Commentaries (some of them cheeky or provocative) on economic topics by Ralph Musgrave. This site is dedicated to Abba Lerner. I disagree with several claims made by Lerner, and made by his intellectual descendants, that is advocates of Modern Monetary Theory (MMT). But I regard MMT on balance as being a breath of fresh air for economics.
Monday, 9 March 2015
Neoliberalism is wicked. I’m disgusted.
It’s pathetically easy to organise a witch hunt: i.e. get the human race worked up into a frenzy of righteous indignation about almost anything.
As William Hazlitt (1778-1830) put it, “Defoe says that there were a hundred thousand stout country fellows in his time ready to fight to the death against popery, without knowing whether popery was a man or a horse.”
One of the currently fashionable witches to hunt is “neoliberalism”. All self-respecting lefties have declared themselves willing to die in the fight against neo-liberalism (without actually being able to define the term). Looking up words in dictionaries is far too much like hard work for lefties, and indeed most of the rest of the population.
One of the many disasters allegedly wrought by neo-liberalism is the current Euro shambles, i.e. the austerity being suffered by the EZ periphery. Just Google “neoliberalism” and “eurozone” and “periphery” and you’ll find dozens of articles attributing Europe’s problems to neoliberalism. But there’s a couple of examples here and here.
As to the definition of neoliberalism, it’s defined in most dictionaries as a belief in the merits of free markets and minimising government involvement or interference in the economy.
Now what is particularly “free market” about the Eurozone? The basic or defining characteristic of the Eurozone is simply that it’s a geographical area which uses the same currency, rather than each country having ITS OWN currency. I can’t see anything inherently neoliberal about that.
And when it comes to competitiveness disparities between different countries, that is dealt with in the Eurozone by internal devaluation, as compared to “regular” or “normal” devaluation in the case of countries which all have their own currencies. Nothing inherently neoliberal there either.
There is of course the point that internal devaluation takes much longer to work than normal devaluation, and results in more austerity. But the architects of the Eurozone presumably thought that was a price worth paying for the benefits of the Eurozone. It looks very much like they miscalculated. But that miscalculation does not stem from a belief in neoliberalism.
Hi Ralph,
ReplyDeleteWell the German ruling party and central bank probably could be labelled neoliberal,though I am no expert.But you could see that some would call them that.This German attitude is the major forces behind the adoption of the Fiscal Pact which imposes rather rigid (neoliberal?) type policies on the signators.
Funny as I do recall in the not too distant past the right wing media and politicians accusing the EU of being a socialist left wing ideal.
The EU is a political ideal and the economics is rather secondary and yes they made a big mistake in getting economic union before political union.But it is the way the EU works.What they are good at exploiting is "benficial crises".When things go wrong the answer is always more and deeper union.It is what has got the EU as far as it has.Only with this crisis they may have bitten of more than they can chew.