01 January 2008

Look Ma, An Honest Neoliberal!

I found an article written by someone of the neoliberal persuasion that actually have an air of honesty to it;

"Globalization" and "Neoliberalism"
By J. Bradford DeLong for the Chronicle of Higher Education

I am a card-carrying neoliberal: a believer that a bet on increased international economic integration is our best hope for rapidly moving to a truly human world, an advocate of NAFTA and GATT, a former not-very-senior official in the Bentsen and Rubin Treasury Departments, and a believer that those fighting to hold back world economic integration are or are the dupes of foes of global prosperity and liberty.

But I also think that this bet on increased international economic integration is a bet. It is not a sure thing. And I think that it is less important to assure people that it is a good bet (although I think that it is) than to help people distinguish the light from the rhetorical heat. After all, there will be other bets and other policy choices to be made in the future. And to fail to understand what is going on now will diminish our chances of collectively choosing wisely tomorrow.

So I want to turn down the volume. I want to approach ideologies of every stripe (including my own) with skepticism. For despite the gallons of ink that have been spilled, our understanding of what "globalization" is and what it will do is still primitive. The people whom you can learn the most from aren't those who claim to have the answers, but those who are still working overtime to ask the useful questions.

The critics of free trade aren't necessarily wrong to be critical of the current state of the international economy. But they write tomes that seem to me at least to reveal confusion and fail to enlighten--instead they deepen the surrounding darkness.

There are, however, some excellent anti-globalization books.

The granddaddy of them all is Karl Polanyi's (1944) more than half a century-old The Great Transformation, published more than half a century ago.

Polanyi argued that the market economy erodes the web of relationships that holds human society together. The market for labor pressures people to move around the globe to where they can earn the most--creating strangers in strange lands. The market for consumer goods rewards people for being fortunate or for responding to the incentives--making status a product of market forces rather than the result of social norms or visions of distributive justice. Moreover, Polanyi argued, the market's undermining of social order threatens to destroy the very societal and institutional structures on which the market economy rests.

More recent works have provided intriguing updates to Polanyi's argument. The Work of Nations by Robert B. Reich, who went onto become Clinton's Secretary of Labor, focuses on the dangers posed by globalization to America's sense of community and to the political order established by Roosevelt's New Deal.

Saskia Sassen's (1998) Globalization and Its Discontents speculates on how the "new mobility of people and money" is about to lead to increases in relative inequality within the narrow spaces of modern post-industrial cities.

The second vein of reform-minded thinking about globalization is best exemplified by Dani Rodrik's Has Globalization Gone too Far?

He claims that globalization cannot be a replacement for (failed) social democracy in the developing periphery. Instead, he believes that globalization must be assisted by (successful) social democracy if it is to produce a world with a human face.

Barry J. Eichengreen, my Berkeley colleague, has written two recent books: Globalizing Capital and Toward a New International Financial Architecture.

A broader perspective, with more points of view but tending toward the same lessons, can be found in Capital Flows and Financial Crises, edited by Miles Kahler.

In response to such critiques, the neoliberal political establishment--the Brookings Institution, the Progressive Policy Institute, and the Century Foundation--assures us that critics of increasing international economic integration are suffering from an irrational fear: Globaphobia is what they call it.

In a sense the neoliberal position is a counsel of despair. Once upon a time development advisors, politicians, economists, and others argued that social democracy was the proper road for developing economies. A strong, active government to build infrastructure and redistribute wealth to ensure that growth would benefit all--or so the argument went. Couple that with high investment (perhaps behind a wall of substantial tariffs) and the private sector would flourish.

But over the past two decades cynicism has set in. A consensus has formed that outside already-developed nations (and indeed inside some of them) an activist developmental state has entailed too many coups, too much corruption, too many business leaders deciding that the road to profits is not capital investment but marrying the C.F.O. to the daughter of the vice-minister of finance.

Neoliberals hope that multinational corporations, financial analysts, bond-fund managers, and bond raters will in the end be able to apply some constructive pressure to improve the situation."

(In “The Squandering of America,” Robert Kuttner says financial elites have too much sway over the Democratic Party — and, as a result, over public policy. (Financial elites ARE the republicans so I don´t think there would be any real choice either way)

Today, we are seeing the squandering of America, on multiple fronts. The ultimate test of a democracy is whether it is possible for the people to throw out the governing party. In politics, we have come very close to losing our democracy, not just in rigged rules and stolen elections but in the domination of politics by big money, the decline in participation by ordinary people, and the assault on basic constitutional liberties."

Kuttner takes on four pillars of neoliberalism: the preference for balanced budgets and modest-size government; free trade; economic austerity as a condition for development aid; and financial-market deregulation. In each case, the evidence suggests neoliberal policies were either irrelevant or downright disruptive.*)

It’s the Politics, Stupid
Inflating the importance of trade liberalization

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