Hi.

And this blog entry must begin with an apology to whoever may have come here in the hope of reading some piece of irate correspondence, but found nothing. Though the following generated for this blog, still remains in the single digits.

What to write then when so such has happened?

Winter is here and the Gulf of Mexico is awash with oil, it was only a month before this tragedy that Barack Obama signaled his intention to expand off shore drilling in the United States. A debate rages in Australia over the Super Mining Tax, there are supporters and detractors and one if left wondering what the effect of the tax will actually be, when so many subjective opinions/interests exist. Where is the impartial news source that we can refer to, so that we may understand complex issues, so that subjective truths may be dismissed in the name of objectivity? I am left only with questions on the matter.

And so much else is happening that I am left feeling inadequate to even try carry on with this entry, left with the resolve to try and do better, it is important.

GLOBALISATION AND ENVIRONMENTAL POLITICS

In a world where capitalism and neoliberal discourse hold great sway, where many, if not all, dimensions of contemporary existence are submitted to economic rationalities1, and economic growth and the market are the “organizing and regulative principle 1” of national governments, global environmental issues can be said to be very prone to market and political failures.

With the economy and market then being the key focus of national governments, it should go without saying, and come as no surprise, that though they have been able to raise awareness of environmental issues (over time), international organizations and the conferences they sponsor have had little effectiveness in bringing about real change and any significant new approaches to environmental concerns, though they have been able to increase awareness and discourse on these.

If real change is to occur with regards to environmental policy, then a variety of factors and forces will need to come together to effect change.

At present we live in a world, where the markets and economies of the world take precedence over all else, where imminent financial crises are responded to with greater sums of money, vigour and media attention than an imminent environmental one is. Global environmental issues can then be said to be very prone to both market and political failures, both failures being heavily connected to one another.

The majority of markets do not take into account the externalities of their goods/services on the environment; further to this these externalities are not figured into the market price of their goods/services. There are numerous examples of this, and it could be argued that any form of human endeavour will have externalities that will affect the environment.

If it is then failure of the market to take into account the externalities of its good/services, it is the failure of national governments to impose a cost/tax on the market for these externalities, thereby improving environmental outcomes. The fact that national governments have yet to impose a cost/tax on externalities, validates Wendy Brown’s assertion that the “market is the organizing and regulative principle of the state and society.1”

Political failure is not limited to the national level, but also extends to the international as well. When economic growth and the market are the primary focus of national governments, it should come as no surprise that nations will defend these priorities and be unwilling to curb practices of their markets, if growth of their economies will be affected on the international stage. This is especially so if competitors in other countries are unwilling to change their own market practices or if competitor’s governments prove unwilling to change their own laws.

International conferences attended by national governments such as Kyoto and Copenhagen have proven to be very unsuccessful at harnessing consensus among countries, let alone in achieving real change on environmental issues. Though there have been many environmental conferences held since the Earth Summit in Rio de Janeiro (1992), none has achieved any real, long lasting, break through on environmental policy.

Conferences of this sort have continuously failed, (the inability to setup mandatory limits on greenhouse gas emissions in Rio, the United States failure to ratify the Kyoto Protocol, and Copenhagen’s divide between the developed and developing countries of the world) and have concluded with little progress, finger pointing and token statements of commitment towards the environment made, while business in individual countries is allowed to continue as per usual.

Though social liberal discourses (sustainable development, renewable energy etc) have been introduced into debates on the environment, neoliberal discourse has come out on top time and time again. Copenhagen is case and point.

Though the European Union (EU) and United States (US) fought for reductions in carbon emissions, 50% on 2000 levels for developing countries and 80% for developed countries by 2050, countries of the South, notably India and China, were unwilling to cut emission levels if economic growth of their countries was to be sacrificed.

This should not lead to finger pointing towards China and India. Their standpoint should not be seen as the sole reason why the Copenhagen failed. Copenhagen’s failure rests on the shoulders of every country in the world, both developed and undeveloped, but perhaps even more so on the shoulders of the developed countries, as the terms of the accord were unequal, favoring the developed countries of the world over the undeveloped.

In real terms the developed countries of the world would need to reduce their emissions levels by not 80%, but rather between 200-400% to make a deal at Copenhagen “minimally equitable,” to the 50% reduction in emissions, asked of developing countries2. Should the EU and US’s proposed cuts in emissions still then be seen from a social liberal perspective? Or rather from a neoliberal perspective, for the purposes of keeping economic and market power in developed world? If the EU’s and US’s desire for environmental change truly so serious why not reduce emission levels further to coax developing countries into agreement?

Ultimately national interests have superseded concerns for the greater environment and the global commons, having effectively hijacked opportunities to effect change through international organizations and the conferences they sponsor.

