Tag Archives: neoliberalism

Noam Chomsky On His New Book, Neoliberalism And More In An Interview With Amy Goodman

Recently, Amy Goodman of Democracy Now interviewed Noam Chomsky with an audience at Cambridge, Massachusetts. Chomsky has a new book, Requiem For The American Dream: The 10 Principles Of Concentration Of Wealth & Power.

The ten principles are:

  1. Reducing democracy
  2. Shaping ideology
  3. Redesigning the economy
  4. Shift the burden on the poor and the middle classes
  5. Attack the solidarity of the people
  6. Let special interests run the regulators
  7. Engineer election results
  8. Use fear and power of the state to keep the rabble in line
  9. Manufacture consent
  10. Marginalize the population

I loved the line about neoliberalism:

So, the neoliberal programs were basically taking off right around 1980. It escalated—started a little with the late Carter, escalated under Reagan, went on more under Clinton and so on. 2007 was the peak of supposed success. This is right before the crash. A lot of euphoria among economists, political analysts about the great achievements of neoclassical economics, of the great moderation, you know, the neoliberal programs, a dismantling of regulations—all these great successes, 2007. What was happening to American working people at that time? In 2007, wages, real wages, were lower than they had been in 1979 when the experiment took off. In fact, for the majority of the population, it’s a period of stagnation or decline. Benefits have declined.

You can read more on the same from the transcript in the website or see the video.

Glenn Greenwald On The New Yorker‘s Admission

Since the U.S. elections results, the media has been hysterically claiming that Hillary Clinton lost the election because of “Russian hacking”. This is mainly to suffocate the debate on why Clinton really lost. A lot of journalists leaning Hillary Clinton before the election do this Russian hacking thing regularly either on TV, or on Twitter or in their articles. Even Paul Krugman has been mentioning Vladimir Putin’s name in almost every article since Nov 9.

There is of course little truth to all this. The main reason this story has attention is that Julian Assange’s WikiLeaks leaked emails of John Podesta, a former White House chief of staff. It’s true that Russia tries to hack the U.S. government servers regularly and hence it’s become easier for people promoting the Russian hacking story to claim that WikiLeaks’ source is the Russian government. But nobody has given any proof of this, yet.

But instead of stopping, the hysteria keeps continuing. Recently The New Yorker published a 13,000-word cover story (Mar 6, 2017) on Trump and Russia/Putin. 

The online version has this header image:

But toward the end of the long essay, The New Yorker makes this admission:

No reasonable analyst believes that Russia’s active measures in the United States and Europe have been the dominant force behind the ascent of Trump and nationalist politicians in Europe. Resentment of the effects of globalization and deindustrialization are far more important factors.

So despite so much hysteria, the magazine is conceding to the effect of globalization and de-industrialization on workers.

Glenn Greenwald of The Intercept has a nice critique of The New Yorker‘s cover story. He says:

As long as the Russia story enables pervasive avoidance of self-critique – one of the things humans least like to do – it will continue to resonate no matter its actual substance and value.

And quoting the cover story’s reference to globalization and deindustrialization, he says:

As Even The New Yorker Admits™, the primary reason for Trump, for Brexit, and for growing right-wing über-nationalism throughout Europe is that prevailing neoliberal policies have destroyed the economic security and future of hundreds of millions of people, rendering them highly susceptible to scapegoating and desperate, in a nothing-to-lose sort of way, for any type of radical change, no matter how risky or harmful that change might be. But all of that gets to be ignored, all of the self-reckoning is avoided, as long we get ourselves to believe that some omnipotent foreign power is behind it all.

Donald Trump has to be resisted but a strong alternative would not be neoliberalism.

Opposing Principles Of Political Economy Just Because Donald Trump Supports It

The blurb of a recent articleThe Ruthlessly Effective Rebranding Of Europe’s New Far Right by Sasha Polakow-Suransky for The Guardian, says:

Across the continent, rightwing populist parties have seized control of the political conversation. How have they done it? By stealing the language, causes and voters of the traditional left

A better way to put it is that the left has genuinely lost interest in addressing people’s grievances, and is promoting policies of neoliberals. The far right has found a clever winning strategy.

Donald Trump will soon be the President of the United States 🇺🇸 and economists and financial analysts have discussed Trump’s liking of fiscal policy. There seems to be a tendency of economists who are leaning toward the Democratic Party in the US to not support this. To me it just looks like a defense of the party than a defense of the correct principles of political economy.

