The End of Neo-liberalism?

By Joseph E. Stiglitz

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.

Middle East and Economy the Muslim Way

One of the most enjoyable parts of my drive to work in the morning is listening to NPR's Marketplace. Its a fascinating and mind boggling world of business that is presented in a an upbeat and lively way. My routine has now also involved listening to Marketplace on the internet radio for this past week because of the fascinating special coverage they have been doing on the "Middle East at Work".

They have covered topics about Islamic Shariah compliant student loans and mortgages, to the mega health cities and desert building sprees, the new silk road and on the "Islamic Roots of Green" business.

Its quite a fascinating work that they have put together. Please do visit here and listen to it. Kai Ryssdal, the host of the show has an interesting story on his job here. He really carries the show for me, makes business seem like its not the 3 trillion dollar economy it is. Also for more on Islamic economics check out wikipedia, its a good beginning point.