the first volume are exploitation theories, labour theories, abstinence theories and others besides. .

Of course if the pure time preference theory of interest is not of interest to Monbiot or Sayer, either man could have tried the book Risk, Uncertainty and Profit by Frank Knight, in which the Ur Chigaco School economist posits a risk and uncertainty theory of rent, interest and profit.

Still unsatisfied? How about Ronald Coase's so-called Coase Theorem (named by George Stigler, not Coase!) which explains that only with zero transaction costs (social costs in Coase's own words) can a world without rent, interest and profit exist.

3. Interest is overwhelmingly a transfer from debtors to creditors. That correlation will come out a lot stronger than a correlation between poor and rich.

4. The switch from grants to loans was a response to the desire popularly held in the 90's and 00's to get more people into university, since the grant system fairly obviously limited the number of students who could be accommodated at any given time.

~ f. crisis? what crisis? ~

Some people cried foul and declared a great crisis of capitalism. One book I'm reading with  just that message is The Failure of Capitalist Production by Andrew Kliman. The global financial crisis and subsequent recession are treated as The Event come to end our world as we know it. The problem for such a narrative is that the period that  calls 'modern economic growth' has continued anyway, and seems from available evidence thus far to be pretty robust for the foreseeable future.

Indeed, a far bigger and more unpleasant crisis hit American, British and European people's living standards in the 1970's, stagflation, a combination of recession, high unemployment and high inflation leaving the UK economically stricken, something considered by neo-Keynesians to be impossible.

A New Statesman piece by Kiran Moodley gets a little confused on some economic points re the 70's but isn't really about that decade as a whole

The thing is, none of them ever demonstrate with sufficient robustness the trends they claim are consigning us all to inevitable doom. Kliman's profit rate diagnosis comes with obvious methodological and epistemic questions.

Think about it. How much poorer are people today than people 20 years ago? The answer is that we are all richer today than we were 20 years ago, and that has been a reliably true statement pretty much every year since roughly 1865*.

On the matter of neoliberalism, Monbiot might benefit from reading Kliman because in the work mentioned above this Marxist economist actually denies that neoliberal policy mixes are to blame for the global financial crisis, that the conditions were set in motion by the 70's crisis, years before any supposedly neoliberal policy mix changes.

* The benefits of modern economic growth only started to filter down to the whole population of the UK somewhere between 1840 and 1850. From then onwards everybody got reliably better off in terms of labor hours expended to afford food, clothing, 100 square feet of living space, light, heat, fuel for the two previous, leisure activities, non-vital consumer goods, and so on.

~ g. noise ~

{1} Governments use neoliberal crises as both excuse and opportunity to cut taxes, privatise remaining public services, rip holes in the social safety net, {2} deregulate corporations and re-regulate citizens. {3} The self-hating state now sinks its teeth into every organ of the public sector.
1. Taxation as a share of GDP is less today than it was in 1970, but considering the performance record of government versus private businesses I wouldn't be too bullish about bringing them back. Look at the scale of misallocation of resources in China right now, for example!

2. Corporate regulation has not lightened in a big way between 1970 and the present day. The total quantity of business regulations increased even from 1980 to 1990.

3. The impact of partial private incursions into the public sector in the UK should be analysed by comparing the openness and the performance of such UK public sector bodies versus their equivalents in countries that have not embraced as much private sector outsourcing, say, the USA vis-a-vis rubbish collection, utilities and telecoms.

~ h. escape? ~

Overall the only policy in reality that could be described as neoliberal and widely adopted is monetarism, or central bank monetary policy that seeks to minimize inflation first rather than unemployment first. That's it. There was no raft of deregulation, the privatisations that did take place were incomplete at most, and most countries didn't engage in such practices anyway unless they were moving away from a Fabian policy mix like the UK in 1979, India in 1991, or Canada and Sweden in 1993.

In other words Monbiot's piece is all sound and fury, signifying nothing.

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