Saturday, January 6, 2018

AN INTERESTING DEBATE

I have been challenged over the years to define myself politically.   I have always responded that I am comfortable being labelled a 'classic liberal' in the Gladstonian (free-trade) tradition ... or perhaps better still in the John Marshall tradition.   

A couple of days ago an acquaintance of mine who has a Phd in economics took issue with that ... he argued that the classic liberal tradition had been swamped by neo-liberalism.     He made some interesting points .....

I also respect the classic liberal tradition, when all its conditions are in good shape. (Its silence regarding the environment is inexcusable, but is not the point here.)  In my case, respect came about through investment of time and effort in PhD economics. The classic liberal tradition is the foundation of classical macroeconomics (originally from Smith, elaborated by Mill, Marshall, and many others).  By the time of my studies in the late 1960s, this had evolved into the ‘neoclassical synthesis’ which blended Keynesian economics with Classical.  However, the original principles remained pretty much intact.

Unfortunately, a strong case can be made that these principles have been hi-jacked at a global level by the neoliberal political movement that began to dominate geopolitics in the Reagan/Thatcher era, and still does. It operates without labels and recognisable structures, but has huge power and influence.   It has distorted the classic liberal tradition to the point that it is no longer feasible.  ‘My’ neoclassical economics has also been rendered obsolete.

The hi-jacking began with abrogation of one of the essential conditions of the classical tradition – open markets and free competition, with none of the competing enterprises having substantial market power.  In this tradition, the dangers of monopolies and oligopolies were recognised and dealt with through necessary interventions.  However, neoliberal influences resulted in these policies being largely abandoned.  Subsequently, huge transnationals have emerged that are beyond effective sovereign jurisdiction anyway. The major outcome has been extreme concentration of power in many essential markets, and accumulation of great wealth by relatively few people.  In the US especially, but also elsewhere, the transfer of wealth has been from the middle class.  Due to the fundamental structural changes in the economy, the ‘hand-up’ part of our tradition no longer works for these people.

In NZ, the neoliberal political movement did not initially attain as much traction as in the US, the UK, and the many other countries to which the gospel was transferred by the World Bank and IMF.  The changes led by Douglas and Richardson were pretty much standard neoclassical prescriptions (from the ‘Washington Consensus’) rather than based on neoliberal ideology.  However, these two people were also neoliberal ideologues and so pressed strongly for further reforms.  They were supported in this by other economic ideologues such as Kerr and several business people – Myers, Gibbs, and Fernyhough, for example.   However, the more extreme neoliberal proposals were pushed back, symbolised by Lange’s call for a ‘cup of tea’ in response to the Douglas proposal for a flat tax, the more moderate policies of the post-Richardson National government, and the even more moderate stance of the whole Clarke/Cullen era. 

In contrast, the Key government strengthened NZ’s ties with the neoliberal political ideology, probably through Key’s personal offshore networks.  It introduced the usual neoliberal policies of privatisation and public-private partnerships. I doubt that Key himself was an ideologue but he liked to be associated with offshore people who are.  His government applied neoliberal policies through its tacit support for light-handed treatment of international financial trusts and acceptance of the Investor-State Dispute Settlement provisions in the original TPP. 

My main point is that these policies, and the current global economy as a whole, are a far cry from the conditions of our classic liberal tradition! 

I attach a Guardian article by George Monbiot that, I think, reviews the situation pretty well.  Of course, both he and the newspaper could be considered ‘leftish’, but I think that his arguments should still be considered objectively on their merits.

Monbiot suggests that many corporate leaders and politicians have been acculturated into commitments to neoliberal beliefs so that they believe in their rightness, without much further thought.  He also argues that neoliberalism cannot be understood according to the standard left/right model, or according to any of the known ‘…isms’.  Instead, it is a paradigm that needs to be understood in its own context, and it should not be confused with classical liberalism.

Monbiot’s piece is more about sociology than economics, but with economic structures and processes providing an essential vehicle for particular sociological developments.  As he puts it, the sociological aim of neoliberal politics has been concentration of both wealth and power, and there is apparently evidence that this has happened and is continuing.

My response is that economic theory is constantly evolving and will continue to do do so.   I agree that to some extent the 'left vs right' labels are meaningless.   For me what works is important.    While you can argue the toss about Key it would be difficult to label English a neo-liberal ideologue ... take as an example his 'investment (read human capital) approach' to social spending ... predicated on the simple truism that it's better (and cheaper) to construct a fence at the top of the cliff rather than having to dispatch an ambulance to the bottom to pick up the pieces.     That model is entirely at odds with neo-liberal theory and practice.     Can't see the new government deviating from that approach either.  


Politics cannot be considered in the abstract.    It is the art of the possible.   Sometimes you have to give a little to gain a lot ... the 70/30 rule (eg the acceptance of the Investor-State Dispute Settlement provisions in the original TPPA).      One thing for sure ... you can't be 'pure' in politics.   You can't be 'pure' in your own Party and you certainly can't be 'pure' in a MMP electoral system (well, actually you can but the price you pay is that no-one listens to you).

