Race to the Bottom: Putting the Brakes on Neoliberal Economics

[Hannah Bell]

While the harrowing economic hardship that started in late 2007 and early 2008 rages on, and countless people in the United States, Europe and other parts of the world are losing their jobs, their homes and their sources of livelihood, policy-makers in the advanced capitalist countries of the West are standing idly by without lifting a finger to alleviate the onerous burden of the crushing recession. On the contrary, they have embarked on an orchestrated series of cruel belt-tightening austerity policies that have, indeed, contributed to the worsening of the recession.

The question is why? How can the policy makers’ callous indifference to the plight of the people, or their pathetic inability to carry out effective policies of economic recovery, be explained?

The official explanation for not investing in the revival of the economy is that, due to the already huge debt and deficit, additional public spending would be “fiscal irresponsibility.” In light of the fact that governments in the US, EU and other debt-ridden countries have showered the powerful international banksters and other financial moguls with trillions of dollars, this explanation falls miserably short of credibility; indeed, it can more appropriately be called an excuse than an explanation.

Explanations offered by most of the left, liberal, or Keynesian critics of the Neoliberal austerity policies are not satisfactory either. As I have argued in an earlier essay, these critics tend to characterize such policies as “shortsighted,” “reckless,” “misguided,” “unwise,” and the like— as if the governments that make such policies do not know what they are doing; or as if policy making is a simple matter of technical expertise or personal proclivities of policy makers, that is, a matter of choice. In other words, liberal/Keynesian critics tend to explain the class-biased austerity policies of the vicious global Neoliberalism in (the benign) terms of policy makers’ “inability to distinguish ‘good’ from ‘bad’ policies: inability to realize that we can grow our way out of this crisis through deficit spending, just as we did in response to the Great Depression of the 1930s.” (See, for example, any of the Nobel laureate Paul Krugman’s economic columns in the New York Times.)

AN ALTERNATIVE EXPLANATION....

http://www.counterpunch.org/zadeh08302010.html

[JCMach1]

1. Dead on with the analysis... and yes where 'the Left' is in-power across the board they are

collaborating with the corporate puppet masters...

I bang my head on the corporatist ideology that thinks ONLY 500% profit is the way to go. Just follow the bouncing ball. Most of the companies shifting manufacturing from the U.S. were profitable.

It is the ideology of the bankers and investors that will only fund expansion if those companies go for the type of profits that can be made from the slave wages overseas.

Maybe the fed should open an investment bank for companies that want to build things right here in the USA, yet might only make 100% profit... What a concept!

It beats the hell out of throwing money at the banks and lenders and letting them give out the funds for overseas expansion. Or worse, having the banks sit on the money making FOREX and derivative (i.e. gambling) plays.

Rant off...

[Hannah Bell]

2. i'm wondering about the obsession with exporting. i feel there's some kind of bankster arbitrage

going on. when you look into some of the free trade deals, they're senseless -- unless there's something going on beneath the radar.

for example, japan, who used to be 100% self-sufficient in rice production, was forced to import some quota of rice.

[JCMach1]

3. It's about freeing-up the slave labor market... you may be familiar with the NAFTA

example.

NAFTA opened Mexico to cheap U.S. corn... nevermind the peasants in the countryside depending on this of a living. The crashing price of corn left millions of workers in a pinch.

Many abandoned rural Mexico for the cities AND the United States.

So, our immigration 'problem' (note the quotes) and the drug problem in Mexico (there weren't many jobs in the city for the campesinos) are directly tied to NAFTA.

Only factory farming can compete when so-called 'free-trade' is involved. Family and subsistence farmers are squeezed out of existence and pushed into the urban workforce.

[Stevepol]

4. What gets me is everybody shakes his head and acts as if this hasn't happened before.

This is the Great Depression come back for a return visit.

And FDR's prescription still holds. We know perfectly well what to do about it, and we know exactly what the nay-sayers will say. This has all happened before.

Obama needs to drop his little love affair w/ Reagan and people like Geithner as if they are really "cool" and understand crap about what's going on.

LOOK AT HISTORY: Try a WPA type approach, quit tip-toeing when you shd be stomping all over the place!!!

[JCMach1]

6. I don't completely agree as today's problems are a bit different...

You are right, jobs are the key to the problem...

But just imagine, what if half the stimulus money had gone into the private sector (I know hear me out). For example, the Fed had organized something like a U.S. Development Bank (or some other cutesy name) specifically to lend money to developing companies that are producing within the U.S.

Part of the economic stall right now is that banks and corporations are sitting on cash. Banks are even more reluctant than usual to lend to companies that can't insure those massive profits (my 500% hyperbole is not far off) that can only be achieved with overseas production. So imagine you started a company with your own cash and make an excellent product right here in America. Most banks are going to deny you an expansion loan as your bottom-line percentage is less than say some of your competitors. Literally, they might give you money BUT ONLY IF YOU EXPAND OVERSEAS to hit that magic profit %.

We live in the age of :wtf: capitalism and government has got to get creative with pulling the jobs back home. Obama's tax credits for small business are just a drop in the bucket. It has to be massive like the old WPA projects to pull this off.

Hell, sell American Recovery bonds!!! I would buy a few to fund such a lending agency.

WPA like and yes Obama/Bush stimulus like projects are problematic as the jobs dry up with the funding. That's the trouble with the economy right now.

[xchrom]

5. ...

'In other words, liberal/Keynesian critics tend to explain the class-biased austerity policies of the vicious global Neoliberalism in (the benign) terms of policy makers’ “inability to distinguish ‘good’ from ‘bad’ policies'


enough with the 'i don't know or i didn't know' crowd.

[izzybeans]

7. Our economic troubles did not begin in 2007.

Other than being late to the recession party, the author is on to something. I think he overshot the mark though. The Bush administration lied about the economic picture for years. Meanwhile we were shedding jobs like crazy. The peak was 2007 not the beginning. People have been losing their jobs for 10 years now and living on depressed wages for 30.

I get the point, but Hossein-Zadeh ascribes too much foresight to the nincompoops in charge. The far scarier proposition (scary because its more likely true) is that policy-makers believe that their policy prescriptions are the right thing, facts be damned.

This isn't a vastly coordinated civilizing process designed by all-knowing overlords. It's a vastly clusterfucked economic fracture designed by people who thought they were bringing freedom and ponies to a Utopian carnival. Has anyone ever talked with a neo-liberal? It's like trying to talk a member of Jonestown down from the Kool-aid. The atheists in this bunch have replaced a theistic belief in a Sky-Daddy with a theistic belief in a sky-banker. If we just pray to our pocketbooks real-hard the sky-banker will make it all okay.

These same people profess a belief in individual liberty, but took part in a dangerous collectivization of our economy and left us all dependent upon bureaucratic fiefdoms run from a distance by investment bankers who have no clue about running a real business (e.g one that actually makes, distributes, or sells a tangible good or service). They just play connect the dots on a balance sheet with computer-generated models. In essence, the utopian neo-liberals have allowed our economy to be taken-over by robotic know-nothings who know only what a linear or stochastic model tells them about numbers on a sheet. Then they sit on their autocratic thrones and command and control our lives. Yet, we are supposed to believe this all happens by magic. Our leaders aren't smart enough to pull this off on purpose. The trouble is the believers in economic magic are peppered throughout the social system in positions of influence. There is no need to coordinate amongst themselves. Only to believe, speak, and stop anyone from trying something different. Market forbid, we try something new.