The dominant political economy of our age is brilliantly analysed here, by 13 accomplished scholars from a range of disciplines, in a clear, highly informative, and even entertaining collection.
Neoliberal policies are a disaster. In 30 years, liberalisation has produced only €1.3 trillion, or barely twice the total U.S. and European bank bailouts. Furthermore, the public guarantees for banks amount to €6 trillion. Neoliberalism has also financialised the major economies and commodified almost all of life. Global financial assets totalled $595.3 trillion in 2007, or 11 times the world's annual output, and vast profits are made from managing money, not from using it.
States raised interest rates between 2004 and 2006, thereby helping to trigger the crash and then rescued the private banks who had caused the crisis. The United States put the equivalent of two thirds of its GDP towards that, and the United Kingdom 87 per cent of its GDP. The leading politicians are so terrified of the financial sector that no state has imposed significant conditions on the biggest beggars in recorded history — who, far from spending the money on drink or even on manufacturing drink, are not putting it to any productive use.
That is because neoliberalism is intensely moral and political; its proponents, starting with Friedrich von Hayek, founded elite think-tanks solely to wreck the public provision which transformed and enriched U.S. and northern European societies and economies after the war. The plotters, who hated democracy, never tested their ideas in the public sphere; Hayek's stated aim was to control the minds of the intellectuals and the politicians. American academies submitted too, deifying Paul Samuelson while dropping the equally Keynesian Lorie Tarshis from their curricula after a ‘vicious' campaign. Tarshis favoured the highest wages compatible with full employment, and opposed monopolies.
The state was hijacked at the top, as were social-democratic parties, in a planned takeover. But when various European economies faced 40 per cent unemployment in the 1990s, even adherents of the Washington Consensus saw that their formulaic crusading produced messy and uneven results and never transcended national and regional concerns. That exposed neoliberal conceptions of knowledge itself. Hayek insists that we can never know the aggregate outcomes of individual actions; he admits that our successes or failures are then due to chance, not to our judgment and action, and adds that we must conceal this lest the public lose their will to work.
The fact that his arguments are founded on major epistemological commitments sets him apart from macroeconomists in particular. The latter search for tidier equations, perhaps with a view to achieving prediction and control, which Hayek says we can never achieve because knowledge itself is too radically incomplete and uncertain to be susceptible to that kind of treatment. Neoliberalism is as much an epistemological project as a moral, political, and financial one.
In any case the project is partial and disingenuous. There is no economic case for intellectual property rights or IPRs, the ‘globalised construction of knowledge scarcity.' They restrict the market, and were forced on us via the World Trade Organisation, by about a dozen corporations which control U.S. policy. Patents limit innovation; pharmaceutical corporations are the biggest funders of many university life-sciences departments. Yet the bulk of scientific and technical innovation and invention occurs without IPRs. As to carbon trading, it reduces the earth's capacity to regulate its climate to nothing but tradable permits. Greenhouse gases, however, cannot be locked away again; if all the currently stored gases are released, the earth may be unable to sustain any life at all. Carbon trading evades the task of reducing our dependence on fossil fuels.
The book's most challenging paper shows how microeconomics, which has come to dominate economics, and neoliberalism reduce all human activity to the individual pursuit of marginal utility and nothing else; in one form of the doctrine, even people's brains are obstacles to economically rational conduct. This paper, splendidly titled ‘Zombieconomics', also examines why political leaders and many economists still chant neoliberal mantras while the world crashes around them. The whole book is a fine epitaph for neoliberalism, the political economy of the undead.
THE RISE AND FALL OF NEOLIBERALISM — The Collapse of an Economic Order?: Edited by Kean Birch and Vlad Mykhnenko; Books for Change, 139, Richmond Road, Bangalore-560025. Rs. 450.