In today’s western world, we see that the ideology and policies of Neo Liberalism are coming to a bitter, kicking and spluttering end.
In the same way as the unions became too powerful under the era of Keynsian democratic socialism, as the post war period was in most free western countries was in retrosepct, the system has become to powerful for its own good and there with, corrupt.
Regime Change Reveal Partial Political Vacuums
The danger for a system in its death throws, is collapse without replacement by something sensible and democratic. This is was originally in fact launched the individualistic, globalising ideology of Neo Liberalism into politics in 1979. From being a far right model for a Darwinian society, where the individual is a competitive, existential entity with no benefit from organised society, into the main stream with Reagan and Thatcher.
We see also the same in Iran in its ‘cultural revolution’ and now Libya, that an unwanted regime is not replaced by a movement which represents the majority who wanted some freedom of speech, but rather it represents a large enough minority with a single socio-economic outlook to sieze and maintain power from the core of a smaller, fanatical minority who assume ruling positions.
Neo Liberalism replaced something that no longer worked in the west, just because it was a strong ideoligcal stand point, the same as the Ayatollah Khomeini did in Iran. People were exhausted by the economic and social turmoil of the 1970s and wanted to turn their backs on the organisations which had once offered freedoms, but not seemed to deny growth in the standard of living and quality of life.
The Rise of Corruption Topples Ideological Empires – Then and Now
In the late 70s going into the 1980s, neither Dennis Healy nor Jimmy Carter could have taken on the unions and won, any more than today Theresa May could take on the Billionaires and the Israeli Zionist Lobby. The Peri Menopausal Neo Liberal political establishment today are in the same position as governments held to ransom by their funders the unions and the uber liberals. In the three decades in which the unions rose from their righeousnous to become corrupt power mongerors, they payrolled the Left and the Right dare not go to war with them.
The demise of that era of democratic socialism (think about it! Yes in the USA too) was hastened by the inflation crisis which many economists present probably rightly so as being precipitated by the oil crisis. This was to some a kind of chain effect, a mere starting spark, while to other economists, the western thirst for petroleums was too much for their current political economic systems and policy of the time to bear. The unions could demand more money in the face of rising living costs, thus fuelling inflation.
Many Keynsian thinkers propose that inflation is not really such an issue, you print more money to ensure it circulates and short periods of high inflation are a sign of a vibrant economy. However in reality inflation up into double figures is a heavy form of taxation on ordinary worker’s take home pay. Also inflation driven by consumer price index influence on currency, decreases the value of assets and debt, which are bad for capital and investors.
The ‘Great Moderation’
In terms of getting capitalism working for the economy again and tackling the post 70s crisis, the Neo Liberals had with them some astute economists and some very cynical politicians and billionaires. Their main aims were to dergulate the movement of capital, castrate the unions and in so doing bring in an era of lower inflation.
Over time also, after a decade of much volatility of interest rates, their economists in their central banks and IMF were able to secure a low interest era, during which it can be argued that the costs of lending money and underpinning much of the credit liquidity in the economy by central banks, is a kind of crypto keynsian approach, because it is in reality a governmental subsidy to industry via the banking system. (More on the era of crypto keynsianism in another blog of mine).
These aims and methods in themselves may have been fortititous for the lower half of earners and net personal wealth, had it lead to investment in productive, free market industries. In fact their could have been a new consumer products boom, coupled to the services and financial products boom. But that would have been inflationary. The other key tool in keeping inflation low over a longer time, was increasing competition on a global basis.
Globalistaion – Slavery Is Reborn, and Exported
The Neo Liberals talked most about free trade, yet this meant in effect the race to the bottom of the labour cost ladder, where what slavery and what being a paid worker is a grey area. Inevitably also it comes back to that old favourite of empires, disinfranchisement of land rights. Kicking the natives off their land and destroing their subsistance lifestyles. It is age old, from the persecution of the Sons of David by the Egyptians, through the Highland Clearances, to today’s slash and burn of the equatorial rain forrests. Yesterday’s sheep grazing is today’s soyabean and palm oil plantation.
