Waking from "‘the deep slumber of a decided opinion"

October 25, 2008 2:39 PM

Financial Regime Change?Robert Wade, professor of political economy and development at the London School of Economics, "argues that we are exiting the neoliberal paradigm that has held sway since the 1980s" and considers the "causes and repercussions of the crisis, and errors of the model that brought it to fruition." Prof. Wade was making similar predictions last year.
posted by Abiezer (24 comments total)

Remember this guy?

It is the “manly-man” work in manufacturing⁹ and farming and transportation that is on the decline, falling from 40% of GDP in 1950 to 15% today. Meanwhile, it is the intellectual “geek work” in finance, professional services and information that is on the rise, as is health care. These high growth sectors have grown from 18% in 1950 to 44% today. I think we need to be concerned about the innovative process in an economy with so much finance and so little manufacturing. Dude, what is the latest financial derivative really worth? How much is it going to change your life?

⁹ If it is the kind of thing you like to do, please substitute “It is the ‘womanly-woman’ work in womanufacturing.’

posted by Non Prosequitur at 2:58 PM on October 25, 2008

Reaganomics is dead. Now liberals can quit flattering the memory of that stupid fuck.
posted by Brian B. at 3:01 PM on October 25, 2008 [3 favorites has favorites]

Your favo(u)rite school of economics sucks.
posted by ZenMasterThis at 3:02 PM on October 25, 2008

New boss same as the old boss. No limits on growth. Somewhere around 1982 we passed the planets sustainability level, we are eating up resources and emmiting pollution faster than the planet can replace or absorb. No limits to growth! Capitalism must not fail, growth must not stop.

New Scientist did a special edition a few weeks ago called How our economy is killing the Earth. Most of it is behind a pay-wall but a few are free including Why politicians dare not limit economic growth.
posted by stbalbach at 3:03 PM on October 25, 2008 [1 favorite has favorites]

Seriously rethinking the model. (Shaky video warning)
posted by 517 at 3:09 PM on October 25, 2008 [2 favorites has favorites]

When was Reaganomics the same thing as Neoliberal economics? Neoliberal economic policies (especially the thawing of socialistic control regimes after the collapse of the USSR) have created a lot of income growth around the world among people who've never heard of nor care about St. Ronald.
posted by Non Prosequitur at 3:10 PM on October 25, 2008 [1 favorite has favorites]

It all, IMO, comes from one dangerous meme: the idea that "we do work to get money". The money is the goal, the work itself a means of achieving the goal; therefore the work we do is of little inherent importance, and if we can get more money some other way, then that other way is what we really ought to be doing.

That's the neoliberal work ethic; as demanding of workers as the Protestant work ethic, often more so, but without the inherent capacity to instil a sense of personal worth.
posted by aeschenkarnos at 3:13 PM on October 25, 2008 [6 favorites has favorites]

Enjoyed that video, 517. Had that classic "why the current crisis proves my politics are right" vibe too, something I always aim for myself :p
posted by Abiezer at 3:48 PM on October 25, 2008

we get a chance every generation or so to rewrite the rules of the game. every few generations the lines collide and every games rules need to be rewritten at the same time.

i'm pretty excited about the possibility... even if it turns out to be very much like the same old shit.
posted by Parallax.Error at 4:01 PM on October 25, 2008

The Financial Crisis May Yield Better-Than-Expected Bonuses on Wall Street
posted by ornate insect at 4:03 PM on October 25, 2008

"we do work to get money". The money is the goal, the work itself a means of achieving the goal

Um, yeah. For the overwhelming majority of workers in the world, that's how it REALLY is.
posted by ZenMasterThis at 7:26 PM on October 25, 2008 [2 favorites has favorites]

Neoliberal economic policies (especially the thawing of socialistic control regimes after the collapse of the USSR) have created a lot of income growth around the world among people who've never heard of nor care about St. Ronald.

