Saturday, October 01, 2016

Could They Have Been Wrong?

The smart folks who sold us on Neoliberalism are having second thoughts. Murray Dobbin writes:

If recent mainstream economic reports are to be taken seriously, some of the big brains managing global capitalism these days are starting to lose faith in their neoliberal ideology. Some come close to sounding like virtual heretics -- like Jonathan Ostry, the IMF's deputy director of research and lead author of an article ("Neoliberalism: Oversold?") in the IMF's official publication. He stated, with a childlike innocence: "[s]ome aspects of the neoliberal agenda probably need a rethink. The [2008] crisis said: 'The way we've been thinking can't be right.'"

The IMF underscores two huge missteps:

The IMF bravely identifies two aspects of neoliberal policy for scrutiny: the elimination of capital controls (allowing for capital flight to be used as a political weapon against poor countries) and fiscal austerity. While "cheering" aspects of the "neoliberal agenda," according to the Financial Times, [Ostry] also acknowledged some "'disquieting conclusions" including that they resulted in "increased inequality that undermined economic growth."

And the UN recently weighed in on the subject:

Just last week the annual report of the UN Conference on Trade and Development (UNCTAD) has leapt ahead of any cautious "rethinking" and calls for a virtual reversal of the whole neoliberal "edifice." The report contains some of the most alarming warnings UNCTAD has ever issued. And that warning relates, in part, to the near-zero interest rates developed countries are using to try to restart their economies. There are unintended consequence of low interest rates, says the report: "Alarm bells have been ringing over the explosion of corporate debt levels in emerging economies, which now exceed $25 trillion. Damaging deflationary spirals cannot be ruled out."

Certainly, what the UN sees around the world applies here at home:

This latter criticism describes the Canadian corporate sector in spades. Instead of investing its record profits -- and its tax break windfall in the billions -- it is sitting on over $600 billion idle cash. But the situation with Canadian corporations is actually much worse than in most OECD countries, particularly compared to their main competitors in the U.S. In previous columns I have quoted past studies done by Harvard Business School's Michael E. Porter. He concluded: "The U.S. is just much more entrepreneurial (than Canada)... Research uncovered key weaknesses in the sophistication of (Canadian) company operations and strategy." He went on to describe Canadian business as cautious and risk-averse, unwilling to spend money on research and development, and addicted to exporting almost exclusively to the U.S.

Could it be that the high octane brains were wrong?



Steve said...

The invisible hand seems mostly into self stimulation.

Owen Gray said...

They were so certain they were right, Steve. And thereby hangs a tale.

Dana said...

That which appears to be a solution to a problem eventually evolves into a problem itself for which a solution must be found which then evolves into a whole new problem for which a new solution must be sought...and on and on and on ad infinitum.

No problem is ever solved. No solution is ever complete.

Owen Gray said...

True, Dana. As Einstein discovered, the universe is evolving. The problem with neoliberalism was that it was an example of devolution, not evolution.

Anonymous said...

P3 are getting a rethink as they are basically found to be wealth transfers.

Many jurisdictions are inhousing contracted work.

Owen Gray said...

It's called trickle up economics, Anon.

Steve said...

P3 construction makes sense. The TTC is proof that in Toronto goverment project management is like D day. P3 ownership and profit no. Give me a good crown corporation anyday though!

zoombats on Georgian Bay said...

The next "Hail Mary" economic move will be the raising of interest rate to see if something happens. It's all so much voodoo really.

Owen Gray said...

They told us that austerity was good for the soul, zoombats. But they were thinking of other peoples' souls.

Owen Gray said...

We used to believe that crown corporations make perfect sense, Steve.

Anonymous said...

Excellent post again NF

It was the corporate hoarders who convinced the 'high octane brains' to go along with their plan and most did.

The only time I ever voted Liberal was in 1984 when Chretien said he would rip up the NAFTA agreement.

Now we are faced with TPP.

It’s amazing to me that the media and policymakers, not to mention a whole bunch of commenters on this thread, are just waking up to the fact that globalization is not great for everyone, that there are real losers, and that dealing with job loss and long-term unemployment is a real thing that maybe we should deal with before it fuels racial nationalism and extremist political movements. It’s almost like we shouldn’t believe that corporate-generated policies will benefit everyone! And that’s not just in the United States, it’s not just in Mexico, and it’s not just in Bangladesh. It’s everywhere around the world.

Anon 2

Owen Gray said...

Thanks for the links, Anon 2. Voter anger at the establishment did not come from Nowhere.