If little has been achieved from these conferences, what then has been the benefit of them? Firstly they have served to raise awareness of environmental issues throughout the world. It was not long ago, that the environment hardly figured into countries/individuals decision-making processes, conferences have helped create and reinforce this shift in environmental consciousness, towards a more stable future. Secondly, conferences have served the purpose of putting pressure on national governments to take active measures to decrease their effect on the environment, rhetoric on the subject is demanded (unfortunately action is not yet) and due to the fact that environmental summits are regular events, governments are not able to wipe environmental issues under the carpet. The downside of these positives is the fact that the rate of environmental degradation is much faster than the political progress made towards reversing it and that once countries of the world reach a stage of wanting to effect proper change it may be too late.

What key forces then will play a part in shaping environmental policy? There are many, and without the cooperation of all, successful change will not occur to the benefit of the environment.

Above all what would seem to be the key factor in shaping environmental policy is the environment itself. At a time in history where the market is “organizing and regulative principle1” of states and society, it will unfortunately take further instances of changing of weather patterns, environmental degradation/destruction, impacting adversely on human life, for the effects of human actions on the environment to be taken seriously and combated against through environmental policy.

Change will neither occur if it is not demanded by the chief beneficiaries of current unsustainable practices, the general public. If change were to occur it would need to be demanded by a well-educated public, in the developed world, that has seen the peril in its current unsustainable practices and deems them to be no longer viable. Without the consent and understanding of the public, policy is doomed to fail. In demanding change the public would need to understand the costs, both to their wallet (potentially) but more importantly to their lifestyles (definitely) if environmental policy were changed.

Civil society would also play a key role in shaping environmental policy: from education of environmental issues/policies to the public, to aiding them in the organisation and realisation of demands for change to environmental policy. Civil society would serve the purpose of informing the public of current news/issues affecting the environment, and act as a pressure group on business, government and the public themselves with regards to unsustainable environmental practices. An example of Civil Society helping the public organise and demand change from the government is GetUp’s current campaign to highlight the Rudd’s Government failure to take Climate Change seriously in the 2010 budget3. Campaigns such as these will only increase in the future and so will their effectiveness.

The media will also be a key force in shaping environmental policy. Apart from informing the public on current state of the environment and environmental policy, the media, like civil society can also act as a pressure group on business, government and the public for change. The media has the power to analyze and commentate on the pros and cons of business, government policy/regulation and society in general, highlighting further actions needed if successful environmental outcomes are to occur. Without the media little progress can be made towards more successful environmental policy.

Government, both on the national and international level, will also play a large part in shaping environmental policy, if not the largest. Policy could be enacted by governments, due to pressure from the above factors (environment, public, civil society, media) or through government’s own proactive steps. What seems likely is that policy enacted will be a combination of the two, pressure being applied to governments, from the above, and governments responding to pressure applied, by taking steps towards greater environmental policy. Policy and regulations enacted both on the national and international stages could be very far reaching. From the implementations of cap and trade schemes on the international level, to the implementation of meat taxes within national boundaries, the steps taken towards more sustainable environmental policy as plentiful as externalities within the market.

Lastly the market will also be a key factor in shaping environmental policy. Changes to market practise and the figuring of externalities into the cost of goods/services will be resisted by the market. The market will state that it is already taking active steps towards more sustainable policy and that new policy enacted will only result in a loss of jobs and damage to the economy. Concerns such as these will have to be seriously considered by governments, and factors already mentioned, before policy is enacted.

Ultimately this is the debate we currently find ourselves in. Should change occur if the economy might be adversely affected by new environmental policies?
References
1) Brown, W, Neo-liberalism and the End of Liberal Democracy, Theory & Event - Volume 7, Issue.
2) Khor, M, Blame Denmark, not China, for Copenhagen failure, The Guardian, 28 December 2009.
3) GetUp, Can You Make The Call?, viewed May 12, http://www.getup.org.au/campaign/ClimateActionNow&id=1057

Money's Hunger

Money’s Hunger
Posted May 10, 2010

Industrial civilisation is trashing the environment. Should we try to reform it or just watch it go down?

By George Monbiot, published in the Guardian 11th May 2010

Those who defend economic growth often argue that only rich countries can afford to protect the environment. The bigger the economy, the more money will be available for stopping pollution, investing in new forms of energy, preserving wilderness. Only the wealthy can live sustainably.

Anyone who has watched the emerging horror in the Gulf of Mexico in the past few days has cause to doubt this. The world’s richest country decided not to impose the rules that might have prevented the Deepwater Horizon oil spill, arguing that these would impede the pursuit of greater wealth(1). Economic growth, and the demand for oil it propelled, drove companies to drill in difficult and risky places.

