Aug 15, 2016

Neoliberalism now the straw man target of a raging left

"Neoliberalism" has now morphed into a vague concept loaded with everything the left dislikes about market economics.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

You keep using that word. I do not think it means what you think it means. A piece by Fairfax's Elizabeth Farrelly, "In Brexit and Trump, neoliberalism has reached its natural conclusion. What now?", received lots of social media love over the weekend. It would not normally be of note except it elegantly exemplifies the growing confusion around liberal economics, which is now under more sustained pressure in Australia than at any time  since the 1980s. And it shows that, like words such as "decimate" and "genocide", "neoliberalism" is increasingly stripped of meaning, becoming a collection of whatever can be vaguely pinned on more conservative political opponents.

"Gradually, as it released its low-dose toxicity into our bloodstream, we've deprived and debilitated our health system, our vocational education, our universities, our ports, our public service, our postal system, our electricity provision, our public assets, our parks and institutions, our public housing, our super, our correctional system, our building regulation and our motorways. As the rich get richer and the fragile vanish from the conversation, the world starts to feel like that scene in The Lion King where Scar takes control and the Pride Lands become the deathlands, tided in misery."

While economic-analysis-by-cartoon-analogy isn't the sign of the greatest rhetorical rigour, you get Farrelly's message -- neoliberalism is a poison that is destroying us. The only problem is, go through Farrelly's list, and much of it simply makes no sense. Take our health system, which supposedly has been deprived and debilitated. Australians are among the world's longest-lived people, and not merely is our longevity increasing but the quality of our lives is better. We have a remarkably successful health system on which we spend just below the average for the OECD. If Farrelly wants to see a well-funded health system look no further than the United States, which spends nearly twice as much on its health system as a proportion of GDP -- and which performs abysmally compared to ours. [Keane: neoliberalism is fine, but what we have is crony capitalism] What about parks? It's not at all clear how that relates to neoliberalism -- beyond that it's a core part of liberal economics that, to the extent possible, those who produce negative externalities (like pollution) should be made to pay for them. Around 13% of Australia's landmass is now protected, and the area protected under the reserve system has grown significantly in recent decades. What about building regulation? The main problem with building regulation in communities like Sydney isn't that somehow it's too market-oriented, but how it frustrates the development of higher-density housing that could reduce the massive ecological footprint of expanding cities and provide cheaper housing for low and middle-income earners at locations vaguely close to economic opportunities. Superannuation? That's simply bizarre. Our compulsory superannuation system is an explicitly anti-market mechanism -- we ban people from using their income any way they want and force them to save it, much of it in industry superannuation funds overseen jointly by unions and employers, run on a non-profit basis. But somehow that's neoliberal poison? And our postal system? People have stopped sending letters, the bread and butter of any postal system. Australia Post has curbed services not because of any neoliberal agenda but because maintaining a 20th century delivery system based on analog communication makes no sense when the bulk of communication is undertaken electronically. As for ports ... that's not clear. Does Farrelly dislike that Chinese companies own them? As for the "fragile" vanishing from the conversation, presumably Farrelly doesn't spend too much time on social media. Or noticed what happened when the Abbott government delivered a budget widely seen as unfair and punitive toward low and middle-income earners -- thereby initiating its own downfall. She seizes on ACCC head Rod Sims' recent comments about privatisation as though he had undergone a Damascene conversion, when he was merely making the point that dozens of "neoliberal" economists have been making for decades -- that governments structuring asset sales to maximise their cash return ends up harming the public interest, when they should be structured to maximise competition. It's also hard to know quite what Farrelly is saying about Trump and Brexit. They are, she says, "simply Reagan and Thatcher's pigeons, home to roost." Does she mean they are blowback responses to Reagan and Thatcher? Which is odd given in both cases they are right-wing elitists espousing a mix of populism and neoliberal policies -- Trump sounds like a protectionist but wants to deliver tax cuts for the rich, while Brexiteers want to rid themselves of the decidedly un-neoliberal burden of economic European regulation. Are they pigeons coming home to roost on the non-neoliberal elements of their policies only? Similarly, Farrelly's vision of neoliberalism is a peculiar one -- neoliberalism is both "approving of [monopoly] as proof of 'merit'" ("hence, for example, Rupert Murdoch", she adds, inexplicably, as though there were no press barons before Murdoch) but also too approving of competition. At other points, her attempt at a critique lapses into incoherence. Thus:

