Tuesday, December 14, 2010

Laurence Lewis on neoliberalism

Laurence Lewis provided a good post on the concept of neoliberalism last month, An unlearned lesson about neoliberalism Daily Kos 11/07/2010. Neoliberalism, also known as the Washington Consensus, is an important concept, one that is much discussed in the context of debates over globalization but hardly mentioned in normal political discussion in the mass media.

In an article Lewis cites, The End of Neo-liberalism? Project Syndicate 07/07/2008 Nobel laureate economist Joseph Stiglitz defines neoliberalism as:

... 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.
Lewis talks about how this ideology displayed itself after President Obama took office:

People were desperate for transformational change, but on the economy they got just a nuanced version of the same basic approach we've seen since the Reagan era, the same basic approach that the Bush meltdown should have ended.
This is not the same as saying that there are no important differences between the two parties in the US. More on that below.

That was a historic opportunity for paradigmatic change, and we had a uniquely talented thinker and teacher in the White House to lead that paradigmatic change. Instead, we got bank bailouts, tax cuts, and an inadequate stimulus that the very same few economists who had predicted the economic meltdown warned was an inadequate stimulus. Calls for a second stimulus were ignored. Every small blip of economic improvement was sold as significant, and Wall Street firms made record profits and paid staggering bonuses, but unemployment and under-employment and foreclosures continued to devastate people's lives. The moment passed. The opportunity passed. Political extremism gained a foothold, Democrats lost their footing, and a Republican Party that had been left for dead not even two years earlier, and that still isn't even widely liked, came roaring back to power. [my emphasis]
This piece got me thinking about just how the common Democratic and Republican commitment to the ideology of neoliberalism expresses itself. Because the differences are real and important. But at the same time, these last two years of the Obama Administration have given us numerous examples in which the Administration proceeded in ways that were effectively the same as those favored by the Republicans, or rather would likely have been favored by them had John McCain been in the White House.

  • The Republicans would have continued the "bailout" of the large banks on substantially the same terms as Obama,
  • Republicans would have given substantially the same amount of assistance to homeowners facing foreclosure as the Obama Administration has, i.e., not much at all.
  • Obama and the Republicans are so agreed on the current tax deal being debated in Congress that mainstream news sources are calling it the "Obama-Republican" deal.
  • Obama and the Republicans both support Social Security Phaseout.
  • Obama and the Republicans both opposed strict regulation of the kind of financial derivatives that will allow a repeat of the 2008 crash.
  • Obama and the Republicans are agreed in practice (technically not in theory) that the Employee Free Choice Act (EFCA) should never be passed by Congress or signed into law.
But there were also real differences between the Obama Administration and the Republicans on a number of issues:

  • Republicans would have focused the 2009 stimulus more exclusively on tax reductions rather than federal spending and would in general have been more reluctant.
  • Obama nationalized General Motors temporarily and thereby helped preserve America's manufacturing base, saved jobs, and left the Auto Workers Union (UAW) intact; McCain and the Republicans wanted to let GM go under to break the UAW. This is an important and substantial difference.
  • Obama supported a Consumer Protection Agency that the Republican oppose.
  • Obama timidly supports comprehensive immigration reform; Republicans oppose it.
And there are several areas where the Obama Administration's commitment to neoliberalism put it in opposition to the position of progressive Democrats:
    • Progressives would have preferred a stimulus about twice the size of the one Obama proposed in 2009 and one more focused on job-creating expenditures rather than less-stimulative tax cuts.
    • Progressives would have applied a real rather than a cosmetic "stress test" to major banks assets and would have been willing to have the federal government seize and reorganize those which failed it.
    • Progressives would have ideally preferred a Medicare For All approach to health insurance. At the very minimum, progressives insisted that a public option was necessarily in the type of health care reform that passed. Despite Obama's whining on the topic - and whining is what it is - the omission of the public option is a real policy weakness, offering insurance corporations chances to evade the intent of the law, and a political one, giving the Republicans an opportunity to gut the reform before it takes place.
    • Progressives wanted financial regulation that would have put meaningful limits on derivatives speculation
    • Progressives wanted to see comprehensive immigration reform and related measures such as the DREAM Act take a much higher priority.
    • Progressives see the EFCA as a critically important priority.
    I don't mean for that to be a complete list, of either instances of how neoliberalism manifested itself as the ideology of the Obama Administration or of the differences between Republicans and Democrats or within the Democratic Party. Obama's START Treaty and his refusal to date to go to war against Iran don't fit neatly in a distinction involving neoliberalism, for instance. But those are major and substantial policies.

    Yet when it comes to economic policy, for all the real differences between the Administration and Republicans, Lewis' judgment is correct. "The Obama economic team seriously underestimated the severity of the crisis they inherited, and were ideologically incapable of perceiving it as the transformative moment it should have been."

    And, as he says in the quote above, "The moment passed."

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