Fri, Nov 08, 2019 - Page 9 News List

The end of neoliberalism nears, as does the rebirth of history

By Joseph Stiglitz

At the end of the Cold War, political scientist Francis Fukuyama wrote a celebrated essay called “The End of History?”

Communism’s collapse would clear the last obstacle separating the entire world from its destiny of liberal democracy and market economies, he said.

Many people agreed.

Today, as we face a retreat from the rules-based, liberal global order, with autocratic rulers and demagogues leading countries that contain more than half of the world’s population, Fukuyama’s idea seems quaint and naive. However, it reinforced the neoliberal economic doctrine that has prevailed for the past 40 years.

The credibility of neoliberalism’s faith in unfettered markets as the surest road to shared prosperity is on life-support these days — and well it should be. The simultaneous waning of confidence in neoliberalism and in democracy is no coincidence or mere correlation. Neoliberalism has undermined democracy for 40 years.

The form of globalization prescribed by neoliberalism left individuals and entire societies unable to control an important part of their own destiny, as Dani Rodrik of Harvard University has explained so clearly, and as I argue in my recent books Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump and People, Power, and Profits: Progressive Capitalism for an Age of Discontent.

The effects of capital-market liberalization were particularly odious: If a leading presidential candidate in an emerging market lost favor with Wall Street, the banks would pull their money out of the country. Voters then faced a stark choice: Give in to Wall Street or face a severe financial crisis. It was as if Wall Street had more political power than the country’s citizens.

Even in rich countries, ordinary citizens were told: “You can’t pursue the policies you want” — whether adequate social protection, decent wages, progressive taxation or a well-regulated financial system — “because the country will lose competitiveness, jobs will disappear and you will suffer.”

In rich and poor countries alike, elites promised that neoliberal policies would lead to faster economic growth, and that the benefits would trickle down so that everyone, including the poorest, would be better off. To get there, though, workers would have to accept lower wages and all citizens would have to accept cutbacks in important government programs.

The elites claimed that their promises were based on scientific economic models and “evidence-based research.”

Well, after 40 years, the numbers are in: Growth has slowed and the fruits of that growth went overwhelmingly to a very few at the top. As wages stagnated and the stock market soared, income and wealth flowed up, rather than trickling down.

How can wage restraint — to attain or maintain competitiveness — and reduced government programs possibly add up to higher standards of living?

Ordinary citizens felt like they had been sold a bill of goods. They were right to feel conned.

We are now experiencing the political consequences of this grand deception: distrust of the elites, of the economic “science” on which neoliberalism was based and of the money-corrupted political system that made it all possible.

The reality is that, despite its name, the era of neoliberalism was far from liberal. It imposed an intellectual orthodoxy whose guardians were utterly intolerant of dissent. Economists with heterodox views were treated as heretics to be shunned, or at best shunted off to a few isolated institutions.

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