Ha-Joon Chang, an author and reader in Political Economy of Development at the University of Cambridge, opens his interview about the problems of neoliberalism with Truth-Out by quoting Gore Vidal: Neoliberalism is "free enterprise for the poor and socialism for the rich," where "the rich have been increasingly protected from the market forces, while the poor have been more and more exposed to them."
By that he means that states bail out investors, hand out sweetheart contracts, and impose austerity to keep bond holders whole, but demolish trade unions and tariffs that block imports from countries with low wages and a weak environmental and safety rules, so that wages and working conditions decline (see also: the "gig economy").
He delves into austerity — a way to "shrink the state, "give more power to the corporate sector" and "change the nature of state activities into a pro-corporate one (e.g., it is almost always welfare spending that goes first) — and then into public debt (good if raised during downturns, from domestic investors), and then, into a prescription for economic growth that should be the platform of Labour and the Democratic Party.
He finishes with a stirring condemnation of trumpist economics that you will enjoy, I think.
A lot of people now talk of a "new normal" and a "secular stagnation" in which high inequality, aging population, and deleveraging (reduction in debt) by the private sector lead to chronically low economic growth, which can only be temporarily boosted by financial bubbles that are unsustainable in the long run.
Given that these causes can be countered by policy measures, secular stagnation is not inevitable. Aging can be countered by policy changes that make work and child-rearing more compatible (e.g., cheaper and better childcare, flexible working hours, career compensation for childcare) and by increased immigration. Inequality can be countered by more aggressive tax-and-transfer policy and by better protection for the weak (e.g., urban planning protecting small shops, supports for SMEs). Deleveraging by the private sector can be countered by increased government spending, as the Japanese experience of the last quarter century shows.
Of course, saying that secular stagnation can be countered is different from saying that it will be countered. For example, the quickest policy that can counter ageing — that is, increased immigration — is politically unpopular. In many rich countries, the alignment of political and economic forces is such that it will be difficult to reduce inequality significantly in the short- to medium-run. The current fiscal dogma is such that fiscal expansion seems unlikely in most countries in the near future.
Thus, in the short- to medium-run, low growth seems very likely. However, this does not mean that this will forever be the case. In the longer run, the changes in politics and thus, economic policies may change policies in such a way that the causes of "secular stagnation" are countered to a significant extent. This highlights how important the political struggle to change economic policies is.
Exposing the Myths of Neoliberal Capitalism: An Interview With Ha-Joon Chang
[C.J. Polychroniou/Truth Out]
(via Naked Capitalism)
(Image: Ha-Joon Chang, New America, CC-BY)