RICHER AND POORER
The failure of neo-liberalism
By Phillip Blond
Published: January 22, 2008
LANCASTER, England: More and more, it appears that in the 21st century we are
returning to the economics of the 19th, where wealth was overwhelmingly
concentrated in the hands of a few owners and astute speculators.
Neither the Right nor the Left seem capable of creating a society in which all
benefit from increased prosperity and economic security.
Right-wing claims that free markets will enrich all sections of society are
palpably false, while the traditional European welfare state appears to
penalize innovation and wealth-creation, thereby locking the poor and unskilled
into institutionalized poverty and unemployment.
Thus in the new age of globalization, both ideologies create the same
phenomenon: an underclass caught between welfare and low wages, a heavily
indebted middle class increasingly subject to job and pension insecurity and a
new class of the super rich who escape all rules of taxation and community.
It was in Britain that neo-liberalism first emerged in its decisive form.
Confronted with union militancy and the apparent bankruptcy of the welfare
state, the Conservative party under Margaret Thatcher was elected in 1979. In
America, Ronald Reagan took office in 1981, and the Anglo-Saxon countries have
pursued and advocated free market liberalization ever since.
Today, its reach extends as far as communist China, which, while eschewing
political freedom, fervently preaches economic liberalization. This year even
the French acknowledged free market supremacy, electing a president who has
persistently denounced the costs of Gallic welfarism and praised the economic
advantages of the Anglo-Saxon model.
But the benefits of free market liberalization depend on who you are, where you
are and how much money or assets you had to begin with.
In terms of economic development, free market fundamentalism has been a
disaster. The free market solutions applied to Russia during the Yeltsin years
succeeded only in mass impoverishment, the creation of a hugely wealthy
oligarchical class and the rise of an authoritarian government.
Similarly, the growth rates of Latin America and Africa, which had been higher
than other developing nations, dropped by over 60 percent after they embraced
IMF-sponsored neo-liberalism in the 1980¢s, and have now ground to a halt.
On an individual level, a similar story pertains. Real wage increases in the
top 13 countries of the Organization for Economic Cooperation and Development
(OECD) have been below the rate of inflation since about 1970.
Thus wage earners - rather than asset owners - have faced a persistent 30-year
downward pressure on their standard of living. It comes as no surprise to learn
that the golden age for the wage worker, expressed as a percentage share of
GDP, was between 1945 and 1973, and not under economic liberalization.
Nobody questions that trade increases prosperity, and that the liberalization
of credit and financial services allow hitherto excluded groups to supplement
their wages by buying shares or houses and thus participating in the asset
economy.
But the real story of neo-liberal success is not the extension of assets to
all, but the huge and disproportionate share of wealth attained by the very
rich. In the United States, between 1979 and 2004 the wealthiest 1 percent saw
an increase in their share of national income of 78 percent, whereas 80 percent
of the population saw an overall decrease in their income share by 15 percent.
That¢s a wealth transfer from the large majority to a tiny minority of some
$664 billion.
The traditional Left panicked in the face of neo-liberal hegemony and spoke in
the 1980¢s of redistribution, higher taxes and restrictions on capital
transfers. But, outside of Scandinavia, they were whistling in the wind:
Traditional state-regulated economies appeared locked into high unemployment
and low growth.
A new path for the Left was offered by the country that first experienced the
new Right: the UK. By the late 1990¢s, Britain was exhausted by Thatcherism;
its public services were failing and the country was socially and economically
fragmented. Thus in 1997 New Labor was elected.
Under the guidance of Tony Blair and Gordon Brown, the new progressives
promised that the benefits of rising prosperity would be applied to the public
sector and the poor. Social exclusion would be tackled by opening up education
and extending opportunity to all. The rest of the world was once more
transfixed by the social experiment taking place in Britain. Could this
seemingly exclusive neo-liberal circle be squared for the benefit of all?
Sadly, after 10 years the conclusion has to be no.
Poverty in Britain doubled under Thatcher, and this figure has become permanent
under New Labor. The share of the wealth, excluding housing, enjoyed by the
bottom half of the population has fallen from 12 percent in 1976 to just 1
percent now. Thirteen million people now live in relative poverty. Social
mobility has declined to pre-war levels.
The least able children from the richest 20 percent of the population now
overtake the most able children from the bottom 20 percent by the age of seven.
Nearly half of the richest group go on to get university degrees while only 10
percent of the poorest manage to graduate. Clearly, the New Left has entrenched
class division even more firmly than the neo-liberal Right.
This in a nutshell is the problem: Both Left and Right seem incapable of
challenging monopoly capitalism. Neither welfarism nor statism can transform
the lives of the poor, and neither, it seems, can neo-liberalism. Only a shared
economy can correct the natural tendency of the free market to favor monopolies.
But we can only share if all own. Thus there is a radical and as yet unexplored
possibility - that of a general and widely distributed ownership and use of
assets, credit and capital. This would dissolve the conflict between capital
and labor since it would be a market without monopoly and a state where waged
labor - since it was the owner of capital - did not need state welfare.
** Phillip Blond is a senior lecturer in philosophy and theology at the
University of Cumbria.
Copyright © 2008 the International Herald Tribune
http://www.iht.com/articles/2008/01/22/opinion/edblond.php
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