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?

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