Failures Of The Neoliberal Order
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You know, one of the most fundamental failures of the neoliberal order over the last few decades has been its decimation of wage growth in Western economies. Not paying high enough wages to the world’s biggest consumers has hamstrung productivity in America. The US economy has been stuck in third gear for 20 plus years or more. All those smart cookies who thought it was a brilliant idea to move manufacturing offshore to developing countries, where they could pay workers peanuts, didn’t factor in the whole picture. Yes, production was much cheaper, but the impact on wages in America meant that consumers couldn’t afford to buy as much stuff.
Neoliberal Model’s Neglect Of Labour Market
The neglect of the labour market by neoliberal governments has delivered a generation of Americans and Australians much worse off than their parents in economic terms. This combined with unfettered capitalism monopolising markets has meant the greatest concentration of corporate control and price setting modern history has ever seen. Consumers have less economic power and less buying power. Prices for everything have been going up and record profit margins are delivering record profits to big companies. Ordinary Americans and Australians cannot afford housing with rents sky rocketing. The neoliberal markets are not delivering the promised outcomes for the people.
Privatization Promised Savings But Delivered Bugger All
Things were supposed to get cheaper when the economy was allowed to function freely and unhampered by government regulation. Privatization of utilities was supposed to mean cheaper energy and that has not happened. A small coterie of investors have made lots of money from these shifts. The rise of billionaires and oligarchs has occurred around the world. Big tech was supposed to deliver a fairer better world, but wealth and power has coalesced into the hands of the few. What they call rentiers or rent seekers have emerged. This is a business model where fees and charges are put on everything consumers and citizens require. B2B rentiers have become the dominant type of business model too.
Productivity has slumped on the back of this way of doing business, as businesses make their money from rents rather than striving for profitability via innovation.
Neoliberalism Suppressed Wage Growth
Thus, these businesses are more immune to wage growth pressures. Plus, the corporate concentration reduces competitive pressures in the labour market. The neoliberal economic order actively suppresses wage growth through its tight focus on monetary policy to the exclusion of all else. Central banks like the RBA are, in their outdated anti-inflationary model from the 1970’s, always warning against wage rises. They are tightly in the grip of neoliberal monetary policy fever. Pulling the interest rate lever is their answer for everything, whatever the question. What is that saying – everything looks like a nail if you all you do is hammer. However, the last thirty years have not delivered wealth for the majority of Australians and Americans.
The wealth divide has grown more disparate than ever. Indeed, many of us cannot afford to live in our own country anymore. This is a huge failure of governments and the neoliberal order.
Wages are going backwards, in terms of their buying power, at the moment with inflationary forces pushing prices up. You never hear the Reserve Bank warning business about putting up prices. It is always grim reminders about possible wage-price-spirals. We are in a supply side inflationary period. This is where prices for things like housing/rents have gone up because of shortages in the supply. Putting up interest rates is not going to help build more houses – quite the reverse. Michelle Bullock is, however, holding up her big hammer. Poorer workers within our communities are struggling with the cost of living – they have used up their savings.
It is time to slay the neoliberal dragon and for governments and central bankers to stop believing in the unfettered market. It is not delivering. It takes courage to see that the emperor has no new clothes and call it out. I am not sure if the current crop of leaders have it in them.
“Though not all scholars agree on the meaning of the term, “neoliberalism” is now generally thought to label the philosophical view that a society’s political and economic institutions should be robustly liberal and capitalist, but supplemented by a constitutionally limited democracy and a modest welfare state. Recent work on neoliberalism, thus understood, shows this to be a coherent and distinctive political philosophy. This entry explicates neoliberalism by examining the political concepts, principles, and policies shared by F. A. Hayek, Milton Friedman, and James Buchanan, all of whom play leading roles in the new historical research on neoliberalism, and all of whom wrote in political philosophy as well as political economy. Identifying common themes in their work provides an illuminating picture of neoliberalism as a coherent political doctrine.”
Robert Sudha Hamilton is the author of Money Matters: Navigating Credit, Debt, and Financial Freedom.
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