It's not well known in the US, but neoclassical economics just about trashed Russia in the 1990s. There is a reason that Europeans are skeptics on neoclassical economics - they watched what it did to Russia next door. It was hell - and yes, they are beginning to pull out, but no thanks to the experiments of the 90s. And these policies have played havoc in several African countries (including Zimbabwe, but also Zambia) when they were forced to it by the IMF. Zimbabwe and Zambia had serious economic problems before being forced to liberalisation (which is why the IMF had the political power - they were in serious debt), but one illness does not cure another. In Zimbabwe, liberalization didn't improve the economy, but did reduce living standards by undermining government services. In Zambia, liberalization forced the sell-off of the government controlled copper industry, just before copper prices jumped back up again. Now all the profit is going to private companies (mostly if not all Western) and - unlike places like Alaska or Canada - the state wasn't even able to put good taxes or rents on the mineral resources.

There is a middle way between centralized economic planning and the cruel anarchy of neoliberalism. Economic policy should be about moderation, and what actually works in the messy world of people - not what looks good in theory. (And both centralized planning and neoliberalism are pretty theories which fail to deliver what they promise in reality).
posted by jb at 9:06 PM on October 25, 2008 [2 favorites has favorites]

In other news it turns out that the obesity crisis in America was rational. People were just trying to get too big to fail so they could qualify for the government bailout.
posted by srboisvert at 11:49 PM on October 25, 2008 [2 favorites has favorites]

Economic policy should be about moderation, and what actually works in the messy world of people - not what looks good in theory.

Agreed.
Unfortunately, economic theory seems to be about the only "science" which doesn't seem to allow adequate testing in a lab before being released into the wild. Of course, this results in a lot of hand-wringing and apologetic excuses like "winners and losers" and "there will be some pain" when your favorite economic policy meets the real world and things don't go exactly as your theory said it would.

The economic theorists seem oddly unable to factor-in such seemingly predictable and very human traits as greed, ego, and the desire for power, despite thousands of years of available data to mine. I mean, anyone naively espousing policies of deregulation and maximized profit, while claiming that all ships will be lifted by the resulting tsunami of wealth, is either in complete denial of human nature and the events of human history or has somehow gotten to where they are while keeping their head buried in sand. That, or they are lying out their butts because they know they are in position to make-out like a bandit if the thing flies.
posted by Thorzdad at 7:42 AM on October 26, 2008 [1 favorite has favorites]

Thanks for posting this. Makes me want to pull out my Karl Polanyi stuff from undergrad.
posted by Telf at 7:58 AM on October 26, 2008

That, or they are lying out their butts because they know they are in position to make-out like a bandit if the thing flies.

Attribute everything to malice when money's involved. During the Reagan years they turned a hose on military spending from borrowed funds (as promised when they said they wouldn't raise taxes). The stocks to pick were picked by the White House, and their top-down, supply-side theory was effectively used to disguise the theoretical incompetence, offered by Jude Wanniski, who had degrees in political science and journalism (not economics), who also claimed that Marxism was the other supply-side theory. Deficit spending was just half of the problem, because deregulation and the junk bond bailout fiasco that followed in the 1980's (see Wanniski's two-Santa theory) showed that Reaganomics failed us right out of the box because it was either borrowed or scammed from the next generation - but they gave him credit for beating communism to hide the shame (which actually deified him instead, which may have been an accident at first, but not after). He is still the only president we know of who committed high treason directly with an enemy by promising spare parts to keep American hostages longer than necessary in order to defeat Jimmy Carter.
posted by Brian B. at 8:27 AM on October 26, 2008 [1 favorite has favorites]

re: rethinking the model & rewriting the rules on money & work...

it's time for idle theory and complementary currencies!

cf. the memory bank & doing nothing :P
posted by kliuless at 8:32 AM on October 26, 2008

I love this quote about Japan, taken from the International Herald Tribune (and quoted in the first link): "The country has a $14 trillion pile of household savings . . . This blessing has also been a curse to investors . . . Japan’s wealth shields it from pressures to meet global standards of economic growth or corporate profitability. This is what allowed the country to accept near-zero growth rates in the 1990s and what allows the survival of Japanese corporate practices like valuing employees and clients over shareholders."

