Neo-Liberalism: What Has It done For Us?

1neo

Sounds fine to me, does it do what it says on the tin?

I think this is a question that isn’t asked often enough, maybe there is an alternative to Social Democracy, after all that’s the strapline to my blog. I don’t see there is any problem in exploring the question to see where it goes. This is a global phenomenon and absolute poverty rates, defined as $1.25 a day, especially in India and China. The benefits of this poverty reduction have yet to reach Africa, for the most part as the chart below shows.

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No-one is claiming that everything is fixed but the improvements have seen “the share of people in extreme poverty has decreased continuously over the course of the last two centuries. This is surely one of the most remarkable achievements of humankind“. So how does this work in practice, how can we improve? The two most commonly mentioned examples are Singapore and Hong Kong.

There’s certainly a lot to like about the economics of Singapore, it is ranked 36th in GDP which is some achievement with a population of five and a half million, a very low tax rate of under 15%, the second busiest port in the world by tonnage, 3rd highest GDP per capita and ranked the most open for business country in the world. The inflation rate is around 1% and it’s economy grew 2.5% in the first quarter of 2017. It also boasts a world-class financial services sector and is a major exporter of electricals, chemicals and services. It has very scarce water and arable land so it needs to import raw materials and export the finished goods to obtain food. A great example for the UK to follow and we have the added advantage of ample agriculture and water in addition to the City.

“Made in Hong Kong!” used to be a popular cry in my household when I was a child, Hong Kong was a byword for anything shoddily made and of poor quality, times have changed since then. The story of the rise and rise is extraordinary, Hong Kong’s gross domestic product has grown 180 times between 1961 and 1997. Also, the GDP per capita rose by 87 times within the same time frame. They have a lot in common with Singapore, low taxes, a thriving (virtually) free port, the sixth largest stock market in the world and a magnet for foreign investment. It has coped with the 1997 handover to China admirably and maintained worldwide confidence. Government spending is entirely financed by taxation and all this with a similarly low population of just over seven million. Surely these are real world neo-liberal policies in action, a template for success, why shouldn’t we copy them? Let’s look at what happened when someone did.

Allow me to introduce Governor Sam Brownback from Kansas, he was elected on low tax platform to put the economy into overdrive. this is a field test for exactly the sort of policies used in Hong Kong and Singapore, the Chicago Tribune takes up the story. “The Congressional Joint Economic Committee reported earlier this year that Kansas had just 9,400 new private-sector jobs in 2015 (out of 2.6 million nationwide). U.S. Department of Commerce data show that, prior to Brownback’s tax cuts, Kansas ranked 12th in the nation in personal income growth; after the tax cuts it fell to 41st”. There’s more.

“Kansas isn’t headed in the right direction,” said a recent editorial in the Topeka Capital-Journal, a newspaper that endorsed Brownback for re-election in 2014. “A massive decline in revenue makes it impossible to compose a stable budget. … The state highway system has been robbed of funds to fix shortfalls. … Those who believe people with mental illnesses or physical disabilities deserve compassionate help are appalled by limitations imposed on services.”

Oh dear. At least the Tea Party Neo-Liberal candidate will be gone in 2018 due to term limitations and the Republicans are desperately seeking to row back on his disastrous polices. As American Prospect puts it “The Kansas governor’s attempt to create supply side nirvana in Middle America not only failed to grow the economy—it created a crippling crisis of government that led to a statewide rejection of his politics”. The near decade long experiment was halted in June this year.

Near midnight on Tuesday, June 6, a number of Republicans in the Kansas legislature did something that few other elected Republicans had done in years: They acted responsibly. Joining with Democrats, they voted to roll back the huge tax cuts that Republican Governor Sam Brownback had inflicted on the state, which had devastated schools and other essential services while also depressing the state’s economy. But after five years of this exercise in trickle-down, the damage had been done.

So why exactly did it all go so wrong? I am sure Mr Brownback had a genuine belief in what he was doing and how he would achieve it, he had a plan and a statewide wave of good faith to help him do it. Neo-Liberalism is a half told fairy tale leaving out the scary bits to avoid frightening the children. Singapore has all the trappings of a democracy but it’s a nasty authoritarian regime and it’s debt level is over 100% of GDP. Sorry did I skip that bit in my Eulogy above? That is straight from the Neo-liberal playbook, they want low taxes, that place has low taxes, therefore taxes should be low. This mind numbing circular logic is equally on display in failing to realise that local governments and national ones have different economics, a local authority cannot produce its own currency making the comparisons facile.

