Tag Archives: neoliberalism

Glenn Greenwald Twitter Thread On Identity Politics As A Cover For Imperialism And Neoliberalism

Glenn Greenwald has an excellent Twitter thread on how the “centrists” use identity politics as a cover:

He writes:

Contempt for it on the merits aside, one has to acknowledge the propagandistic genius of exploiting harmless-to-power identity politics as the feel-good cover for perpetuating and even strengthening the neoliberal order and further entrenching corporate and imperial power.

See the full Twitter thread and also a recent post, Identity Politics As A Neoliberal Alternative To A Left, where I mentioned him.

Joan Robinson On How Free Trade Is Destructive

Joan Robinson in her 1977 paper What Has Become Of Employment Policy on how free trade has been destructive and leads to divergence of fortunes of countries. Also in Collected Economic Papers, Vol V. Relevant text (with footnotes and quoted references in the same text) reproduced below, with my highlights:

II

Class war was not the only element of inherent vice in the free-market system to disturb the age of growth. There were also the problems generated by the unevenness of development amongst various capitalist nations and the economic and political relationships between industrial countries and primary producers, particularly those in the third world.

The pre-Keynesian theory of international trade required the balance of imports and exports for each country to be maintained by movements in relative price levels. After experiencing the attempt to return to the gold standard in 1925 (see Keynes, 1972), Keynes adopted the view that depreciating the exchange rate was much to be preferred to attempting to depress the price level. At the end of his life, feeling obliged to defend the Bretton Woods agreement against his better judgement (Kahn, 1976), he lapsed into arguing that, in the long run, market forces would tend to establish equilibrium in international trade (Keynes, 1946). He had forgotten his old crack, that in the long run we are all dead.

As it turned out, market forces generated disequilibrium. Differences in competitive power, whatever their origin, set up a spiral of divergence. A country such as West Germany, with growing exports, could maintain a high rate of investment and therefore of growing productivity, which enhanced its competitive power, and allowed real wages to rise so that workers were less demanding. In the United Kingdom, any increase in employment caused an increase in the deficit in the balance of payments so that every hopeful go had to be brought to an end with a despairing stop. Thus strong competitors grow stronger and the weak, weaker.

Because of the size and strength of the United States and its overseas economy, trade plays a small part in national income, but not a small part in the world market. The USA can move from deficit to surplus without much disturbance at home, but with a great deal of disturbance to the other trading nations. Moreover, it was able to take advantage of the dollar being the world currency to run an ever greater outflow on capital account with an ever growing deficit on income account, until President Nixon, with the dollar devaluation of 1971, suddenly tried to reverse the position with a stroke of the pen. All this laid great strains on the international monetary system.

Keynes worked out the structure of the General Theory mainly in terms of a closed economy. When it is extended to take in the operation of international economic relations, a missing link appears in the argument. The rate of interest was to be used to regulate home investment, and Keynes believed that a secular fall in interest rates was both necessary for this purpose and desirable in itself. Exchange rates were to offset differences in relative labour costs. Then nothing would be left to regulate short-term capital movements. Traditionally this was the function of relative interest rates. Britain, and other countries with chronically weak payments balances, could not indulge in cheap money however much home conditions required it, and had to follow the interest rates of other countries up whenever they happened to rise. This was one more turn in the spiral of weakness weakening itself.

Over and above the strains set up by the uneasy relationships amongst the industrial nations themselves, there were the strains involved in the relations of the industrial countries as a whole and the third world. The formation of prices in the free-market system is in two parts—cost-plus in manufacturing industry and supply and demand for primary products.† A rise in the level of production and consumption in industrial countries normally increases demand for all kinds of primary products. When prices of materials rise, while money wage rates are constant, real wages fall and so generate a demand for rising money wages, which adds to the original rise in costs. Thus favourable terms of trade reduce class conflict in the industrial countries and unfavourable terms exacerbate it.

Commodity prices responded sharply to the pressure of demand during the Korean war boom, but this was soon over and during the 1950s the terms of trade moved in favour of industrial countries. However, the long boom, swollen by the Vietnam war, financed by the USA on the principle of guns and butter, caused an acceleration in the rate of increase in commodity prices and finally sparked off the great inflation of 1973.

