Neoliberalism: fact or fiction?

As a student of politics, it is amusing to read an academic waffle on with little regard for the complexity of policy. Take Robert Manne’s recent argument about the possibility that healthcare reform in the United States possibly signalling the end of the “greed is good” era, basically another dig at evil neoliberalism (a term which many humanities academics use to describe all that is wrong with recent policy trends) (Robert Manne, ‘Death throes of the neo-liberal delusion’, The Australian, April 10, 2010).

Manne’s analysis suggests that we all got hoodwinked toward a blind acceptance of neoliberalism through the creation of think tanks, converted politicians to the cause, and a new generation of academic economists. The usual political culprits Margaret Thatcher and Ronald Reagan are blamed for initiating flawed policies that would over the next 30 years entrench neo-liberalism (effectively market fundamentalism), especially in the US, UK, Canada, Australia and New Zealand.

To Manne, neoliberalism has dominated government policy with individuals pursuing their self-interest within free markets, the government role strictly limited besides defending property rights and creating the framework of commercial law, and most other state economic interventions and regulations perceived to do harm with business deemed more efficient. 

But Manne’s article expresses little intellectual honesty in regard to why the policies occurred or what they should have been.

Sure, Manne tells us much of the consequences of recent policy trends in the US with the wealthiest 10 per cent of Americans increasing their share of national income from 35 to 49 per cent between 1980 and 2006 while US GDP trebled. Further, he highlights the disgraceful level of wages earned by CEOs and the disaster that resulted from defaulting subprime mortgages which led to collapse of large US financial companies and the GFC.

I am also disgusted by any nation which would have a health system that would leave 47 million people without access to basic health insurance, as was the case in the US until Obama’s recent policy reform. I also do not support a worsening level of income inequality.

In fact, while Manne (co-editor) includes a Kevin Rudd essay in a new book, Goodbye to All That? On the Failure of Neo-Liberalism and the Urgency of Change, I am also disgusted by the lack of real policy solutions that exist today in lucky Australia to deal with record home unaffordability as government relies on higher levels of immigration.

But, as a political student trying my best to inform the public, I will never adopt a righteous position with little regard to the complexity of policy solutions.

Rarely does Manne ever refer to the difficulties of finding policies that will more effectively balance national and international economic considerations. Instead, we hear about the crisis of the early 1970s (high inflation and unemployment), and how this context gave those evil knights supporting free markets (Hayek and others) their chance to influence government policy and reject Keynesian economics.

But what did Manne propose as alternative policies in recent decades, and why did few listen?  As Michael Stutchbury reminds us (Goodbye to the notion neo-liberalism caused the global financial crisis’, The Australian, April 17, 2010), Manne once co-edited Shutdown: The Failure of Economic Rationalism and How to Rescue Australia (1992) which blamed Paul Keating’s recession on a calamitous experiment in “radical free-market economics” that aimed to strip “all state intervention from the economy” and predicted “permanent high unemployment” of 15 to 20 per cent when properly measured in the wake of financial deregulation, the dismantling of import protection, privatisation and so on. 

As Stutchbury points out, the Australian economy did experience one of its longest periods of economic growth from 1992 to 2007, a boom that withstood the 1997 Asian financial crisis, the early 2000s sharemarket techwreck and now the GFC. If Australian governments had not pursued the policies it did, then many battlers would now be even worse off. 

But this does not mean that I share Stutchbury’s optimism about Australia’s future just because unemployment rate is still 5 per cent, or that we should sit back and benefit from the mining boom (now again leading to labour shortages).