NEW YORK – The world has not been kind to neo-liberalism, that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently, and serve the public interest well. It was this market fundamentalism that underlay Thatcherism, Reaganomics, and the so-called “Washington Consensus” in favor of privatization, liberalization, and independent central banks focusing single-mindedly on inflation.
For a quarter-century, there has been a contest among developing countries, and the losers are clear: countries that pursued neo-liberal policies not only lost the growth sweepstakes; when they did grow, the benefits accrued disproportionately to those at the top.
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Nor did markets prepare us well for soaring oil and food prices. Of course, neither sector is an example of free-market economics, but that is partly the point: free-market rhetoric has been used selectively – embraced when it serves special interests and discarded when it does not.
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This mixture of free-market rhetoric and government intervention has worked particularly badly for developing countries. They were told to stop intervening in agriculture, thereby exposing their farmers to devastating competition from the United States and Europe. Their farmers might have been able to compete with American and European farmers, but they could not compete with US and European Union subsidies. Not surprisingly, investments in agriculture in developing countries faded, and a food gap widened.
Those who promulgated this mistaken advice do not have to worry about carrying malpractice insurance. The costs will be borne by those in developing countries, especially the poor. This year will see a large rise in poverty, especially if we measure it correctly.
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Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.
Full article at Project Syndicate
Sadly, I do not see neo-liberalism coming to an end soon. It has proven its failure as a global economic system, but some are still benefitting from it.
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impressive post. Happy to see such an intellectually grappling post here, wish there was more commentary though, its okay, still happy to see this here.
Thanks Affad (I think).
I shy away from commenting on such topics because my knowledge of them is superficial, at best.
What I found most interesting about the article though is that it is authored by a respected Prof at Columbia, who has recently won the Nobel Prize for Economics. Opposing neo-liberalism is no longer restricted to tree-hugging activists (with all due respect to them).
hmm interesting, great post huda…Stiglitz has always made some excellent points however I’m a little weary of him bc he was the head of the World Bank after all. and while he’s critical of it, he always tends to demonize the IMF more as if the World Bank were any better…but anyway…i think its seems almost impossible at times that the end of neoliberalism could be near seeing how it has been so successful, and as Huda noted, so many still benefit from it…however I think that alongside that ‘success’ its policies have caused so much destruction that the snippets we hear about every once in a while still seem so small to many (sweat shops, developing countries debt, etc.). i do largely agree with him that neoliberalism is on its way out….unfortunately I don’t see capitalism leaving soon enough…capitalism is like a superbug disease always gaining the upper hand on its next vaccine…not even Marx in all his genius expected it to transform into the monstrosity that it is now.
neoliberalism on the other hand, was always an idealistic doctrine as Stiglitz mentions, that is not supported by economic theory bc there is no way of testing it. when neoliberals are confronted with the problems at hand, their solution and answer is that it is bc the markets are not free enough. Neoliberalism at its core has the values of freeing up trade and capital markets, deregulation, privatization, reducing organized labor, cutting taxes for the wealthy, and reducing the role of government except when it comes to military expansion which is what we are seeing now.
what a lot of people don’t understand about the markets, is that they are not natural. they are created by neocon liberals through the states that also created the movement of free labor, free flow of money, free flow of goods and services without any regulating markets …that is why Reagan and Thatcher believed that the free markets were the way to go.. there is no mechanism to protect labor and workers under the free market system which is destructive to humanity. if we continue to run unregulated markets, it will destroy man and the environment simple as that.
and how have they done this? through many moves one of which was the Washington consensus that Stiglitz mentioned. it was policy advise being addressed by the Washington based institutions, IMF World Bank, the U.S. treasury, and other neoliberal global power elites (the latter part of the G8 countries) to Latin American countries in the late 80s that only represented the conventional interest and wisdom of the US and international financial institutions. their strategy was basically having faith in the markets, the use of the states/governments were unnessary, and that the poor and rich really did not have conflicting interests by tactics such as those mentioned above. in other words, it became a tool to further neoliberalization, to globalize it and spread it to the world. what did this do? it’s caused all the problems we see today bc the IMF and WB became sites of authority that aren’t accountable to anyone and countries that followed their prescriptions did worse than those who ignored them.
as a result we know see many global countermovements that began out of the destructive laden path neoliberalism has paved. this is why I think many like Stiglitz believe neoliberalism is on its way out…it has created its own fate and has created the conditions for these countermovements to counter global capitalism. we can know see that its policies and strategies are no good for society and politics. at the end of the day, only a global civil society can put an end to this nonsense. and while I have hope, I look around at all the other devices out there to persuade and brainwash us into thinking we need to shop or eat more or whatever and its very disconcerting. anyway ill shut up now cuz I said too much
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