Hong Kong is an accident of history and geography sitting pretty in Asia and right next door the worlds fastest growing economy. It has been the global hub since colonial times and other countries cannot replicate its circumstances. There is also a strong savings culture within those countries and that replaces a lot of taxation. The governments are very strong in these countries another fact the Neo-Liberals inexplicably miss out. Move along now nothing to see here. I shall leave the last words to TLC.

Don’t go chasing waterfalls.
Please stick to the rivers and the lakes that you’re used to.
I know that you’re gonna have it your way or nothing at all,
But I think you’re moving too fast.

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11 thoughts on “Neo-Liberalism: What Has It done For Us?

  1. Do not believe poverty levels,this is bad maths,ie since i think it is now $2 a day was set & redefined $15t at least has been printed making that figures useless,the amount is socialised per head ie gdp divided by population (no wealth distribution taken into account)and & then pricing and then conversation rates which isn’t the best maths anyway.
    Hence why absolute poverty is absent in the uk,yet it is there, if you walk the streets of any medium to large town or visit foodbanks you see it.
    Just poor maths and maths inappropriate or unfit for purpose to try give neoliberalism some credit-ability it doesn’t deserve.

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    1. I agree, but remember I was trying to give reasons on why NeoLiberalism has become so entreched, I’m as baffled as you as it’s always jam tomorrow.

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      1. I was trying to give reasons on why NeoLiberalism has become so entreched,

        It’s as entrenched in the British mind as the thinking that says “Britain has control of its own currency, thus it can run up as much debt as it pleases.”

        Understand the one and you’ll understand the other.

        That’s when you realize that the Singaporeans are very happy with their authoritarian state, because that’s how they live their lives.

        Just as the Brits are happy that their government runs up debts rather than dealing with the problems that created the debts. The average Brit has to borrow money at the end of the month to pay their bills, the Government is no different. The reasons are the same: neither of them have sufficient income. Neither of them know how to increase their income. The average Brit hasn’t any chance to get more pay from their boss, the government hasn’t a clue.

        That, by the way, should answer your Kansas question: they cut their taxes and their income went down with it. Then their spending fell and the jobs that it sustained… and saw their portion of the tax revenue vanish along with their jobs. A negative spiral.

        How then do you create a positive spiral? That’s not something I’ve heard from any blogger yet… albeit there was one post in the Guardian.

        This is one tale of how to kick-start a positive spiral – albeit it was derailed when the Americans pulled the plug on their latest banking fraud…

        https://gemmasponderings.wordpress.com/2015/02/18/the-german-stadtsanierung/

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        1. Thanks Gemma, I’ll have a read of that. The solution is the restoration of Full Employment and allowing spending to be restrained by real resources, #MMT.

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          1. I’m sorry, but stating the obvious isn’t going to make it happen, is it? Marx thought like that, and look where it got Trotsky.

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  2. To rebalance a typical western economy we have simply to stop living beyond our means and our leaders should be setting an example by removing all the easy credit and lending facilities that is driving our downfall.
    Instead of which I saw a clip of Macron performing 3 masonic handshakes in under 10 seconds at the G20 summit on BBC1 NEWS.
    We have no chance cause the damage has already been done

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    1. To rebalance a typical western economy we have simply to stop living beyond our means

      Here in Europe, most of my friends don’t have a credit card and rarely use their bank overdraft. I do have a credit card, it makes it a lot easier to buy tickets on the German railways.

      In Britain and places like it, I believe they use credit cards because they’re underpaid.

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  3. Edited Comment, Grammarly is my Friend,

