What is neo-liberalism? Denunciations of it are ubiquitous. A writer for The Guardian describes neo-liberalism as nothing less than “the ideology at the root of all our problems,” one responsible for “epidemics of mental illness” that is “crushing the minds and bodies of millions.” Upon the election of President Donald Trump, left-wing professor Cornell West declared “the neo-liberal era in the US ended with a neo-fascist bang.”
Reading the perfervid attacks on neo-liberalism today, one is put in mind of what George Orwell observed seven decades ago about “fascism,” a word with “no meaning except in so far as it signifies ‘something not desirable.’”
Broadly understood, neo-liberalism describes a set of policies generally aimed at reducing the role of the state in the economy. Neoliberals embrace free trade, capital and labour mobility, privatisation, and fiscally solvent social welfare systems. Think Bill Clinton in the US, or Tony Blair in Great Britain. Neo-liberalism is embodied by the “Washington consensus,” a set of 10 economic prescriptions laid out by the International Monetary Fund and World Bank for developing countries beset by economic crises.
But with the rise of Bernie Sanders on the left and Trump on the right, (as well as their European analogues), neo-liberalism is under a two-pronged attack — and in serious need of defending. Left-wing critics decry neo-liberalism as “market fundamentalism.” Right-wing critics assail it for encouraging “open borders.” Both are suspicious of free trade, which they paint as a zero-sum game in which third world labour benefits at the expense of first world blue-collar workers.
This is erroneous. Because other countries tend to have higher entry barriers for foreign goods, free trade agreements open more overseas markets to US exports than they open the US market to foreign competition. Free trade with Mexico in particular also has had a beneficial effect on that right-wing anti-globalist bugbear: immigration. An economically prosperous southern neighbour, which Mexico has increasingly become thanks to North American Free Trade Agreement(Nafta), is one that will generate good-paying jobs, thus lowering illegal immigration to the US.
It isn’t neo-liberal free trade regimes that are making manufacturing jobs obsolete in the developed world, but technology. A recent study by the Centre for Business and Economic Research at Ball State University found that productivity growth — driven largely by automation — accounted for over 85 per cent of the loss in manufacturing sector jobs between 2000 and 2010, as opposed to just 13 per cent lost from trade. Western economies, in other words, are producing more things with fewer people.
In their opposition to free trade, Sanders, Trump and their acolytes are essentially asking the vast majority of Americans (as well as citizens of other countries) to suffer the costs of higher prices, reduced economic activity and slowing innovation on behalf of a small group of arbitrarily selected communities who are the losers of globalisation. But it’s hardly clear that erecting trade barriers would even help these people. A joint UCBC-Columbia University study found that ending free trade agreements, on average, would cause the poorest 10 per cent of consumers across 40 countries to lose 63 per cent of their purchasing power.
To mitigate the crisis of work in the 21st century, governments need to provide better safety nets and job retraining for the unemployed. Limiting trade won’t help. Economic growth — stimulated by trade — will. Growth leads to higher employment and incomes, and, in turn, generates higher tax revenues with which to fund the very entitlement programmes that left-wing critics of neo-liberalism want to protect and strengthen.
The neo-liberal consensus born of the post-Cold War era collapsed alongside the 2008 crash. Rather than reform liberal democratic capitalism to make it more inclusive, the radical critics who throw around “neo-liberalism” like a dirty word want to overturn the entire system. According to a 2016 Harvard poll, a majority of millennials reject capitalism. In the recent French presidential election, some leftist intellectuals advised voters to stay home rather than vote for the centrist Emmanuel Macron over the far-right Marine Le Pen because, in the words of Marxist philosopher Slavoj Zizek, Macron represented “neo-liberalism with a human face.”
Of course the status quo isn’t perfect, far from it. Critics of neo-liberalism, however, have nothing new to offer. What they prescribe is the same old mix of heavy regulation, onerous trade barriers, and state-directed economic planning that brought the world success stories such as Venezuela and Greece. Indeed, one suspects that the anti-globalisation movement’s beef isn’t ultimately with “neo-liberalism” but plain old liberalism — that is, freedom.
For all its faults, capitalism has brought more wealth to more people than any other system in history. “People who live in a golden age usually go around complaining how yellow everything looks,” observed poet Randall Jarrell. The same could be said about today’s critics of neo-liberalism.
— Los Angeles Times
James Kirchick is author of “The End of Europe: Dictators, Demagogues and the Coming Dark Age.”
