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Rudd's breathtakingly cynical essay

By Marko Beljac - posted Wednesday, 4 February 2009


The origins of neoliberalism can be found in the crisis of corporate profitability that was occasioned by the stagflation of the 1970s. Neoliberalism arose as an attempt to restore, indeed increase, corporate profitability, in the context of declining economic growth.

Despite all the accolades that were directed towards "the masters of the universe", as the glitterati at the World Economic Forum used to call themselves, economic growth has tended to trend below that of the "golden age of capitalism" during the Keynesian era of the 1950s and 1960s.

However, as a result of neoliberalism, corporate profits have never been higher as a proportion of the economy than they are now.

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The shift towards profits in the wages-profit share was not a mere consequence of policy it was the object of policy. To restore profits in the context of growth rates trending less than that of the 50s and 60s required greater labour productivity, but with less of the pie going to wages or to the poor through social welfare. This process has been accurately described as "the revolt of the elites". Disciplining the poor and workers through free market policies enabled this revolt to proceed.

Neoliberalism merely serves to cover the vile maxim. It is true that financial market liberalisation has under-priced risk but this should not obscure how the broader system functions and will continue to function. A new financial edifice will be created to internalise systemic risk, true, but the vile maxim is invariant.

But what has happened since the financial crisis reached critical mass I can hear the critics proclaim?

The government has spent $10 billion on a fiscal stimulus package and promises to spend more in the near future. This replicates the actions of governments the world over. In Australia the fiscal stimulus will put the budget into deficit and is directed towards the poor.

The best way to understand this policy reaction is by considering Keynes. Did not the rise of Keynesian economics in the 1930s and 1940s see to it that the vile maxim was banished for the first time in history? Should not now its revival be seen in similar terms?

Hardly.

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Keynesian theory and the economic policies that ushered it in may be described as "Keynes' addendum" to Smith's vile maxim so that it now becomes "all for ourselves, and nothing for other people, except when it suits us, seems, in every age of the world, to have been the vile maxim of the masters of mankind".

The Rudd Government is not spending money on the poor for the sake of helping the poor. It was not long ago that pensioners marched on Flinders Street Station decrying government policy following its first, neoliberal, budget.

No, the government is spending on the poor because economists cynically inform us that they have a greater propensity to spend transfer payments. It thereby follows that spending on the poor is the best way to help bailout the rich. Some have bemoaned the poor for not taking into account the needs of the rich more readily, for instance by their use of the stimulus payment to increase savings or to pay off debt.

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About the Author

Mark Beljac teaches at Swinburne University of Technology, is a board member of the New International Bookshop, and is involved with the Industrial Workers of the World, National Tertiary Education Union, National Union of Workers (community) and Friends of the Earth.

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