    Hi Bill, I think the Malone Approach of looking at starting assumptions is the key with a big Dash of John ( The Slog) Wards aversion to ideology Pills. What we see is a misapplication of resources. Neo-Liberalism and Religous Economics assumes that efficient market price signals inform rational Economic actors and apply resources to maximum benefit. That starting assumption leaves out the fact that most of the Maths used are misapplied and not set within appropriate and honest Boundary Conditions. Throw is a healthy dose of vested interests in complete denial that their Share of a smaller cake is Bigger than they had before, so they have something real to protect, and pretty soon we find, All that is being measured is Froth and speculation with an equally pliable and irregular Measure ( GDP), which, is a monetary measure and Money is a Variable. I have been re-reading some of Tragedy and Hope this morning as I have been plotting out the next few Chapters of the novel I am writing at the moment. What Strikes me on the umpteenth reading of the First chapters of Quigley’s OPUS is that he is giving an Honest History, surely written by the Victor but in the conceit that Victory will be perpetual. Essentially Quigley was declaring the emergence of the 1000 year Rech of Uncle Sam. Published in 1967 And written in the 20 years following World War 2 I am sure Quigley’s confidence seemed more than justified at the Time. % years Later, OPEQ, The Oil Shock, The Nixon Shock and Bingo here we are now back in the Roaring 20´s and Miserable 1930´s. I have also been reading some Le Quesne and dipping into the Physiocrats who inspired Henry George. And also some Rothbard, Some Proudhon and Some Bastiat with a nice shake of Alexander the great, The Rise Of Venice and the Ottoman Empire and had a jolly jaunt through the Triple Alliance and Some good Old fashioned Bismarkian Blood and Steele. What struck me is that the USA is an undeclared Empire which was always in denial of Empire and remains blissfully aware of its decline. Of Course, the EU is equally in Denial of its own Decline But what is the decline really about. What we see is a failure of Political Institutions and Imagination in a Privileged Political and Financial Class grown fat between the ears in the belief that the Medicine of Liberal Democracy and The There is no Alternative Mantra. That oft Big Lie, repeated often enough so beloved of Herr Goebbels. We are living in an age when we are not experiencing widespread crop failures of Famines induced by nature’s whims but in a world of despair where the despairs are coming from the paranoias of Self-interested Ruling classes. The secular religion of Climate Belief has failed to get the assistance from Mother Nature that its dire predictions wished for and meanwhile as Elizabeth Lease said we have full supermarket shelves and empty wallets. We do not have a problem of Production and resources but a problem of Distribution. We have a set of assumptions and institutions geared for scarcity when what we need to do is have a set of assumptions and Institutions geared for Great Potential and the Plenty which in Truth löooks like being almost infinite at this point. Our Political and Economic concepts are based upon a two centuries old set of assumption which even when drawn up were already out of date. The Power Structures though are predicated on protecting the store House when they need to be protecting us from the Power structures themselves. As an increasingly and hopelessly dependent Urban Civilisation what is clear to see is that City Folk sure do scare easy and the Volume of the Scare Machine is ever increasing. Neo-Liberalism, as it enters its middle age, is having the mother of all mid-life crises. https://en.wikipedia.org/wiki/Physiocracy
    Natural order[edit]
    The physiocrats thought there was a “natural order” that allowed human beings to live together. Men did not come together via a somewhat arbitrary “social contract”. Rather, they have to discover the laws of the natural order that will allow individuals to live in a society without losing significant freedoms.[13] The concept of natural order originated in China. The Chinese had believed that there could be good government only when a perfect harmony exists between the “Way of Man” (governmental institutions) and the “Way of Nature” (Quesnay’s natural order).[7]
    WU Wei,
    From May 11 2011.
    http://letthemconfectsweeterlies.blogspot.se/2011/05/nature-of-predictability-probability.html
    Nationalise the Peoples Banks for good.
    Dolce and Gabanna chains are still chains. A gilded cage will still imprison.
    Monopoly and Oligopoly are nothing to do with Free Trade. For a healthy economy support local farmers and local produce and use the nationalised Banks.
    Charlie Chaplin – FIGHT to Free the World
    http://www.youtube.com
    http://informationstation.ning.com/ Charlie Chaplin as you may not expect him… From ”The Great Dictator”, posted under FAIR USE in educational and non-pro…
    http://en.wikipedia.org/wiki/Laozi
    Wu Wei, literally “non-action” or “not acting”, is a central concept of the Daodejing. The concept of Wu Wei is very complex and reflected in the words’ multiple meanings, even in English translation; it can mean “not doing anything”, “not forcing”, “not acting” in the theatrical sense, “creating nothingness”, “acting spontaneously”, and “flowing with the moment.”[24]
    Now they say the Physiocrats gave us Laissez-faire, I think They Like Henry George have been sold short by the Liberal Democracy Wallers.
    Now let’s get back to that Man Malone, What was that. Starting assumptions, yep, that was it.

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