Tuesday, 10 May 2016

The Neoliberal Agenda - or, "If I Hear 'Neoliberalism' One More Time I Might Puke"

I kinda have to stop making posts solely in response to my tutorials. Like my discussion of the Efficient Market Hypothesis last week, and now this. A bit repetitive, but then again, it is the Life of an Econ Student.

What is also the Life of an Econ Student, it seems, is to be terrorised by Neoliberalism. On campus, I'm surrounded by signs and posters and demos objecting to the 'Neoliberal Universities', 'Neoliberal debt crisis', 'Neoliberalism wracking the planet' and call to protest the apologists for neoliberalism. It is USYD, what would you expect?

And for today's reading, I had to suffer through Palley's 2009 article:
A central feature common to new Marxist, SSA, and structural Keynesian analyses concerns the adoption of the neoliberal growth model around 1980. That shift initiated a thirty year period of wage stagnation and widened income inequality, and both narratives trace the roots of the crisis back to this change of economic paradigm.
Wage stagnation, detachment of wage from productivity and widened income inequality. Gotcha.

Not that inequality really matters, but let's look at the claims anyway. It's kinda strange to make such conclusions while ignoring that wage stagnation is a myth, that detachment of wages from productivity is kinda a priori impossible in a market economy, and that income inequality (GINI) in, say, the U.K. is the same today as 25 years ago.

Not to mention that worldwide income inequality is falling (Thanks, Capitalism!); I'm sure there's neoliberalism in this chart from Milanovic too. It shows the worldwide gains from globalization for different percentiles of the global income distribution. Since poor countries (and incomes of poor people) has grown much faster than rich countries (and incomes of rich people), income inequality necessarily falls. Well, the "poor" in some rich countries have seen very little gains - that's true. But ultimately, with a track records like this (and the hard-to-quantify gains through the betterment of product) - who cares?

Percentage change in real income between 1988 and 2008 at various percentiles of global income distribution (in 2005 PPP dollars). Data source: World Bank.
Fun question: if neoliberalism is responsible for all the ills in the world - is it also responsible for all the good? The amazing technological revolution, the billion+ people out of poverty, the Millenium Development Goals hit ahead of schedule etc

Today's tutorial also gave us the next step; independent central banks is neoliberalism. Well maybe it fits the kinda broad description of neoliberalism as "transfer power from public to private sectors but intervene in markets to create the desired outcome whenever markets can't reach this goal on its own" - but maybe, just maybe, the half-century old understanding among economists that politicians in control of the central bank can wreck even more havoc (see Nordhaus' The Political Business Cycle). And maybe central bank independence precedes neoliberalism by, like, a few decades.

'Neoliberalism', like 'Fascism', is one of those words that mean anything and everything. So, sure, let's brand everything we dislike with a Bad Name, and accuse all our opponents of being associated with this Bad Name. Neoliberalism, Ugh!


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