Thursday, 2 October 2014

The Reasons Why I Oppose Neoliberalism

Neoliberalism Ensnares Democracy
Quoted from Wikipedia
"Nowadays the most common use of the term neoliberalism refers to economic reform policies such as "eliminating price controlsderegulating capital markets, lowering trade barriers", and reducing state influence on the economy especially by privatization and fiscal austerity. As an ideology the term is used to denote a conception of freedom as an overarching social value associated with reducing state functions to those of a minimal state.
American professor of political science and Democratic socialist Frances Fox Piven sees neoliberalism as essentially hyper-capitalism."

Rich and Poor
Speaking globally, there is an enormous and growing gap between the rich and the poor. In many countries, particularly in the third world, the ruling elite make sure that they become ever richer at the expense of their compatriots.  Corruption and weak government is the scourge of the under-developed countries of the world, but apart from withholding grants, it’s difficult to see what anyone in the West can do about this, even though I believe it’s the root cause of much of the world’s misery.  

Corrupt leaders are frequently less interested in investment, which leads to development opportunities for their own people, than in grandiose externally financed projects from which they can take their 10% oh sorry I meant 20%.  Furthermore political instability and perceived risk often causes a lack of inward investment.  All of this creates barriers to development and improvement in living standards for the general population of such countries. 

But even though corruption is endemic in many developing countries, during a recent trip to Kenya, somewhere that I hadn't visited since the 1980's,  I was pleasantly surprised by most of the changes that I saw. There is now a significant and growing middle class with money to spend on housing and goods or services. There are small businesses everywhere and a spirit that values work and enterprise.  If benign and effective government can be maintained, improvements for the standard of living of the rest of the population will follow.

The European Model
In Europe we are more fortunate that our political systems, whilst not perfect, are more transparent and less corrupt as a result of centuries of history.  We also fundamentally share a belief in social democratic principles; the protection of the most vulnerable, the provision of certain services by the state and an element of re-distribution of wealth.  In the UK even Thatcher did not really change any of that.

There is, in addition, a network of laws, regulations and standards built up during the 19th and 20th centuries, which protects Europeans from the excesses of unrestrained capitalism.  Whilst we may not always be happy that enough is being done, at least we can express our views to our representatives and decide whether to vote for them or not every five years.

The Downfall of Left Wing Idealism
The communist system, which had at its core a set of idealistic Marxist beliefs in equality and the sharing of wealth, imploded after 72 years.  There were many reasons for this. There was a series of authoritarian leaders, intolerant of dissent, who undermined the movement’s principal ideals.  This was combined with the absence of incentives to work and innovate, which led to economic stagnation.  Finally the burden of the “Star Wars” arms race with the USA pushed the system over the edge.  It was a miracle that there was not a bloodbath as regime after regime collapsed.  During the same period Western democracies delivered better living standards, even after two devastating world wars.

Neoliberalism or Capitalism?
Concerning delocalisation and the rise of third world manufacturing, we all deplore the working conditions in countries like Bangladesh, Vietnam, Cambodia and China, but we still buy the goods that they produce because they are cheaper than we can achieve in Europe.  Is this a result of “unrestrained capitalism” or just human nature?  Europe in the 19th century had similarly harsh conditions for employees, which slowly improved as a result of unionisation and enlightened legislation.  Do we expect other less developed countries to show more wisdom and compassion at a similar stage of development than we did?  And can’t de-localization of western industries also be seen as giving poorer countries the opportunity to improve their living standards? 

Would Neoliberals Stop Burning Fossil Fuels?
Of all the possible examples of the effects of capitalism and its attendant economic growth, for me the most worrying is climate change.  Without a concerted international response to reduce, or even to stabilize the concentration of atmospheric carbon dioxide, we will be leaving a very different planet to future generations, which will be uninhabitable in many places.  But I am, however, less pessimistic than some and I believe that technological solutions to this issue are possible which, as well as replacing the existing use of fossil fuels, could also accommodate the rapidly growing future energy needs of developing economies like China and India, without adding to atmospheric carbon dioxide.  

But whereas China can mobilise, and pay for, large research teams and resources to direct investment into carbon neutral energy sources, and is rapidly trying to move away from dependence on coal; in the West we are constrained to use slower carrot and stick methods, in the form of subsidies and regulations, to create change.  Because they are so heavily in debt, and suffer from short term political thinking driven by the electoral cycle, western governments are no longer able to carry out long term projects that require major government funding.  Consequently I am of the opinion that in the West we will continue to burn fossil fuels until cleaner methods of generating energy are proved to be cheaper by the Chinese.  These would then attract the necessary investment capital in developed countries to replace gas and above all coal, the most polluting and dangerous fossil fuel. 

The Neoliberal Trojan Horse
The latest neoliberal ploy 
Finally, coming back to Neoliberalism, without the likelihood of making a profit capital investments will not be made, but there still needs to be protection from the excesses of uncontrolled and unregulated private enterprise.  It is, however, precisely this protection that Neoliberals would like to dismantle under the guise of a Trojan horse of worldwide free trade agreements. 

After the financial crisis of 2008, which was a direct result of de-regulation and lack of banking controls, one can only think that Neoliberals must hold their beliefs as a result of irrational faith in “The Market” rather than any logical process.  

Unfortunately by over-stating the potential benefits of free trade agreements in terms of economic growth and employment, the Neoliberals have persuaded EU governments that it’s worth their while to risk giving up many of their powers as well as those things that define European values, like social protection and the precautionary principle.

I hope we can all agree that the Neoliberal agenda is not an acceptable way forward when so much is at stake and we must all do our best to block it at every opportunity.


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