But we needn’t rely on this event to dismiss the cornucopians’ thesis as self-serving nonsense. A new paper in the Proceedings of the National Academy of Sciences calculates deforestation rates between 2000 and 2005 in the countries with the largest areas of forest cover(2). The nation with the lowest rate was the Democratic Republic of Congo (DRC). The nation with the highest, caused by a combination of logging and fire, was the United States. Loss of forest cover there (6% in five years) was almost twice as fast as in Indonesia and ten times as fast as in the DRC. Why? Because those poorer countries have less money to invest in opening up remote places and felling trees.

The wealthy nations are plundering not only their own resources. The environmental disasters caused by the oil industry in Ecuador and Nigeria are not driven by Ecuadorian or Nigerian demand, but by the thirst for oil in richer nations. Deforestation in Indonesia is driven by the rich world’s demand for palm oil and timber, in Brazil by our hunger for timber and animal feed.

The Guardian’s carbon calculator reveals that the UK has greatly underestimated the climate impacts of our consumption of stuff(3). The reason is that official figures don’t count outsourced emissions: the greenhouse gases produced by other countries manufacturing goods for our markets. Another recent paper in the Proceedings of the National Academy of Sciences shows that the UK imports a net 253 million tonnes of carbon dioxide, embodied in the goods it buys(4). When this is taken into account, we find that far from cutting emissions since 1990, as the last government claimed, we have increased them(5). Money wrecks the environment.

So the Dark Mountain project, whose ideas are spreading rapidly through the environment movement, is worth examining. It contends that “capitalism has absorbed the greens”(6). Instead of seeking to protect the natural world from the impact of humans, the project claims that environmentalists now work on “sustaining human civilisation at the comfort level which the world’s rich people – us – feel is their right.”(7)

Today’s greens, it charges, seek to sustain the culture that knackers the planet, demanding only that we replace old, polluting technologies with new ones - wind farms, solar arrays, wave machines - that wreck even more of the world’s wild places. They have lost their feelings for nature, reducing the problem to an engineering challenge. They’ve forgotten that they are supposed to be defending the biosphere: instead they are trying to save industrial civilisation.

That task, Paul Kingsnorth, co-founder of Dark Mountain, believes, is futile: “the civilisation we are a part of is hitting the buffers at full speed, and it is too late to stop it.”(8) Nor can we bargain with it, as “the economic system we rely upon cannot be tamed without collapsing, for it relies upon … growth in order to function.” Instead of trying to reduce the impacts of our civilisation, we should “start thinking about how we are going to live through its fall, and what we can learn from its collapse … our task is to negotiate the coming descent as best we can, whilst creating new myths which put humanity in its proper place.”(9)

Though a fair bit of this takes aim at my writing and the ideas I champion, I recognise the truth in it. Something has been lost along the way. Among the charts and tables and technofixes, in the desperate search for green solutions that can work politically and economically, we have tended to forget the love of nature that drew us into all this.

But I cannot make the leap that Dark Mountain demands. The first problem with its vision is that industrial civilisation is much more resilient than it proposes. In the opening essay of the movement’s first book, to be published this week, John Michael Greer proposes that conventional oil supplies peaked in 2005, that gas will peak by 2030 and coal by 2040(10).

While I’m prepared to believe that oil supplies might decline in the next few years, his coal prediction is hogwash. Energy companies in the UK, as the latest ENDS report shows, are now beginning to deploy a technology which will greatly increase available reserves(11). Government figures suggest that underground coal gasification - injecting oxygen into coal seams and extracting the hydrogen and methane they release - can boost the UK’s land-based coal reserves 70-fold(12,13); and it opens up even more under the seabed. There are vast untapped reserves of other fossil fuels - bitumen, oil shale, methane clathrates - that energy companies will turn to if the price is right.

Like all cultures, industrial civilisation will collapse at some point. Resource depletion and climate change are likely causes. But I don’t believe it will happen soon: not in this century, perhaps not even in the next. If it continues to rely on economic growth, if it doesn’t reduce its reliance on primary resources, our civilisation will tank the biosphere before it goes down. To sit back and wait for what the Dark Mountain people believe will be civilisation’s imminent collapse, without trying to change the way it operates, is to conspire in the destruction of everything greens are supposed to value.

Nor do I accept their undiscriminating attack on industrial technologies. There is a world of difference between the impact of windfarms and the impact of mining tar sands or drilling for oil: the turbines might spoil the view but, as the latest disaster shows, the effects of oil seep into the planet’s every pore. And unless environmentalists also seek to sustain the achievements of industrial civilisation - health, education, sanitation, nutrition - the field will be left to those who rightly wish to preserve them, but don’t give a stuff about the impacts.

We can accept these benefits while rejecting perpetual growth. We can embrace engineering, while rejecting many of the uses to which it is put. We can defend healthcare, while attacking useless consumption. This approach is boring, unromantic, uncertain of success, but a lot less ugly than the alternatives.