In an economic model, it is possible to analyse the consequences of any one change by keeping other things constant. In real life a lot of things happen at once. During the long boom, an excess of demand over growth of capacity led to shortages of one commodity after another. The demonetisation of the dollar in 1971 drove speculative funds into commodity markets. The Moslem oil producers, temporarily bound together by hostility to Israel, suddenly realised the extent of their monopoly power. Inflation at what now seems a mild and acceptable rate had been going on for years all over the capitalist world, setting up expectations that inflation would continue and undermining the conventional belief that a dollar is a dollar. Injected into this situation, the sudden rise in the costs of materials, especially oil, blew the inflation sky high.

This concatenation of circumstances has been described as a historical accident. But it is the inherent vice in the free-market system of international trade which creates the setting for such ‘accidents’, from which it has no means to defend itself except by destroying prosperity and depriving the primary product sellers of their favourable terms of trade.

III

The hopes which accompanied the Keynesian revolution, of reforming capitalism so as to ensure continuous prosperity with full employment, are now all but extinguished. The slide into crisis in the capitalist world has re-established the pre-Keynesian orthodoxy as the conventional wisdom in economic policy-making at both national and international levels. The inevitable consequence of this is a much higher general level of unemployment and recurrent crises, involving a massive waste of resources and considerable human misery.

Important changes in the world economy have taken place over the last two decades, which have ended the era of near-full employment and exposed the inadequacies of the conventional Keynesian analysis. One of the most important of these developments has been the relaxation of tariffs and exchange controls and the resulting large increase in international trade‡ and capital movements; this has increasingly exposed national economies to the ravages of uncontrolled capitalist competition, in the way that they were exposed before the 1930s.

While the USA remained the predominant world economic and political power, and effectively acted as the world central bank, some semblance of order in international economic relations was retained. The use of the dollar as a reserve currency and the eagerness of the USA to lend abroad allowed international liquidity to expand to meet the needs of the growing volume of trade and facilitated post-war reconstruction and structural adaptation in the capitalist world. But with the emergence of Japan and western European countries as strong competitors to the USA, and the deterioration of the USA’s balance of payments, unhindered capital movements became a major destabilising force. The IMF proved totally inadequate to its appointed task of protecting national economies from external shocks and assisting the correction of more permanent imbalances in payments. In fact, by establishing rules which threw the burden of adjustment mainly onto deficit countries, the IMF institutionalised an important element in the process of unequal development among capitalist countries.

Faced with growing international pressures, the governments of debtor countries have been obliged to adopt the deflationary policies acceptable to their creditors (including the IMF); policies which conflicted with the avowed aim of maintaining full employment and with the real-wage demands of the working class. Thus democratically elected governments of debtor countries, where the working class is well organised, have walked a knife edge between the international and internal disapproval of their economic policies. But the frequently imposed deflationary policies progressively weakened the competitive position of such economies, increasing their indebtedness and reducing the opportunities for advances in real wages. Unable to meet either internal or external demands, economic policy vacillated wildly; consequently growing economic crisis has been accompanied by increasing political instability and further destabilisation of the international economy.

The world market system has run into a second, and much more general, impasse, caught between two interlocking conflicts—the demands of workers in the industrial countries for higher real wages and the demands of the third world for improved terms of trade.

So long as unemployment and slow growth continue, the relative prices of raw materials are kept down and this somewhat mitigates inflation in industrial countries. As soon as a revival begins, prices of raw materials and foodstuffs begin to go up and real wage demands become harder to resist; the authorities nervously pull back and the revival is checked. The orthodox economists, still repeating incantations about equilibrium, encourage the authorities to pursue these deflationary policies—the very same that Keynes in the thirties used to describe as sadistic.

It is ironic that after the great technical achievements brought by the age of growth, all we are offered is a return to large-scale unemployment and poverty in the midst of plenty, in an age of frustration. Kalecki was right to be sceptical; the modern economies have failed to develop the political and social institutions, at either domestic or international level, that are needed to make permanent full employment compatible with capitalism.