To be fair to them, Donald Trump indeed has a character and ideology leaning to the dark side. But it still doesn’t mean why the US government shouldn’t engage on a fiscal expansion plan. Because this is a principle which belongs to the traditional left. Else they should stop pretending to be ideologically leaning to the left in the “political spectrum”.

Brad Setser has a post on his blog Follow The Money in which he seems to be not excited about a possible fiscal expansion by the US government. Now, Donald Trump is an erratic person and we’ll never know what he’s going to do until he does it but let’s just assume that he does it.

Setser’s point is that surplus nations have more room for fiscal expansion than deficit nations and I agree with that. But Trump’s policy is also to declare China 🇨🇳 a “currency manipulator”, in his own words. In another post, Setser opposes this and favours status quo on this issue from the US viewpoint.

Currently, although the US has a large negative international investment position (minus 44% of Q2 GDP), it’s not that the US economy is under immediate threat from a collapse of the dollar. The US economy can expand by raising tariffs and also asking other governments to do fiscal expansion. Even if others don’t initially, they might when they start to see the positives.

But none of these points will be made by economists. Trump’s fiscal stimulus may not even be large and its effect on the US international investment position may not be that bad. The US anyway has the option to appeal to the Article 12 of the GATT (General Agreement on Tariffs and Trade).

I think Bernie Sanders said it the best about the Democrats in a speech at Berklee, a few days back (at 38m, 58s in the video):

In other words, one of the struggles that you’re going to be seeing in the Democratic Party is whether we go beyond identity politics. I think it’s a step forward in America if you have an African American head or CEO of some major corporation. But you know what, if that guy is going to be shipping jobs out of his country and exploiting his workers, doesn’t mean a whole hell of a lot if he’s black or white or Latino.

The Democrats have clinged on to social issues because Trump’s views are horrible on this. While Trump should be passionately opposed on such issues, it’s an attempt by the Democrats to impose neoliberalism on the population. Sanders, although a Democrat, understands this.

Sanders’ opinion on this, his statement after the US election results were out, is the right one and should be followed:

Donald Trump tapped into the anger of a declining middle class that is sick and tired of establishment economics, establishment politics and the establishment media.  People are tired of working longer hours for lower wages, of seeing decent paying jobs go to China and other low-wage countries, of billionaires not paying any federal income taxes and of not being able to afford a college education for their kids – all while the very rich become much richer.

To the degree that Mr. Trump is serious about pursuing policies that improve the lives of working families in this country, I and other progressives are prepared to work with him. To the degree that he pursues racist, sexist, xenophobic and anti-environment policies, we will vigorously oppose him.

To President Obama And Secretary Clinton: In The Name Of God, Go

by Thomas Palley

Dear Secretary Clinton and President Obama:

On April 20, 1653, Oliver Cromwell spoke these words to the Long Parliament:

“You have sat here too long for any good you have been doing… Depart, I say, and let us have done with you. In the name of god, go.”

Secretary Clinton, you are rightly being blamed for the electoral tragedy that has befallen our country. The country wanted change and you offered continuity. You prided yourself on the neoliberal economic policies of your husband, President Bill Clinton, which have driven our country into stagnation and despair. Your rejection in Wisconsin, Ohio, Michigan, and Pennsylvania speaks to a greater rejection of the economic policies you, your husband, and your Third Way associates imposed on the party of Franklin Roosevelt.

President Obama, you too deserve enormous blame. You wasted the historic opportunity at the beginning of your presidency to break with neoliberal economics. Instead, you pushed Obamacare with its expensive sub-standard insurance that is punitively imposed on the self-employed. Donald Trump benefitted enormously from the premium increase notices that were received up and down the country in the week before the election. And at the end, you pushed the Trans-Pacific Partnership, another neoliberal globalization agreement, which ceded the economic argument to Mr. Trump. Your charm and intelligence are no substitute for the economic change we need, you promised, and then reneged on.

Cromwell’s words apply to both of you. Heed them and be gone.

Sincerely,

Tom Palley

This post first appeared at Thomas Palley’s website

The Treaty Of Rome And Balanced Trade

Policy Research in Macroeconomics (PRIME)’s blog Prime Economics reminds us of the Treaty of Rome, to establish a European Economic Community, first signed in 1957 which has a Chapter on Balance of Payments:

CHAPTER 2

BALANCE OF PAYMENTS

ARTICLE 104

Each Member State shall pursue the economic policy needed to ensure the equilibrium of its overall balance of payments and to maintain confidence in its currency, while taking care to ensure a high level of employment and a stable level of prices.