For all that, the debate this project has begun is worth having, which is why I’ll be going to the Dark Mountain festival this month(14). There are no easy answers to the fix we’re in. But there are no easy non-answers either.

www.monbiot.com

References:

1. Even now the US has failed to tighten up the regulations - http://www.guardian.co.uk/environment/2010/may/09/oil-spill-ecological-review-environment

2. Matthew C. Hansen, Stephen V. Stehman and Peter V. Potapov, 26th April 2010. Quantification of global gross forest cover loss. Proceedings of the National Academy of Sciences. doi: 10.1073/pnas.0912668107.
http://www.pnas.org/content/early/2010/04/07/0912668107.full.pdf+html?sid=5b769cf3-6222-4b4c-bcf0-365a786bca9b

3. http://www.guardian.co.uk/environment/interactive/2010/apr/21/national-carbon-calculator

4. Steven J. Davis and Ken Caldeira, 23rd March 2010. Consumption-based accounting of CO2 emissions. doi: 10.1073/pnas.0906974107.
You can read the abstract here: http://www.pnas.org/content/107/12/5687.abstract
But I had to pay $10 for the full paper.

5. http://www.guardian.co.uk/environment/blog/2010/may/05/labour-tories-carbon-calculator

6. The Dark Mountain Project, 2009. Uncivilisation: the Dark Mountain manifesto. Hard copy.

7. Paul Kingsnorth, 2010. Confessions of a recovering
Environmentalist. Dark Mountain, Volume 1. Proof copy. The Dark Mountain Project.

8. Paul Kingsnorth, 18th August 2009. Should We Seek to Save Industrial Civilisation?: debate with George Monbiot. http://www.monbiot.com/archives/2009/08/18/should-we-seek-to-save-industrial-civilisation/

9. ibid.

10. John Michael Greer, 2010. The falling years: an Inhumanist vision. Dark Mountain, Volume 1. Proof copy. The Dark Mountain Project.

11. Environmental Data Services, April 2010. Interest grows in ‘clean’ sub-sea coal gasification.
http://www.endsreport.com/index.cfm?action=report.article&articleID=22309

Unfortunately you need a subscription to read it.

12. Recoverable coal reserves, 2003: 243 million short tons.
US Energy Information Administration, May 2006. Country analysis brief -
United Kingdom. http://www.eia.doe.gov/emeu/cabs/United_Kingdom/Background.html

13. Coal recoverable by UCG, 2004:
“UK coal resources suitable for deep seam UCG on land are estimated at 17 billion tonnes (300 years’ supply at current consumption) and this excludes at least a similar tonnage where the coal is unverifiable for UCG.”
Department of Trade and Industry, October 2004. Review of the Feasibility of Underground Coal Gasification in the UK. http://webarchive.nationalarchives.gov.uk/tna/+/http://www.berr.gov.uk/files/file19143.pdf

14. http://www.eventelephant.com/uncivilisation

“Neo liberalism has been thoroughly discredited, but where do we go from here?”

“Neo liberalism has been thoroughly discredited, but where do we go from here?”

The following essay will seek to show how neoliberalism has been discredited with particular focus on the United States, where the impact of neoliberalism has been “felt most purely.1” The Global Financial Crisis, GFC, will be used as the main example of how neoliberalism and it’s mantra of the market has been discredited. However it will also be the purpose of this essay to outline the broader political and social order that neoliberalism encompasses, making the reader aware that neoliberalism extends far beyond the field of economics. Further to this alternatives to a neoliberal world will be detailed.

Neoliberalism is commonly known to be an economic practise/theory that seeks to minimize the role of government, based on the central tenet that the private sector is more efficient than the public and thus should have greater control of the economy. In this context neoliberalism is understood to be “the repudiation of Keynesian2” economics, which gradually found ascendancy in the economic/political landscape post World War II and was to become to dominant force not only in the United States, but also in the “Anglosphere1,” (Australia, Britain and New Zealand) after the stagflation and oil crisis of the 1970’s. Neoliberal policies were claimed to be an extension of Adam Smith’s Wealth of Nations and advocated by a group of influential thinkers led by Friedrich Hayek and Milton Friedman through the Mont Pelerin Society, formed in 1947, to keep the liberal ideal alive in an era where communism was seen to be on one side of the iron curtain and Keynesian economic policy on the other.

Neoliberalism’s reach though extends far beyond that of just economics, though the two are heavily entwined. Neoliberalism extends deep into the politics of countries, its effects taking potentially disastrous courses for nations, citizens as well as natural environments. Wendy Brown’s informative piece of work “Neoliberalism and the End of Liberal Democracy,2” sets out the following characteristics as being a part of neoliberal political rationality.