† See Robinson (1962); K. J. Coutts, W. A. H. Godley and W. D. Nordhaus, Industrial Pricing in the United Kingdom, Cambridge, CUP, forthcoming.

‡ Exports of OECD countries as a whole increased from 11% of GDP in 1954 to almost 17% of GDP in 1973.

References

Kahn, R. 1976. The historical origins of the IMF, in Keynes and International Monetary Relations, ed. H. P. Thirlwall, London, Macmillan

Keynes, J. M. 1946. The balance of payments of the United States, Economic Journal, vol. 56

Keynes, J. M. 1972. The economic consequences of Mr Winston Churchill, in Collected Writings of John Maynard Keynes, vol. 9, Essays in Persuasion, London, Macmillan

Identity Politics As A Neoliberal Alternative To A Left

The George Floyd protests are now international. Initially, the Democratic Party tried to discredit and delegitimise the protests as instigated by the Russian government, but the protests became so strong that they had to feign support for it. What explains?

This tweet by Glenn Greenwald is an exceptional explanation to what is happening:

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Title borrowed (and slightly modified) from Adolph Reed Jr.

Paul Krugman’s Mea Culpa On Globalisation

Last year, Paul Krugman had an article on globalisation and how he got it wrong. Of course, typically, the ones doing mea culpa rarely admit it that they were totally wrong and spin it the way which is most opportunistic. I had a post on it.

Recently Bloomberg published an excerpt from it.

Noam Chomsky wrote a book Profit Over People in 1999 with an Introduction by Robert McChesney who had a fanstastic description of globalisation:

And nowhere is the centrality of governments and policymaking more apparent than in the emergence of the global market economy. What is presented by pro-business ideologues as the natural expanson of free markets across borders is, in fact, quite the opposite. Globalization is the result of powerful governments, especially that of the United States, pushing trade deals and other accords down the throats of the world’s people to make it easier for corporations and the wealthy to dominate the economies of nations around the world without having obligatons to the peoples of those nations. Nowhere is the process more apparent than in the creation of the World Trade Organization in the early 1990s, and, now, in the secret deliberations on behalf of Multilateral Agreement on Investment (MAI).

Link

Fantastic Critique Of Liberalism By Perry Anderson

Perry Anderson in Situationism À L’envers? in New Left Review, Issue 119, Sep-Oct 2019:

Liberalism has always contained different shades, and its dominant version has varied across countries and periods. In the capitalist world, going back to the eighties, the line of division separating a liberal politics from a politics of the left is their respective attitudes to the existing order of things: does it require structural change or situational adjustment? The degree envisaged of each defines relative locations on either side of the dividing-line. To see where Tooze’s position might lie requires a sense of the dominant liberalism of the period. That comes in two inter-related packages. Between states, the ‘liberal international order’ has for thirty years been the touchstone of geopolitical reason: free markets, free trade, free movement of capital and other human rights, policed by the most powerful nation on earth with help from its allies, in accordance with its rules and its sanctions, its rewards and its retributions. Within states, ‘neoliberalism’: privatization of goods and services, deregulation of industries and of finance, fiscal retrenchment, de-unionization, weakening of labour, strengthening of capital—compensated by recognition of gender and multicultural claims.

The first has reigned far more unchallenged than the second. Very few liberals have seriously contested the principles of free trade, the primacy of the United States, or the rule of international law as enshrined in a United Nations whose decisions the us has for the most part been able to determine at will. The liberal international order remains a precious icon. Many, on the other hand, have questioned or resisted the full application of neoliberal measures within their own societies, nowhere implemented in their entirety. The extent to which the first shapes the intellectual universe of contemporary liberalism can be judged by the adaptation of leading minds once on liberalism’s left to its requirements: thinkers like Rawls, Habermas and Bobbio all furnishing apologetic glosses on us wars of intervention against states declared outlaws by Washington, with or without the affidavit of the Security Council. Tooze has never compromised himself in this way. But the language of ‘global economic governance’, cleansed of any reference to its most prominent innovation, the proliferation of sanctions to strangle or bludgeon recalcitrant countries into line—‘war by other means’, as Ambassador Blackwill candidly describes it—offers a route to much the same.