I remain happy to be labelled a classic liberal with the freedom to move between all camps in the National Party recognising that no one camp has a monopoly on good ideas.  

Meanwhile cricket from the Basin is about to start and I'm orf.

14 comments:

Adolf Fiinkensein said...

Anyone who quotes Monbiot and reads the Guardian is a neoclassical idiot.

His classification of John Key as a neoliberal is revealing. PM Key kept in place all of Helen Clark's socialist policies. Neoliberal indeed.

Did he pick up his PhD in a lolly scramble?

David said...

I think your friend has got quite a bit right. I'll also be interested to read Monbiot's piece later tonight. Meantime, I commend this book to you. Covers some of the ground above, but goes quite a long way back to before the founding of the Chicago model of economics that has wrought so much destruction on societies.

this book


Reminds me of the words of the late Bob Ellis in First Abolish The Customer, Economies exist because people trade and not the other way 'round.

Adolf Fiinkensein said...

A look over Monbiot's wiki page reveals he is a raving leftie. (No wonder he is david's hero.) Not only that but an economics expert with a degree in zoology.

This is the guy whose lunacy some say gave rise to the term "moonbat."

David said...

Shows you how little Adolf reads outside the News Corp bubble that he has to Google Monbiot, a prolific author and journalist.

Unlike you, Adolf, I don't have heroes. I agree with some of the Monbiot I have read, disagree with other things he writes. But at least I am prepared to read a range of views. Janet Albrechtsen might provide for all your needs, but I like to add in a few sources other than the Oz.

BTW, the term "moonbat" was coined long before Monbiot was born, but why would a righty let a fact get in the way of a rant?

The Veteran said...

Adolf ... Doctorates from Purdue University ain't awarded lightly. W was one of the first New Zealanders to be awarded a scholarship there. H is a respected academic and university lecturer with hands on involvement in ensuring the success of the dairy industry. Having said all that he is prepared to challenge the status quo and that's important as economic form and practice is constantly evolving.

While he is a Green party voter he is not a happy 'Greenie'. He sees the Green Party as having lost its way to the point where it is but a cypher for the Labour Party to be fed scraps as the occasion demands.

Adolf Fiinkensein said...

Vet

While all you say might be correct, the fact remains this fellow is wide of the mark in his commentary. A PhD does not make inaccurate commentary accurate.

Noel said...

https://www.google.co.nz/url?sa=t&source=web&rct=j&url=https://sites.otago.ac.nz/Sites/article/viewFile/273/296&ved=0ahUKEwjXnaaO88LYAhWLopQKHcueD6g4ChAWCD4wCA&usg=AOvVaw2IvOrNS4ClwjleLOtVepzP

Anonymous said...

Veteran....it would be helpful if people would define what they meant by Neo-liberalism. The definition has changed since the early 20th century and has become a catchphrase for the ills (or otherwise) of society. An esteemed colleague of ours wrote a lengthy thesis in the dangers of Neo liberalism without actually explaining what neo liberalism meant. In it's simplest form it means "a modified form of liberalism which favours free market capitalism." He obviously was talking about a different form of NL.

NL allows the wealth of a country to flow upwards at an alarming rate and privatisation where shareholders take precedent over citizens in vital utilities and transport is now seeing chickens coming home to roost. Germany and France (amongst others) resisted the Thatcher/Reagan rush to the free market that overtook the English speaking world and the consequences are societies with rock solid and future proofed infrastructures and balanced economies, in fact France wins the most contented people in the world award on a regular basis in spite of having some of the highest taxes.

The Troll will dismiss this as ravings, mainly because he won't understand it. Why does his two liners sound like air escaping from a colostomy bag.

Lord Egbut (Classical liberal)



Anonymous said...

An article by Monbiot that should be compulsory reading
https://www.theguardian.com/commentisfree/2017/jul/19/despot-disguise-democracy-james-mcgill-buchanan-totalitarian-capitalism

Anonymous said...

Neo liberalism or what ever posh tag you want to put on it (neo just means new or renovated) is not a new concept. It was alive and well in NZ when two South Island families at one stage had more money and more credit than the NZ government in the 1890's. Griggs of Longbeach and being one and I believe Deans of Canterbury the other.

It is the inevitable result of unrestrained capitalism that few will own all but it is the periodic changes in government that prevent us from becoming a bread and circuses economy.

Lord Egbut

Gerald said...

Beyond Neoliberalism? - Victoria University of Wellington

Anonymous said...

Gerald.........example please.

Lord Egbut

Gerald said...

https://www.victoria.ac.nz/about/global-engagement/villa/publications/villa1-murray-challies.pdf

Noel said...

Another viewpoint
https://www.jacobinmag.com/2017/03/new-zealand-neoliberalism-inequality-welfare-state-tax-haven/