1) The politics of countries, as well as the dimensions of all contemporary existence are “submitted to an economic rationality.2”All decisions made, are made according to the profitability of them. In the case of health care, “setting health care up as a private good for sale rather than a public good paid for with tax dollars.3” Market rationale is imposed on all decisions made, across all spheres of life.
2) “The market is the organizing and regulative principle of the state and society.2” In contrast to laissez faire, essentially allowing industry to be free from state intervention, Brown states that through neoliberalism the state “openly responds to the needs of the market,2” and is legitimized by the success of these measures through economic activity and economic growth. The cost and benefit of all decisions becomes the “measure of all state practices,2” and state actions, including warfare bringing a new light, as Brown states, to Paul Bremer’s declaration that Iraq “was open for business,2” post Saddam Hussein’s fall from power.
3) The individual is responsible for themselves and moral responsibility is equated with rational action, through a cost/benefit/consequence analysis, the individual is held responsible for all their own decisions, no matter the personal constraints on one’s life, eg: lack of education, poverty, limited social welfare. Rational economic action by the individual “replaces express state rule or provision.2”

The impact then of neoliberalism on the political and social order of the modern world is far reaching. As can be seen by the above, neoliberalism is not just a “bundle of economic policies with inadvertent political and social consequences,2” it is with this in mind that the GFC, focussed on the US, should be understood, combined with the characteristics detailed above.

The GFC has its roots in the burst of the tech bubble of the 1990’s. With the stock market in deep decline in 2000 and the United States going into recession in 2001, the Federal Reserve led by Alan Green sharply lowered interest rates to limit the economic damage. The market being the “organizing and regulative principle of the state and society.2” With lower interest rates, mortgage payments became cheaper and the demand for houses began to rise, with millions of current homeowners also taking “advantage of the rate drop to refinance their existing mortgages.4” As demand increased the quality of mortgages went down and subprime loans were created for people with weakened credit histories who had what were deemed to be reduced repayment capacities5. In 2006 the rate of defaults and delinquencies on loans began to rise, but the speed of lending did not. To hedge against risk, banks and other investors across the country “devised a plethora of complex financial instruments to slice up and resell the mortgage-backed securities,4” but it did not work.

In June 2007 two hedge funds that had invested heavily in the subprime market owned by Bear Stearns collapsed and as the year progressed more banks were to find out “that securities they thought were safe were tainted with what came to be called toxic mortgages.4” Over the next year, as the credit crisis began to take hold a wave of sales, seizures and failures of banks, insurance and investment companies was to occur. Most notably the failure of Lehman Brothers6 the sale of Merrill Lynch to the Bank of America7, the take over of Fannie Mac and Freddie Mae “government-sponsored entities that were linchpins of the housing market,4” by the Federal Reserve and the $85 billion Federal bailout out and take over of the insurance company the American International Group.

The fact that so many banks and investment companies in the US financial system were affected by the credit crisis, forced the Federal Reserve on September 18 to propose a $700 Billion proposal that would let the government purchase so called toxic assets from the nations biggest banks in “a move aimed at shoring up balance sheets and restoring confidence within the financial system.4” A fact that was to anger many Americans, but was pleaded by President Bush to be passed through Congress. Measures taken in the United States were not enough to fend off a global crisis though. Banks in England and Europe had invested themselves heavily in mortgage-backed securities offered by Wall Street and losses from these investments and the effect of the same “tightening credit spiral being felt on Wall Street began to put a growing number of European institutions in danger.4”

Polls were to show that Barack Obama’s victory on the November 4 Presidential election was partly due to voters thinking that he would run the economy better than Senator John McCain, but by late November stock markets were to fall to their lowest level in a decade, and when December came economists were to formally state that the US was in a recession and had been so for the past year, a fact that US retailers were keenly aware of, the 2008 holiday season being one of the worst in the past thirty years as consumers cut back spending.

This then is a very condensed introduction to the GFC; describing how it came about, what the effects of it were and how it was responded to. It is now important to show how the GFC relates to neoliberalism in the US and how the GFC is evidence of neoliberalism in the US being discredited.

Firstly if Brown’s characteristics of neoliberalism are to be used to discredit neoliberalism, then neoliberalism can be said to be hypocritical. In essence the GFC was created by the financial markets of the US and if the same logic of cost/benefit/consequence for the rational individual is applied to that of the financial markets, then the financial markets should be held responsible for the actions and decisions they made preceding and during the credit crisis which lead to the GFC. This to a large degree has not happened yet. It is true that some companies were allowed to fail during the crisis and even that Goldman Sachs has had a court case filed against it by the securities commission of recent9. But these should be considered as isolated incidents rather than the norm. As yet little to no regulation has been passed so that future events such as the GFC do not occur again and with Republican opposition strong in Congress, regulation of the financial sector seems as if it will not happen soon. We still live in a time when the market is seen to be “the organizing and regulative principle of the state and society,” and though filled with rhetoric of regulation the state “openly responds to the needs of the market.” The market and specifically the companies who were responsible for the crisis considered “too big to fail.9”