I wish our corporate practices included valuing employees and clients over shareholders.

---------------------------------

But back to the main subject of the article:

I'm no economist - merely a history student who's been doing a lot of economic history in the last few years. But I'm fascinated to see the breakdown of the economic growth by region in the last half-century - the timing and location of growth just doesn't support the Washington consensus.

It's not that history clearly supports what has been assumed to be the opposite of neoclassical economics - state-centred development in a semi-socialist model (nationalizing and promoting heavy industry). There have been a lot of problems with this model in African countries. But what the history of not just the twentieth century, but also earlier centuries (like the sixteenth to eighteenth in Britain) does not support the Washington consensus either. Over the last four years, I've come across three big studies on market integration (increased long distance trade, domestic and/or international) which suggest that it doesn't have a simple relationship with growth in a developing economy (actually negatively associated in 19th century India; in Europe c1500-1800, countries with good national integration but barriers to international integration aka protectionism grew more than countries internationally integrated). England was actively seeking import substitution in the late 16th/early 17th centuries - and largely succeeded, esp at the cheap end of the market. They used both government support and protectionism to achieve this (as well as fate - war in the Netherlands undermined one of their main competitors for their own domestic market). As noted in the article, China has not been following Britain's 19th century laissez faire policy, but rather the example of the US in the 19th century, as it tried to play catch-up: "The state [in China] has been an integral promoter of development, and has adopted targeted protection measures as part of a wider strategy for nurturing new industries and technologies".

I don't think that necessarily means you want to cut off markets -- but you want to think of government policies as things that should be tools driven by results, not ideologies. And results have shown that local demand is very important - the more money your people have, the more they can buy and the healthier your economy. So is moving your economy away from producing raw materials to producing more finished products with greater value, so that more of the profit is made in your country, and if you need some selective import substitution to do so, that may work out better in the long run. I think the best policies for economic growth for the third world is in looking to historical precedents for examples, and an economic policy which is balanced and flexible.

Part of me is ambivalent about economic growth. I am deeply concerned about international inequality, on moral grounds. But I am aware on practical grounds that our planet cannot sustain six billion people living at a North American standard of living, not with our current technology and energy basis, and I don't expect that to change quickly enough. Reducing international inequality will probably require a reduction in our lifestyles. I am (along with many others) willing to do that - to promote growth elsewhere, and to reduce our own ecological damage. But I doubt that anyone will ever get elected supporting that.

-----------

This comment is very scatterbrained - there is so much to think about. And I'd be the first to say that while I feel I understand some things about macro-economic development, I am completely lost in the world of international finance. Maybe we all need more education in finance, economics and economic history - just to be well-informed citizens of our respective countries. Sadly, economic history is out of fashion at all levels of history education in North America - whether basic schooling, tertiary education or the public historical discourse. My own grounding in it should be stronger than it is, but it's simply not taught to the same extent than political, intellectual, cultural and social history is. And that's a serious problem.
posted by jb at 8:33 AM on October 26, 2008 [3 favorites has favorites]

Bloodbath in Mayfair as half of all hedge funds face termination
posted by ornate insect at 9:39 AM on October 26, 2008

Reaganomics failed us right out of the box because it was either borrowed or scammed from the next generation - but they gave him credit for beating communism to hide the shame (which actually deified him instead, which may have been an accident at first, but not after). He is still the only president we know of who committed high treason directly with an enemy by promising spare parts to keep American hostages longer than necessary in order to defeat Jimmy Carter.

Please, can we continue this beating, pounding and eventual eviscerating of the Reagan legacy whenever and wherever possible on MeFi? It really does need to be done. It's the prime example that I know of (in my lifetime) of how a villain (or perhaps just a gigantic fool) has managed, via weird propagandistic juju, to become deified over time. Ronald Reagan did not love you. Ronald Reagan served only his evil scriptwriters and the producers who were bankrolling the production.

