What follows Neo-liberalism? (Jessop, 2007) What is Neo-liberalism? Neo-liberalism is a term referring to a reemergence and redefinition of classical liberalism. It is promoted as the mechanism for global trade and investment supposedly for all nations. The main points of neo-liberalism include: • Free Market • Redirection of public spending • Deregulation • Privatization • Liberalization Second half of the 1980s and first half of the 1990s with the contingent combination of neo-liberal system transformation, neoliberal regime shifts, and neo-liberal policy adjustments Reasons: 1) Neo-liberal system transformation: a tabula rasa approach in which the creative destruction of inherited state socialist institutions was somehow expected to lead to the emergence of a liberal market society. 2) Neo-liberal regime shifts: A set of policies that are intended to alter the balance of forces in favour of capital. 3)There are neo-liberal economic restructuring processes and regime shifts that have been externally imposed on crisis-ridden economies and their states by the leading capitalist powers. 4) The minimal changes necessary in the face of growing internationalization and a global shift in the balance of forces to enable alternative economic and social models to be maintained in the face of new conditions
• Ecological dominance is the capacity of the profit-oriented, marketmediated capitalist economic order to have a greater impact on the evolution of other social orders than these orders can have on it. • The concern is the ecological dominance of neo-liberalism may be ended by the ecological dominance of the natural environment in a period of growing environmental crisis.
The Rebirth of the Liberal Creed: Path to neoliberalism in Four Countries (Fourcade-Gourinchas, Babb 2002) 1. General Thesis
1) Economic and financial globalization during the 1970s created a new environment both for developed and developing countries. 2) Especially the Bretton Woods break down (1971) marked the crucial turning for the installation of neoliberal policies (market paradigm) since the national vulnerability to international capital movement rose. 3) But the transition to neoliberalism within different countries is highly is irregular in timing, scope and nature. 4) Local institutions and dynamics shape the perception of necessity and purposes of economic liberalization, as well as channels of diffusion and influence of neoliberal ideas
“It showed, that institutionalized patterns of state-society relations determined
the way in which neoliberal transition were carried out” (Fourcade-Gourinchas, Babb, 2002: 533)
2. Changing international economic order and the rise of the market Paradigm
• Post-war economic regime “National capitalism” and “embedded liberalism” • Reason for this variety of Post- war social contracts: Bretton-Woods-System Security about currency stability, based on fixed exchange rates, offered to pursue different domestic objectives • Neoliberal turning point: Break down Bretton Woods 1971 Now new challenges/ objectives for national policies occur: International finance and globalization Same starting point but variations within adaption of neoliberal policies
3. A comparison of neoliberal transitions (Fourcade-Gourinchas, 2002: 572)
Chile Balance of payment crisis Inflation yes Britain Yes Mexico Yes France Yes
High relative to neighbours High High
Medium relative to neighbours Medium Low
High Business support for neoliberal ideas Political Origin of neoliberal ideas International opening Very rapid after transition
Already very open
Ideological transition 1973-79
Ideological transition (1976) 1979-83 Main Problem
Progressive before and after neoliberal transition (common market) Pragmatic Pragmatic transition 1985- transition 1978 and 1983-
Progressive before and after neoliberal transition
Insufficient adaption to International challenges
Policy-economic variables to distinguish Chile/Britain form Mexico/ France • Embedded liberalism produced more economic growth in M/F • Control of social unrest France: state imposes wage restraints, centralized bargaining Mexico: demand for higher wage suppressed by repressive form of corporation Britain/Chile: high interruptions of production by labour unrest
Inflation and increase of prices Social conflicts Britain/Chile comparatively high relative to national “peers” Chile: 1960-1973 over 600% Hyperinflation
In Sum: Differences in ability to mediate distributional conflicts and control inflation Consequence Revolutionary shift (ideological) in Britain and Chile - failed economic policies - social conflicts - high inflation Strength of political groups with alternative economic ideas Chile: military (Pinochet, Chicago Boys) Britain: democratic (Thatcher, Think Tanks) New set of experts: Monetarists Pragmatic shift in France and Mexico - macroeconomic difficulties - transnational economic integration Search for “Technical knowledge” to overcome crisis New set of experts: Technocrats
4. Example of Variation within developing countries: Comparison of the Influence of Economists in neoliberal transition
Ideological Transition: The Chicago Boys in Chile Social movement Pragmatic Transition: Professionalization of Economic policies in Mexico Individual incentives for high-trained academics
Have We Overestimated the Effects of Neoliberalism and Globalization? Some Speculations on the Anomalous Stability of Taxes on Business
- All social scientists agree that business taxation in advanced capitalist countries would be declining - BUT: in reality the taxes are rising Theoretical expectations of declining taxes - Organizational or cultural institutionalism - Exchanges between the state and businesses - “exit” and “voice” reactions Have tax rates on business converged over time? Four related questions 1) To what extend have tax rates on capital converged over time? 2) Have globalization and neoliberalism facilitated convergence? 3) Have international organizations like the EU increased the pace of convergence? 4) Has convergence occurred across even the most institutionally different developed states? Has state spending on business increased with globalization? Three types of spending money in business - infrastructure/capital spending - Direct subsidies - Human capital (e.g. education) Conclusion - The anormality may be explained by the game theory - Overestimation of globalization and neoliberalism
• What are the effects of neo-liberalism to world’s market?
• Think about the economic system in your home country. How would you characterize the dominant paradigm?
„The fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism“ (Joseph Stiglitz, Interview with Nathan Gardels, September 16, 20081)
Would you agree and consider the current financial crisis as a turning-point for the economic paradigm like the Bretton Woods break down in the 1970s?
• Also referring to that, in 2020, what development would you predict? Will there be a dominant system? If yes, which one?
• (Remember the influence of academics neo-liberalism. Why did you decide to study abroad? How could this influence the future when you are back to your home country?)