As has been stated neoliberalism grew as a response to Keynesian economics, which had gained ascendancy since World War II. But if Keynesian economic measures, through financial bailouts, were used to bail out the financial markets during the financial crisis how then can neoliberalism and Keynesian economic action be reconciled? Is this not a case of neoliberal policy contradicting itself? If neoliberalism were strictly an economic theory then this would be the case, but if Brown’s characteristics of neoliberalism are to be used, Keynesian economic policies can be reconciled with neoliberalism very comfortably with the state openly responding to the need of the market, pumping money into market when needed. When proposing the $700 Billion deal to Congress and the American people President Bush argued that the bail out package “was simply a continuation of the American system of free enterprise, which "rests on the conviction that the federal government should interfere in the market place only when necessary".10”

If then this is the case that neoliberalism and Keynesian economic action can be reconciled, how then can neoliberalism be discredited? Once again it is the hypocritical nature of neoliberalism that discredits itself. What is good for the goose is not good for the gander. As Ha-Joon Chang states “The unfortunate thing, however, is that American pragmatism does not extend beyond its borders. In a version of "don't try this at home", Americans tell other people that they should all adopt the free-market, free-trade model. However big their financial crises are, other countries are told that they should let the markets correct themselves.10”

To give an example; during the GFC, the case for financial bailouts in the US was perfectly valid. However during the 1997 Asian Financial crisis during Indonesia was forced by the IMF to close sixteen of its banks and raise interest rates to 80% and at the same time South Korea had to shut down close to a quarter of its financial institutions and raise interest rates to 30%10. Chang goes onto state that it would “help the world even more if the US accepted that all countries, and not just itself, have the right to use a pragmatic mix of the market and state intervention according to their own "necessities", as Mr Bush put it so succinctly.10”
Perhaps though neoliberalism would make no apology for this hypocrisy, it being a system put in place to maintain a political/social order, on a national and global level. It depends, in neoliberal parlance, on the individual’s cost/benefit/analysis of neoliberalism.

In conclusion then how is neoliberalism discredited? It is a subjective question. Ultimately if one believes in neoliberalism, as defined by Brown, that the state should be subjugated to business interests and that individuals are all rational beings, accountable for their own specific situations in life, then neoliberalism is not discredited at all, further to this neoliberalism could be said to be serving its purpose, towards a political social order.

If one however is to believe in a world beyond the importance of the market, and see the inherent contradiction between how individual and market responsibilities are treated neoliberalism begins to be discredited. Neoliberalism can then said to be hypocritical.

There is also an inherent hypocrisy in how countries experiencing their own financial crises have been forced to act, as opposed to the way the US chose to act during its own financial crisis, through pragmatic measures. Hypocrisy then plays a large part in the discrediting of neoliberalism. One can take this one step further and say that neoliberalism is part of a political and social order that does not take into account the equality of nations and the importance of individuals, their education, health or social welfare, but is rather a part of a hegemonic order devised to keep power in the hands of the so called powerful.

It is hard to offer an alternative to a behemoth such as neoliberalism, countless books could be written on the subject, but what does seem evident is the need to move away from a market emphasis, where market rationale is applied to all spheres of life, perhaps in some way the political and social order that neoliberalism encompasses could be slowly weakened.

Neoliberalism’s stranglehold on the state must be curbed, costs/benefit analysis should be made more holistic, in the case of healthcare the benefit of providing free health care to citizens should be seen as a benefit both in the short and long term rather than a short term cost, thinking such as this is too short term. The focus of the state should be its people and the market, not the market solely. The case of the GFC is one of market failure and greed and an indictment on American neoliberalism. The state should not be made subservient to the market, helping out only when the market needs and looking away the rest of the time. Regulation should be put in place to stop future abuses of the system occurring again. Obama’s attempts at regulation should be welcomed. Ultimately the hypocrisies of neoliberalism need to be eliminated, as well its strange hold on the current political social order of the world, towards a more democratic, holistic, socially viable state.