And, to quote myself from a couple of days ago:

Maybe it was my age when Reagan took over (20) and my proclivity for punk rock and hanging out with dope smoking anarchist weirdos ... but I never bought his act, even slightly. It would take a few thousand words to put this into proper context so forgive me for just saying (without annotation) that his eight years in power were dark times for anyone who gave a shit about humanity, and the degree to which he is now thought of in heroic terms comes like a continual kick in the face. Did he bring down the Iron Curtain? No. The people trapped behind it did, maybe with a little help from Elvis, The Beatles and Levis. Do his administration's nefarious doings pale in comparison to Bush Jrs? That's the wrong question to ask. I prefer, to what degree did his cynical crowd set the stage for Karl Rove, Dick Cheney and company by pointing out just how sentimental, one dimensional, xenophobic and stupid the American electorate could be?
posted by philip-random at 9:50 AM on October 26, 2008 [1 favorite has favorites]

"we do work to get money". The money is the goal, the work itself a means of achieving the goal

Um, yeah. For the overwhelming majority of workers in the world, that's how it REALLY is.

In many countries, various neoliberal actors have done stuff like, for example, tell small-scale farmers, "oh, you're growing (huge variety of crops)? Here, I have a better idea- grow coffee/whatever instead, it's way more valuable. Then you can sell it and afford to import food to eat, and other people get your coffee while your country's GDP grows!"

Good in theory, until of course the price of coffee falls and hundreds of thousands of farmers are plunged into destitution and starvation, because they no longer grow actual food they can eat themselves.

Think of it this way. If we pulled every fish out of the ocean this quarter, it would be the BEST QUARTER EVER, right? But, oh. Then all the fish are dead, and not only can we not sell fish any more, but there are all kinds of ecological consequences we can't even predict. Having a bunch of money from selling the fish won't change any of that.
posted by showbiz_liz at 9:55 AM on October 26, 2008 [2 favorites has favorites]

Except, of course, this person predicted the dollar would collapse...

(Really, I still don't understand that one.)
posted by markkraft at 10:24 AM on October 26, 2008

re: japan - as merkel sez, "Japan-style malaise is sounding pretty good." :P cuz even tho our debt is denominated in dollars, a lot of it is owed abroad; what happens when treasury auctions fail? "When that happens, we will have a statement that shifting private debts to the US Government is not appreciated by the creditors of the government."

re: state capitalism [1,2] - yea, i think it's always been such wrt industrialisation (obviously taking different forms and to various degrees) but esp interesting in regard to social value and providing for the general welfare, cf. natural capitalism, green accounting & social entrepreneurship, viz.[3,4]

re: polanyi - found this paper:

In The Great Transformation, Karl Polanyi posed what he considered the major paradox of the past 200 years. How is it possible to maintain the dynamism of the market on which our society is based without destroying, as he put it, “the human and natural substance of society?” [...] Addressing the paradox requires first recognizing that prime directive of our market society and the global economy in general is maintaining continual capital accumulation, creating what Ernest Gellner (1983: 24) called a “society of perpetual growth.” For our economy (and indeed our society) to function we must produce and consume more this year than last and more next year than this in perpetuity. Failure to do so will result in political, economic and social upheaval.

i'd submit that approaching a first order approximation to a 'solution' would take a (re)emphasis on use-value over exchange-value, that is trying to maximise well-being rather than (more easily measurable) consumption/production, part of which i think involves rethinking our monetary system at a really basic level and perhaps even our means of (re)production...

cheers!
posted by kliuless at 11:44 AM on October 26, 2008 [1 favorite has favorites]

In many countries, various neoliberal actors have done stuff like, for example, tell small-scale farmers, "oh, you're growing (huge variety of crops)? Here, I have a better idea- grow coffee/whatever instead, it's way more valuable.

Perhaps a more enlightened neoliberal actor would have counseled diversification as a means to a more predictable return. Yet another example of intervention by well-intentioned western "experts" screwing things up in the undeveloped world.
posted by ZenMasterThis at 6:37 PM on October 26, 2008