Neo Liberalism was going to hit the buffers because the world is not a single free market and will never be so. In the same way as communists viewed the human race as homogenous, the globe was viewed as a single opportunity which would obey the core ideological rules of Adam Smith and all the other free market economists down the ages who spoke of indeed, the Wealth of Nations, and not the well being of the world. Where Neo Liberalism hit the terminus station’s buffers was China, most of any other low cost production country (LCC). The race to China.
China – The Waterloo of Neo Liberalism
China as you may have seen and heard on the news very recently, is a country controlled by a large, non democratic ‘socialist’ government, They do all the bad, naughty economic tricks the Neo Lib’s have spent so much effort in eradicating from the public mind in the west through their control of the main media. China now has command capitalism and prints money, while controlling the value of Yuan on internaional markets. They also invest massively in state infrastructure, and plan entire cities before commanding capitalism to move in and do its very best to make a buck, sorry , yuan or two. In addition they are such a large manufacturing economy, that they can manipulate both the supply and demand for any key commodity or even some advanced componentry. They allow people to become rich, but tax heavily. China is so populous that their tourist demand abroad alone is powerful enough to give them political influence. They still only allow most couples a single child before there are punitive financial penalties. They do lots of bad stuff. Yet in Neo La La Land, they get away with and steal jobs from the west.
The promise was that China was opening up, and western companies could make a lot of cash there. The reality was that western companies would make most cash closing profitable plant in their former indigenous countries, moving to China and then selling back to their old countries. The balance of trade is enormously biased towards China when considering both the EU and the USA, with many corporates no longer being geographically identifiable with the west. The Chinese too learned to compete with value added products as well as being cheap on bricks and electric kettles.
Capitulating to China
The west have capitulated because those who fund those in power, were able to tell this lie about ‘free trade’ creating jobs. AAmongst those are the great retail chain owners who wanted to extend choice and margin on products for ordinary, cash strapped workers.
It took a maverick Billionaire, one Donald Trump, to call the game, because he unlike his rival politicians, doesnt need funding or to get any richer, he just wanted power. This week he is in China, and it seems he genuinely will bring into force a new era of better balance mechanisms with China, such that the US can once again compete in manufacturing.
A Property Precipice?
Will Trump be too late, and any way does he not represent all that is wrong with Neo Liberalism in the first place? His own family’s fortune is based on property and laterly hotels, back to what his good ol’ grand daddy from Germany did in the Yukon over a century ago. But it was in property that the Trumps became archetypal neo liberalists. His father made a fortune in building flats sponsored by the state, as the peace dividend for GI’s returning from WWII. Although Donald has tried various other enterprises, often failing, it is property development he is king of, because, like in a game of monopoly, he has a lot of capital to lever to make new gains.
Now property we have mentioned of course. Its’ value is deflated by high enough inflation in currency, over time in a typical slow post war ‘2.4’ kids demographic. Inflation running at the levels it did even before the oil crisis of the 70s, means that there was more risk in property. However the returns were still good for developers, landlords and home owners over time due to urbanisation and concentration of industrial centres in the 1940s to the 1970s.
Property and metropolisation became important to the funders of Neo Liberal political parties and they would go on to influence policy for several decades to favour growth, and often unsustainable growth, in ‘real estate’ values.
By the mid eighties, the Unions had been castrated in the key Neo Liberal economies of the UK and USA. So wage rises were arrested in industry, and the emerging modern consumer and business services industries were kept largely union-free there after. This meant that wages were paid to the ‘going market rate, and that is often taking advantage of the percieved bargaining position employers have vs prospective employees, especially with higher unemployment and underemployment as a result of Neo Liberal economics. So they needed to have metropolisation as a driving force, which could be influenced in public policy by centralisation of governmental departments and services. Also they wanted a tacit acceptance of higher immigration, be that legal or illegal in order to keep demand for property up, while also suppressing wages by importing poor, cash hungry workers.