References

1) Manne R, 2010, Goodbye to all that, On the Failure of Neo-Liberalism & the Urgency of Change, Penguin Books.
2) Brown, W, Neo-liberalism and the End of Liberal Democracy, Theory & Event - Volume 7, Issue 1, 2003
3) McGregor, S, 2001, Neoliberalism and health care, International Journal of Consumer Studies - Special Edition on ‘Consumers and Health, 25:2, p. 84.
4) Credit Crisis – The Essentials 2010, The New York Times, viewed March 21, 2010, http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_crisis/index.html?scp=1-spot&sq=credit%20crisis&st=cse
5) Subprime Lending, Federal Deposit Insurance Corporation, viewed May 3, 2010, http://www.fdic.gov/news/news/press/2001/pr0901a.html
6) The Reckoning, The New York Times, viewed May 1, 2010, http://www.nytimes.com/2008/10/23/business/economy/23paulson.html?pagewanted=all
7) Lehman Files for Bankruptcy, Merrill Is Sold, New York Times,viewed May 1, 2010, http://www.nytimes.com/2008/09/15/business/15lehman.html?pagewanted=all
8) Fed’s $85 Billion Loan Rescues Insurer, New York Times, viewed May 5, 2010, http://www.nytimes.com/2008/09/17/business/17insure.html?pagewanted=all
9) Bipartisan pact on “too big to fail,” Reuters, viewed May 5 2010, http://www.reuters.com/article/idUSWAT01440920100504
10) The economics of hypocrisy, The Guardian, viewed May 5 2010, http://www.guardian.co.uk/commentisfree/cifamerica/2008/oct/20/economic-policy-us-bailout

“Neo liberalism has been thoroughly discredited, but where do we go from here?”

“Neo liberalism has been thoroughly discredited, but where do we go from here?”

The following essay will seek to show how neoliberalism has been discredited with particular focus on the United States, where the impact of neoliberalism has been “felt most purely.1” The Global Financial Crisis, GFC, will be used as the main example of how neoliberalism and it’s mantra of the market has been discredited. However it will also be the purpose of this essay to outline the broader political and social order that neoliberalism encompasses, making the reader aware that neoliberalism extends far beyond the field of economics. Further to this alternatives to a neoliberal world will be detailed.

Neoliberalism is commonly known to be an economic practise/theory that seeks to minimize the role of government, based on the central tenet that the private sector is more efficient than the public and thus should have greater control of the economy. In this context neoliberalism is understood to be “the repudiation of Keynesian2” economics, which gradually found ascendancy in the economic/political landscape post World War II and was to become to dominant force not only in the United States, but also in the “Anglosphere1,” (Australia, Britain and New Zealand) after the stagflation and oil crisis of the 1970’s. Neoliberal policies were claimed to be an extension of Adam Smith’s Wealth of Nations and advocated by a group of influential thinkers led by Friedrich Hayek and Milton Friedman through the Mont Pelerin Society, formed in 1947, to keep the liberal ideal alive in an era where communism was seen to be on one side of the iron curtain and Keynesian economic policy on the other.

Neoliberalism’s reach though extends far beyond that of just economics, though the two are heavily entwined. Neoliberalism extends deep into the politics of countries, its effects taking potentially disastrous courses for nations, citizens as well as natural environments. Wendy Brown’s informative piece of work “Neoliberalism and the End of Liberal Democracy,2” sets out the following characteristics as being a part of neoliberal political rationality.

1) The politics of countries, as well as the dimensions of all contemporary existence are “submitted to an economic rationality.2”All decisions made, are made according to the profitability of them. In the case of health care, “setting health care up as a private good for sale rather than a public good paid for with tax dollars.3” Market rationale is imposed on all decisions made, across all spheres of life.
2) “The market is the organizing and regulative principle of the state and society.2” In contrast to laissez faire, essentially allowing industry to be free from state intervention, Brown states that through neoliberalism the state “openly responds to the needs of the market,2” and is legitimized by the success of these measures through economic activity and economic growth. The cost and benefit of all decisions becomes the “measure of all state practices,2” and state actions, including warfare bringing a new light, as Brown states, to Paul Bremer’s declaration that Iraq “was open for business,2” post Saddam Hussein’s fall from power.
3) The individual is responsible for themselves and moral responsibility is equated with rational action, through a cost/benefit/consequence analysis, the individual is held responsible for all their own decisions, no matter the personal constraints on one’s life, eg: lack of education, poverty, limited social welfare. Rational economic action by the individual “replaces express state rule or provision.2”

The impact then of neoliberalism on the political and social order of the modern world is far reaching. As can be seen by the above, neoliberalism is not just a “bundle of economic policies with inadvertent political and social consequences,2” it is with this in mind that the GFC, focussed on the US, should be understood, combined with the characteristics detailed above.

The GFC has its roots in the burst of the tech bubble of the 1990’s. With the stock market in deep decline in 2000 and the United States going into recession in 2001, the Federal Reserve led by Alan Green sharply lowered interest rates to limit the economic damage. The market being the “organizing and regulative principle of the state and society.2” With lower interest rates, mortgage payments became cheaper and the demand for houses began to rise, with millions of current homeowners also taking “advantage of the rate drop to refinance their existing mortgages.4” As demand increased the quality of mortgages went down and subprime loans were created for people with weakened credit histories who had what were deemed to be reduced repayment capacities5. In 2006 the rate of defaults and delinquencies on loans began to rise, but the speed of lending did not. To hedge against risk, banks and other investors across the country “devised a plethora of complex financial instruments to slice up and resell the mortgage-backed securities,4” but it did not work.