Link

Lawrence Summers On The Failure Of The New Consensus

Larry Summers has a Twitter thread in which he talks of how the economics profession got it wrong by downgrading fiscal policy. He also concedes to Post-Keynesians:

We have come to agree w/ the point long stressed by Post Keynesian economists & recently emphasized by Palley that the role of specific frictions in economic fluctuations should be de-emphasized relative to a more fundamental lack of aggregate demand.

The title is the link.

Labour Day!

Nicholas Kaldor on how neoliberalism weakened labour power:

The centrepiece of the Government’s economic strategy, the control of the money supply, however genuinely believed in by some people, is really only a façade or a smokescreen. The important consequence of the strategy is to alter the balance of bargaining power, to weaken the trade unions through the intensification of unemployment and through the loss of jobs, through factory closures and bankruptcies, and thereby to succeed in bringing wage settlements well below the rate of inflation; that is to say, to reduce real wages.

– Nicholas Kaldor, The Economic Consequences of Mrs. Thatcher, page 62

Nicholas Kaldor, picture from National Portrait Gallery

To understand how labour power has been weakened, you need to understand monetary economics.

Happy Labour Day 🥂

Link

Jason Hickel Features Again On Citations Needed

The latest episode of the podcast Citations Needed features Jason Hickel again who together with the hosts Nima Shirazi and Adam Johnson explain how the mainstream narrative hides the correct story about success and failure of nations by spreading the wrong idea that corruption is the main factor.

Jason Hickel: So, of course I teach on global economics and, and one of the questions I like to ask my students at the beginning of term is something along the lines of, okay, so we have this massive inequality between global north and global south, rich countries and poor countries, why do you think poor countries are so poor? And I would say, you know, 80 and 90 percent of the students will put their hands up and say they believe it’s because of corruption, you know, because the global south has corrupts leaders. But the problem with that story is it erases, you know, the history of colonization, the history of structural adjustments, the history of unfair trade arrangements. And so it’s a very de-politicized way of thinking about the drivers of impoverishment because the focus is solely on the nation states as opposed to the relationships between nation states and geopolitical regions of the world. And that’s really what I want to draw attention to.

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What’s Left On “Open Borders”

Aimee Terese and Benjamin Studebaker have a podcast named What’s Left.

In their latest episode they discuss the idea of “open borders”. This idea these days is presented as some sort of a binary and is frequently conflated with the idea of “no borders” with a world government among other things.

In the episode, they make a convincing case that “open borders” is a neoliberal idea serving corporate interests.

In my view, lots of things need to happen before we have have relaxed migration controls. There needs to be a coordinated fiscal expansion with a reform of WTO with planned trade with balance of payments targets. Instead we have tight fiscal policy and balance-of-payments constraint in a world of free trade. If employment creation is high, a nation can allow migrants to come in and even expand more. Tight fiscal policies constrains output and hence employment and additional labour supply from migrants becomes a cheap labour policy.

Link

Jason Hickel Features On Citations Needed

The latest episode Neoliberal Optimism Industry of the podcast Citations Needed features Jason Hickel, who has done a lot of work to bust the narrative of the World Bank on poverty.

Excerpt:

Jason Hickel: So Gates is sort of the forefront of this aid narrative and the way that I see this as problematic is because it effectively ends up obscuring the real causes of the problems that are at stake. Right? So we’re all concerned about global poverty and human suffering, etcetera. But what’s really causing these problems? So the aid discourse makes it seem as though what’s needed is like little technocratic fixes here and there, some more malaria bed nets here and there, but it distracts our attention away from the fundamental structure of the international economy and you know, the rules that govern international trade and that’s really what needs to be addressed because effectively if you look into the way that that system operates, it’s effectively designed in such a way that facilitates the siphoning of wealth and cheap labor and resources from the South to the North.

I am not a fan of degrowth in the episode but the podcast is for an hour and worth your time. The title is the link to the audio and transcript. You can alternatively find the episode on iTunes.