As I blogged on before, another big change in the 1980s was access to credit and the amount of risk the entire credit banking system, and in turn central banks, could take. To extend material standard of living, or enter a better education than your parents, the western consumer borrowed and kept on borrowing, until the value of money leant and the handling of that credit, was more than the value-added-manufacturing industry nationally.
All Things, Good or Bad, Come to an End
The combined effects of Neo Liberalism are then to make the top third of society more wealthy and more powerful, and in particular to make the very top 1% mega rich and with the ability to buy out politicians, media houses and now troll the internet against consumer’s own generated media opinion. The lower third of society have stagnated and often become poorer in western countries, even relative to their predecessing generation. While the middle third were the battle ground for a long time for the Neo Libs in bribing them with often the highest relative tax reductions, allowing them to lever to three times income and beyond in a way which helped inflate property prices. The middle class and the house owning working class, became rather obsessed with getting on and moving up the property ladder, to tthe extent where many expected the capital gains on the way to be a major part of their pension when released in later life.
Now of course this latest period of recession and general western economic malaise for ordinary workers locked to one nation, was precipitated by the property scandal know as the Sub Prime Mis-selling fiasco. Many see that the possibility for a wide bubble, because the level of debt to equity has developed over the last decade again because prices are not sustainable relative to longer term they would claim demand. Too many buyers are off the ladder, and rental prices are squeezing out workers who are not prepared to go into debt just to live in a metropolitan area without owning anything as a result.
Economy Not Working ? – Blame Immigrants and Any Other Scape Goats
After five years of the old cures not working and the republican congress and senate fighting Obama, then the stage was set for a shift out of the Neo Liberal period and into a new, Alt Right one, with immigrants, established minorities, and whom ever you want to call subversive or deviant being the blame for the ills of capitalism’s boundless power. THis is in effect what Hitler did to stir a nation on its economic knees to common, ethnically purified action. Brexit, Trump and some minor victories in Europe are the result, fuelled also by the migrant and refugee crises of the Middle East, Africa and South East / South Central Asia.
The trouble being here in part that immigration in the key Neo Lib’ economies was driving the economy because as above, it was keeping tabs on wage rises within national borders, while supplying the housing market with new renters and eventual first time buyers. Due to flattening growth in domestic populations, declining to as low as 1.4 babies per couple in some western countries, this means a declining population once the baby boomers die off. So it is immigrants who have been stoking the basement boiler of the housing market just by their turning up, and also because in many cases they tend to have larger families and stimulate consumer demand too.
The Paradise-Panama Paper Fly in the Ointment
These last weeks, the truth about the funders of the Alt Righ and Neo Liberalist Polticians has come out. In the same way as the unions were able to extract an unfairly large proportion of wealth from the economy relative to productivity gains, the super rich and global corporates are able to avoid taxation by exporting profits to tax havens. In western countries they are very often most heavily invested in rentier based enterprisesand the credit system which supports the housing bubble. Second to that they are involved in privatised public services and suppliers of materials to the public sector, in particular armaments and medical related products. Productive, value adding industry is now long down the list, and you just have to glance at the FTSE 100 to see that indigenous manufacturers operating in largely private free markets are largely absent. It is dominated by banks & financial institutions, pharma, munitions and rentier utilities.
Like Communism, Neo Liberalism is In Free Fall
Neo Liberalism like Marxist Leninism is based on a false set of utopian ideals, and both became highly authoritarian forms of government who chose in effect, which element in society they rewarded most. Free market ideology is fine and good until you enter into the equation slavery at the bottom end of the world’s supply chains, depletion of natural resources and destruction of the ecosystem, and most of all, political corruption, even though much of it in the USA and UK is legalised. All people are free to compete in the market, but some people are more free to compete than others.