Kevin Rudd claimed, in February’s Monthly, that neo-liberalism was no longer the dominant paradigm for governments and he was right.
His government has massively increased interventions of government into the market by spending on a range of programs that are designed as infrastructure building and counter cyclical spending, so thanks John Maynard Keynes. However, that essay and the more current debate on which treasurer has the best market credentials (my deficit is stronger than yours!) fail to recognise that neo-liberalism is not just about the financial crisis or even about economic policies.
This gap in understanding emerged in last week’s history bickering at the Paul Kelly launch. I find myself in unusual agreement with Kelly that Keating and Howard had very much in common as economic reformers. Rudd was wrong in his claim that Howard did not build on Keating’s reforms, because he did extend many aspects of the neo-liberal market models introduced by the previous government. Rudd similarly fails to note his own government’s continued use of market frameworks in many policy areas because he uses a very limited definition.
Neo-liberalism, or neo classical economics, assumes that human nature is predictable as individuals act rationally on the basis of self interest. Equations therefore can predict and explain our choices and there is no need to explore more complex bases for human behaviours such as relationships, optimism, irrational exuberance and idiocy.
These are excluded as tastes as are the pressures and pleasures of belonging to family, society, community or other groupings. Market theory is problematic to politicians because it is value free and creates winners and losers as power and resources are unevenly distributed.
As politicians usually want to impose their value system on their social system so the past three decades have seen various versions of market models in the economic sphere, with different overlays of social interventions. The more conservative parties may push social control, and law and order. The ALP mitigated some market effects with social wage spending. However, Howard preferred to shift spending to higher-income earners and families as his forms of control.
Under both regimes, there was a major shift of political and media interest onto economic performance as though it was the only aspect of society that mattered. GDP growth and interest rates drowned out any serious debates about the society we wanted, assuming that wealth was the main aim and would solve all problems.
We heard little on the social effects of inequality, whether markets were the best ways to deliver education, financial services, labour, health, care, creativity or how to create resilient societies to deal with climate change. Money was assumed to equate quality of life. The assumption was that the market was the best provider of options for almost everything so governments were only to intervene where markets failed.
That dominance of markets is neo-liberalism. Its failure to understand human behaviour meant it was unable to control irrationality and manipulation in the markets but that is only one part of the process. Reading the Rudd essay again, I am concerned that his solutions are very limited and don’t question anything but limited regulation. He claims we need to fix market failure by fixing the money supply in the present crisis and increase regulation but that is it!
There is no evidence that he is really questioning the basic assumption of markets as the best form of distribution. This mean that his government will retain too many market-based policies in power, transport, health, education, child care, skills, community and unemployment services.
I am not arguing against markets, where appropriate, but against the ideological assumption that competition and markets are always preferable. This is what needs urgent reviewing to create more equity, efficacy and therefore efficiency.
So: please, Kevin Rudd, can you extend your critique to those left-over policies that have not been appropriately looked at?
Didn’t ABC Child Care suggest that looking at markets as the preferred form could create problems? Can we please have a proper debate about the appropriateness of your neo-liberal policy making outside financial areas? Can we, for instance, talk about education and even early-childhood services, as more than increasing human capital for the labour market?
The lesson from the GFC is “do not wait for the next (social) crisis” before fixing the problems. As citizens in a supposed social democratic state, we need discussion of the proper roles of markets, communities and public spheres. Then we can decide what society we want in the future, not just what GDP we want.
I think Eva Cox has spent too much time with people who agree with her about what should be prescribed to achieve their social goals, or just plain human happiness on a large scale, or with people whose failure to agree inspires more contempt than pity. She should acknowledge that, like the rule of law, reliance on markets is a way of keeping the bossy ways and views of others out of one’s life. It is a good thing that they detract from politicians and bureaucrats ability to impose their values, and, worse, detailed prescriptions. (Ms Cox recognises the busy-body side of politicians who want to impose their values but doesn’t mention the fact that most are not consistent about their values at a deep level but can be relied on to have some particular bees buzzing in their bonnets which involve limiting someone else’s freedom – as well as, just occasionally some good win-win ideas).
A more profound point in favour of markets is that they require people to work out how to make themselves valuable to others and, with great deviations from the ideal, but always some tendency, at least in prospect, to come back towards the ideal, to encourage behaviour beneficial to others individually and collectively by rewarding people with more money (especially money) for being more useful to others.
Of course it is all as complicated as a climate model (with clouds who actively respond to provocations and invite alliances with volcanoes and tsunamis) and sometimes for some people the attractions of life in a monastery can be understood and, for all of us who crave simplicity and certainty, the beauties of Sharia law, or maybe the Sanhedrin or the Vatican…… Even in Red State America they do at least give scope for the exercise of human energy and ingenuity in the competitive market place and I suppose one would cope with Sharia by concentrating one’s secular energies on making Islamic finance work and sucking up to the Mullahs or Ayatollahs. One way or another the animal spirits will out and there is likely to be a lot less waste and grief it they are let loose in a neo-liberal democracy than any society where someone knows best.
Uh, no, markets are about greed and self gratification and generally making enough money so that you don’t have to have any sort of social conscience. They also seem to move wealth in to progressively fewer hands, without necessarily creating any new wealth.
I see no evidence that markets consider any benefit to communities or even particular nations, it is just about personal and entrenched wealth. Just coincidentally, this is also destroying the planet.
Vive Chavez and roll on 21st century socialism I say
I agree with Julius’ points on the merits of markets. Michael’s views won’t win him any PhDs but are a common by-product in the popular mind of unregulated markets existing only for the benefit of those at the top of the food chain.
Rudd’s essay railed at “market fundamentalism” and lack of regulation. But he never gets very specific. No mention of recognized mechanisms by which participants may cheat the level playing field. For example, undermining the competition is sometimes an easier road to success than producing a better product at a better price and market it more effectively.
That last is why we have a Trade Practices Act, and we seek to prohibit things like predatory pricing, cartels, monopolistic takeovers, and other anti-competitive practices that can unbalance a market if it’s not regulated properly.
Airlines that cut accreditation of travel agencies for not meeting minimum-quota bookings, banks that do the same to mortgage brokers, consumer brands that cut off supply to retail stores for discounting below a fixed price, supermarket chains boycotting the produce of independent farms in their pursuit of vertical integration and control of Australia’s food supply. Some of these are illegal, some should be, all are done with impunity because whatever the law says, regulators just don’t have the resources to enforce it.
What was Rudd’s response to his own analysis of the problem? Fuel-Watch and Grocery-Watch. Measures which seek to distil the free market into its purest form by adding visibility. If any measure smacks of “neo-liberalism” as Eva describes it above, where is Rudd’s strategy to reintroduce real regulation?
Eva also makes the point eloquently that money, and by extension economics, isn’t everything. But you have to have some sort of working measure of well-being, or else nobody woul ever agree on anything and parliament would become even more disfunctional than it is.
What about “wealth”, redefined to mean that which enables people the most freedom to get on with life and control their own destiny? (Freedom in the liberal sense, I mean.)
Define wealth in that way, and working your way backwards you soon find that although owning lots of shares and a house in Wooloomooloo makes you far from helpless, people still need to eat and society needs control and security of its own food supply. Which is an example of where GDP alone is inadequate. You can sell out your farming sector because it has too many bad years and isn’t competitive enough. Or you can recognize that it has value beyond that of its exports on the international grain markets, and act accordingly.
So far I can’t see any evidence of real thought or creativity from Kevin Rudd on any of these types of things. Just Fuel-Watch and Grocery-Watch, the closest things to “neo-liberal” initiatives that we’ve seen for some time.