Neoliberalism
Characteristics
Neoliberal “free market” canon vs the Classical liberal canon
- Source: Why the “Miracle of Compound Interest” leads to Financial Crises By Michael Hudson (retrieved on 04/04/2011)
| Neoliberal "free market" canon | Classical liberal canon |
|---|---|
| If left alone, markets settle at a fair equilibrium in which all parties have equal opportunity. | Economies tend to polarize unless governments act to prevent free lunches by vested interests. |
| The MV=PT formula views money as being spent on goods and services, and hence sees more money as inflating consumer prices. | Most credit is created for spending on real estate, stocks and bonds. Hence, what is inflated are primarily asset prices. |
| Analyzes the "real" economy as if it operates on the basis of barter without the buildup of interest-bearing and property-rent claims. | Emphasizes the distinction between the "real" economy�s S-curve expansion path and the exponential growth of debt. |
| Credit is invested productively, enabling borrowers to repay loans and interest. | Most bank credit is unproductive, imposing a debt burden that diverts income away from buying goods and services. |
| Borrowers use the loan proceeds to make enough money to pay off their loans and keep a profit for themselves. | Under a regime of asset-price inflation, loans are paid off increasingly out of new borrowing against collateral that is rising in price. |
| Bank lending increases investment to hire labor to produce more goods and services, supplying more output and keeping commodity prices down while raising living standards. | Mortgage credit which is used to bid up real estate prices, or financial credit to bid up prices for bonds and stocks. In the ends, loans are paid off mainly out of capital gains (asset-price inflation). |
| High debt leverage increases the return on equity, spurring more wealth creation. | High debt leverage increases the debt overhead, and inflates asset prices, obliging property buyers to go deeper into debt. |
| "Supply-side" economists claim that loans spur more investment, and hence more profits to tax. | Loans reduce tax revenues, because interest is a tax-deductible expense. This shifts the fiscal burden onto labor. |
| Cutting taxes on property income and capital gains lowers the cost of doing business and hence frees more income for investment. | Tax cuts free income to be pledged to creditors for higher loans to buy real estate, financial securities and entire companies. This raises asset prices. |
| Low wages make economies more competitive, assuming that there is no feedback between wages and productivity. | High productivity requires high wages and living standards. |
Discussion
What is neoliberalism? A programme for destroying collective structures which may impede the pure market logic.
by Pierre Bourdieu
"And yet the world is there, with the immediately visible effects of the implementation of the great neoliberal utopia: not only the poverty of an increasingly large segment of the most economically advanced societies, the extraordinary growth in income differences, the progressive disappearance of autonomous universes of cultural production, such as film, publishing, etc. through the intrusive imposition of commercial values, but also and above all two major trends. First is the destruction of all the collective institutions capable of counteracting the effects of the infernal machine, primarily those of the state, repository of all of the universal values associated with the idea of the public realm. Second is the imposition everywhere, in the upper spheres of the economy and the state as at the heart of corporations, of that sort of moral Darwinism that, with the cult of the winner, schooled in higher mathematics and bungee jumping, institutes the struggle of all against all and cynicism as the norm of all action and behaviour." (cited on IDC mailing list, June 2010)