"... competition as a guarantor of excellence (and therefore consumer satisfaction) works if – but only if – the consumer can assess and compare products. This is possible in, say, restaurants but not in master of philosophy degrees or breast surgeries. Or forklift courses. In most things that matter, product quality is not discernible until it's way too late to change, and often not even then."

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26 thoughts on “Neoliberalism now the straw man target of a raging left

  1. Dog's Breakfast

    Sorry you weren’t able to parse the intent of the article BK. You do a good job of taking neoliberal economics that hasn’t worked and giving it another name, such as “outsourcing because the private sector always does it better’ is merely now called crony capitalism because we did it badly.

    Fact is that the underlying idea of neoliberal economics is rightly under attack because it doesn’t work. Outsourcing, almost never works, asset sales almost never works for the public benefit (Gas, electricity, telecommunications) trickle-down theory and Laffer curves, remarkably and consistently wrong. Tax cuts to the wealthy as they will invest it and make us all richer – didn’t happen, unless you were a lawyer or an accountant in the Cayman Islands.

    Essentially, the neoliberal ideas could work, in theory, but they just fall down in practice because they are ineffably wrong, on every level, in every circumstance, in the real world. State monopolies are far more effective than private duopolies, and that is the only choice we have been given. The only system that is working is the health system, that one that is a state monopoly, except where private health funds are driving up the costs for the insured.

    Superannuation – her point was not that superannuation was a neoliberal idea, but that the idea that it should be taxed so that it isn’t just another tax avoidance scheme was being attacked by, you guessed it, neoliberal dickwads.

    Rational economic theory still makes sense, but the intersection between rational economics and neoliberal economics is increasingly thin. And just as you have claimed the Farrelly re-titles things as neoliberal when the left don’t like them, you have re-titled failed neoliberal policies as other things (crony capitalism) when they didn’t work. Market failure is everywhere BK, look around.

  2. Steve Gardner

    Sorry Bernard, but your argument is as much an incoherent dog’s breakfast as you accuse Farrelly’s of being. Just look at your conclusion, where you invite your readers to attribute our “fantastic health services, popular public school systems, [and] strong retirement savings system” to the successful application of neoliberal economic policies for the last 30 years. Except that as you yourself point out in the article, the reason why our health services are the envy of the world is that we have a strong public health system, not the expensive failed one the neoliberals want us to copy from the US; our popular public school system is under constant attack from neoliberals who want to defund it completely because, you know, the State has no business educating people, and as you also point out, our successful superannuation system is also not neoliberal but social-democratic in its origins and execution.

  3. Shane Maloney

    Goodness me, what a silly article.