ARTICLE 105

  1. In order to facilitate attainment of the objectives set out in Article 104, Member States shall co-ordinate their economic policies. They shall for this purpose provide for co-operation between their appropriate administrative departments and between their central banks. The Commission shall submit to the Council recommendations on how to achieve such co-operation.
  2. In order to promote co-ordination of the policies of Member States in the monetary field to the full extent needed for the functioning of the common market, a Monetary Committee with advisory status is hereby set up. It shall have the following tasks:
    – to keep under review the monetary and financial situation of the Member States and of the Community and the general payments system of the Member States and to report regularly thereon to the Council and to the Commission;
    – to deliver opinions at the request of the Council or of the Commission or on its own initiative, for submission to these institutions.

The Member States and the Commission shall each appoint two members of the Monetary Committee.

I have emphasized many times in my blog that Euro Area balance of payments and international investment position imbalances are quite important for the Euro Area. Even before I started writing this blog, I had stressed before anyone else (on other Post-Keynesian blogs) that the imbalances are large and quite important in understanding the crisis.

Of course, imbalances can be corrected by deflating demand and output as has been the case in the Euro Area since the start of the crisis by policy makers. But it’s good to know that the founders of European integration thought of coordinating policies, which implies their policies would have been expansionary. Anyway, had the original ideas not been overthrown, the Euro Area would also have had a central government. Unfortunately neoliberalism became popular in the 1980s and this led to the Maastricht Treaty which forgot the original intentions of the founders.

The Treaty’s opening also has this important line:

RECOGNISING that the removal of existing obstacles calls for concerted action in order to guarantee steady expansion, balanced trade and fair competition

I should mention however that the Euro Area has this thing called the Macroeconomic Imbalance Procedure which tries to address the issue and even thinks of current account surpluses in the balance of payments as an imbalance, but it is still far away from doing anything about it, such as a coordinated fiscal policy expansion.

Free Trade And Balanced Budgets

Wikileaks has released “The Podesta Emails” which show Hillary Rodham Clinton’s political positions best explained by an NYT article:

[Clinton] embraced unfettered international trade and praised a budget-balancing plan that would have required cuts to Social Security, according to documents posted online Friday by WikiLeaks.

The tone and language of the excerpts clash with the fiery liberal approach she used later in her bitter primary battle with Senator Bernie Sanders of Vermont and could have undermined her candidacy had it become public.

Neoliberalism, the “New Consensus” and pre-Keynesian economics stand exactly for this idea: free trade and balanced-budgets. John Maynard Keynes’ true followers starting with Joan Robinson stood exactly in dissent against the idea of free trade and balanced budgets. Keynes himself understood the trouble with free trade, as can be seen by reading his chapter on Mercantilism in the General Theory, but didn’t emphasize it enough. Unlike what others see, Joan Robinson stood for her opposition to free trade more than anything else.

According to the New Consensus of economics, fiscal policy is impotent and hence budget should be balanced. Free trade will lead to convergence of fortunes of nations according to this view. Instead what we see is polarization. In my previous post, I quoted a top advisor who conceded how economists had been wrong about fiscal policy. But the damage seems to have done. Progressive and Keynesian ideas have a long battle ahead.

Needless to say Donald Trump is not the alternative. So there’s a lot of fight ahead for economists in years ahead to overthrow the new consensus. Macroeconomics makes a difference in people’s life, and it’s a battle worth fighting.

Link

An Undergraduate’s Question About Economic Policy: Thomas Palley Replies

Thomas Palley replying to a student:

Economics, like all social thought, is a contested space. Neoliberals have an interest in controlling economics since control helps them advance their political and economic project by helping them sell their policy ideas.

… I am a great fan of the student movement for change in economics.

Full email and reply in the link. The title of this page is the link.

Noam Chomsky On Neoliberalism

I have been looking at Noam Chomsky’s views on neoliberalism and I found a documentary Neo-Liberalism Ensnares Democracy by Richard Brouillette which I thought I should mention.

Noam Chomsky on Neoliberalism

Noam Chomsky in ‘Neo-Liberalism Ensnares Democracy’
Picture from the documentary’s site.

Chomsky argues how neoliberalism is not really “neo” and that it is what created the third world. He goes on to argue how this happens: In his language, free capital flows creates a virtual parliament of investors and lenders who carry out moment by moment referendum on government policies. Governments hence face a dual constituency and that neoliberalism is power-play.

The documentary length is 160 minutes (2h 40m). Chomsky appears at 23:06, 57:20, 1:10:22, 1:46:38, and 2:33:18.