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Home JackpineRadical Rooms JPR Reading Room Exposing the Myths of Neoliberal Capitalism

  • bemildred (6901 posts)
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    Exposing the Myths of Neoliberal Capitalism


    C. J. Polychroniou: For the past 40 or so years, the ideology and policies of “free-market” capitalism have reigned supreme in much of the advanced industrialized world. Yet, much of what passes as “free-market” capitalism are actually measures designed and promoted by the capitalist state on behalf of the dominant factions of capital. What other myths and lies about “actually existing capitalism” are worth pointing out?

    Ha-Joon Chang: Gore Vidal, the American writer, once famously said that the American economic system is “free enterprise for the poor and socialism for the rich.” I think this statement very well sums up what has passed for ‘free-market capitalism’ in the last few decades, especially but not only in the US. In the last few decades, the rich have been increasingly protected from the market forces, while the poor have been more and more exposed to them.

    For the rich, the last few decades have been “heads I win, tails you lose.” Top managers, especially in the US, sign on pay packages that give them hundreds of millions of dollars for failing — and many times more for doing a decent job. Corporations are subsidised on a massive scale with few conditions — sometimes directly but often indirectly through government procurement programs (especially in defense) with inflated price tags and free technologies produced by government-funded research programs. After every financial crisis, ranging from the 1982 Chilean banking crisis through the Asian financial crisis of 1997 to the 2008 global financial crisis, banks have been bailed out with hundreds of trillions of dollars of taxpayers’ money and few top bankers have gone to prison. In the last decade, the asset-owning classes in the rich countries have also been kept afloat by historically low rates of interests.

    In contrast, poor people have been increasingly subject to market forces.

    In the name of increasing “labor market flexibility,” the poor have been increasingly deprived of their rights as workers. This trend has reached a new level with the emergence of the so-called “gig economy,” in which workers are bogusly hired as “self-employed” (without the control over their work that the truly self-employed exercise) and deprived of even the most basic rights (e.g., sick leave, paid holiday). With their rights weakened, the workers have to engage in a race to the bottom in which they compete by accepting increasingly lower wages and increasingly poor working conditions.


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    It ain't the things you don't know that hurts you, it's the things you know that ain't so.

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  • FanBoy (7983 posts)
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    1. +100

    Many of those who push for austerity do so because they genuinely (albeit mistakenly) believe that it works, but those who are smart enough to know that it doesn’t still would use it because it is a very good way of shrinking the state (and thus giving more power to the corporate sector, including the foreign one) and changing the nature of state activities into a pro-corporate one (e.g., it is almost always welfare spending that goes first).

    In other words, austerity is a very good way of pushing through a regressive political agenda without appearing to do so. You say you are cutting spending because you have to balance the books and put the house in order, when you are actually launching an attack on the working class and the poor. This is, for example, what the Conservative-Liberal Democrats coalition government in the UK said when it launched a very severe austerity program upon assuming power in 2010 — the country’s public finance at the time was such that it did not need such a severe austerity program, even by the standards of orthodox economics.

    Many imports from countries like China and Mexico are things that are produced by — or at least produced for — American companies. When the price of iPhone and Nike trainers made in China or GM cars made in Mexico go up by 20 percent, 35 percent, not only American consumers but companies like Apple, Nike and GM will be intensely unhappy. But would this result in Apple or GM moving production back to the US? No, they will probably move it to Vietnam or Thailand, which is not hit by those tariffs. The point is that, the hollowing out of American manufacturing industry has progressed in the contexts of (US-led) globalization of production and restructuring of the international trade system and cannot be reversed with simple protectionist measures. It will require a total rewriting of global trade rules and restructuring of the so-called global value chain.

    Even at the domestic level, American economic revival will require far more radical measures than what the Trump administration is contemplating. It will require a systematic industrial policy that rebuilds the depleted productive capabilities of the US economy, ranging from worker skills, managerial competences, industrial research base and modernised infrastructure. To be successful, such industrial policy will have to be backed up by a radical redesigning of the financial system, so that more “patient capital” is made available for long-term-oriented investments and more talented people come to work in the industrial sector, rather than going into investment banking or foreign exchange trading.

    As mentioned above, the improvement in infrastructure is an ingredient in a genuine strategy of American economic renewal. However, as you suggest in your question, this may meet resistance from fiscal conservatives in the Republican-dominated Congress. It will be interesting to watch how this pans out, but my bigger worry is that Mr. Trump is likely to encourage “wrong” kinds of infrastructural investments — that is, those related to real estate (his natural territory), rather than those related to industrial development. This not only will fail to contribute to the renewal of the US economy but it may also contribute to creating real estate bubbles, which were an important cause behind the 2008 global financial crisis.