  4. Hunt Ian

    Oh Bernard. Will “long live neoliberalism,” or perhaps “liberal economics,” be on your last breath? Dog’s breakfast has pretty much summed up what needs to be said about this tirade against the “left”.
    Of course some really competitive markets provide improvement in products and productivity better than any known alternative. The problem that Farelly has put her finger on is market totalitarianism, the belief that markets should take care of every service and good leaving minimally low taxes to support minimally necessary functions of government.
    This has given rise to privatising and outsourcing that has done no one any good, apart from the newly minted CEOs of the newly private oligopolies, who attract appallingly high salaries, because they run a business, you know, and businesses have taken to paying appallingly high salaries to CEOs.
    Bernard expresses horror at what we might go back to. Certainly we all hope that the old imperial preference schemes will not come back and we should look bleakly on some latter day so called “free trade” deals as being too close to old preference schemes.
    The fact is, Bernard, that universities, hospitals and public schools have been damaged and starved of funds because of the low tax mantra of neo-liberalism. If you don’t think the damage is real, get seriously sick or try some time travel to compare old, cost efficient universities in the eighties with the “businesses” of today. Compare the faux competition in the so-called NEM, with real competition.
    Government instrumentalities can do very well, as Australia Post once showed. And a whole lot of institutions should be left as instrumentalities and not be starved of funds because businesses always do more with less.
    When people look at economics rationally, they recognise that markets come in all shapes and sizes and that they have limits, so that some services and goods are best delivered not into faugh competitive markets, with a whole lot of buying and selling and fraud and rip offs, but are best delivered by public instrumentalities that maintain ethical commitments to provide education up to the leading edge in the world, or medicine up to the leading edge in the world, with a commitment to cost efficiency promoted not by low tax policies but sensible thrift.

  5. Lee Tinson

    I didn’t read the offending article, but I just have to say that Bernard wrote not so long ago that we don’t have neoliberalism here: we have crony capitalism. I think we have both. The neoliberal scheme was invented by crony capitalists for their own benefit, and it works very well for them at huge cost to the rest of us.

    I went through this article of Bernard’s as carefully as I could until I got too annoyed by the cherry-picking. There was maybe some good to be had by some outsourcing and privatisation, but not, I will always say, our health and education, our utilities, roads and railways. They are a national security issue, whose control must remain with our governments. It’s not good enough to say they work better, or more efficiently in private hands. That has clearly not been the case.

    Fact is, almost NO private business operation can be trusted to look after anyone other than itself. The trickle-down benefit as described by Reagan and Thatcher (and Turnbull and maybe Keane as well) is now and always was a monstrous fraud, and that’s what criticism of neoliberalism is all about.

    Bernard’s characterisation of the US health system as well-funded is imaginative, I have to say. The reason he rightly says it doesn’t work is because the bulk of this funding is provided by private individuals in the form of premiums to private insurance companies. It doesn’t get spent on health at all.

    The reason we still have a better health system is because we are forced to fight our neoliberal government for it every day. They would destroy it if they could, as Fraser did, and replace it with an American system which wouldn’t work here either.

    Neoliberal economics is a geat big turd. Doesn’t matter how much you polish it ….

    Anyway the other commenters have said all this and more. Good on you, guys.

  6. bushby jane

    At least you have come out Bernard. Although maybe this article is just a cat amongst the pigeons written as a stir. Worked well in that case.

  7. Jeanette Weir

    Bernard could you please write an article describing how neo-libs have helped the vocational training sector. Would like to see a different slant on what I see.

    1. JMNO

      Yes, the VET sector was deregulated to provide competition to TAFE.

  8. JMNO

    Bernard writes really well on politics and political morality but when economics comes up he lurches back into purist theoretical mode, as though economics can be divorced from the people who perform economic activity and wreck the theories and the perfect markets.
    I agree with the other comments. Utilities are natural monopolies and should stay in government hands. Publicly-funded human services such as health, aged care and child care should not be outsourced to the for-profit sector who cut services, make these sectors more expensive and channel government money into private profits.

  9. Draco Houston

    “If not “neoliberalism”, then what? Back behind the tariff wall, taking us back to when buying a pair of school shoes for your kids cost a huge chunk of your weekly wage? Back to when the government controlled the exchange rate? Back to high inflation and high unemployment in a low-productivity economy? Back to the days of an engineering-obsessed Telecom that didn’t give a stuff about its “customers”, who couldn’t go anywhere else? Back to the Wran years in NSW when the state was plagued by winter blackouts because the government had failed to build enough generation capacity?”

    Just because you and the protectionists have no imagination, it doesn’t follow that protectionism is the only way out.

  10. Draco Houston

    Also, calling everything you don’t like “crony-capitalism” is just as tedious as what you complain about here.

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