In June 2007 two hedge funds that had invested heavily in the subprime market owned by Bear Stearns collapsed and as the year progressed more banks were to find out “that securities they thought were safe were tainted with what came to be called toxic mortgages.4” Over the next year, as the credit crisis began to take hold a wave of sales, seizures and failures of banks, insurance and investment companies was to occur. Most notably the failure of Lehman Brothers6 the sale of Merrill Lynch to the Bank of America7, the take over of Fannie Mac and Freddie Mae “government-sponsored entities that were linchpins of the housing market,4” by the Federal Reserve and the $85 billion Federal bailout out and take over of the insurance company the American International Group.

The fact that so many banks and investment companies in the US financial system were affected by the credit crisis, forced the Federal Reserve on September 18 to propose a $700 Billion proposal that would let the government purchase so called toxic assets from the nations biggest banks in “a move aimed at shoring up balance sheets and restoring confidence within the financial system.4” A fact that was to anger many Americans, but was pleaded by President Bush to be passed through Congress. Measures taken in the United States were not enough to fend off a global crisis though. Banks in England and Europe had invested themselves heavily in mortgage-backed securities offered by Wall Street and losses from these investments and the effect of the same “tightening credit spiral being felt on Wall Street began to put a growing number of European institutions in danger.4”

Polls were to show that Barack Obama’s victory on the November 4 Presidential election was partly due to voters thinking that he would run the economy better than Senator John McCain, but by late November stock markets were to fall to their lowest level in a decade, and when December came economists were to formally state that the US was in a recession and had been so for the past year, a fact that US retailers were keenly aware of, the 2008 holiday season being one of the worst in the past thirty years as consumers cut back spending.

This then is a very condensed introduction to the GFC; describing how it came about, what the effects of it were and how it was responded to. It is now important to show how the GFC relates to neoliberalism in the US and how the GFC is evidence of neoliberalism in the US being discredited.

Firstly if Brown’s characteristics of neoliberalism are to be used to discredit neoliberalism, then neoliberalism can be said to be hypocritical. In essence the GFC was created by the financial markets of the US and if the same logic of cost/benefit/consequence for the rational individual is applied to that of the financial markets, then the financial markets should be held responsible for the actions and decisions they made preceding and during the credit crisis which lead to the GFC. This to a large degree has not happened yet. It is true that some companies were allowed to fail during the crisis and even that Goldman Sachs has had a court case filed against it by the securities commission of recent9. But these should be considered as isolated incidents rather than the norm. As yet little to no regulation has been passed so that future events such as the GFC do not occur again and with Republican opposition strong in Congress, regulation of the financial sector seems as if it will not happen soon. We still live in a time when the market is seen to be “the organizing and regulative principle of the state and society,” and though filled with rhetoric of regulation the state “openly responds to the needs of the market.” The market and specifically the companies who were responsible for the crisis considered “too big to fail.9”

As has been stated neoliberalism grew as a response to Keynesian economics, which had gained ascendancy since World War II. But if Keynesian economic measures, through financial bailouts, were used to bail out the financial markets during the financial crisis how then can neoliberalism and Keynesian economic action be reconciled? Is this not a case of neoliberal policy contradicting itself? If neoliberalism were strictly an economic theory then this would be the case, but if Brown’s characteristics of neoliberalism are to be used, Keynesian economic policies can be reconciled with neoliberalism very comfortably with the state openly responding to the need of the market, pumping money into market when needed. When proposing the $700 Billion deal to Congress and the American people President Bush argued that the bail out package “was simply a continuation of the American system of free enterprise, which "rests on the conviction that the federal government should interfere in the market place only when necessary".10”

If then this is the case that neoliberalism and Keynesian economic action can be reconciled, how then can neoliberalism be discredited? Once again it is the hypocritical nature of neoliberalism that discredits itself. What is good for the goose is not good for the gander. As Ha-Joon Chang states “The unfortunate thing, however, is that American pragmatism does not extend beyond its borders. In a version of "don't try this at home", Americans tell other people that they should all adopt the free-market, free-trade model. However big their financial crises are, other countries are told that they should let the markets correct themselves.10”

To give an example; during the GFC, the case for financial bailouts in the US was perfectly valid. However during the 1997 Asian Financial crisis during Indonesia was forced by the IMF to close sixteen of its banks and raise interest rates to 80% and at the same time South Korea had to shut down close to a quarter of its financial institutions and raise interest rates to 30%10. Chang goes onto state that it would “help the world even more if the US accepted that all countries, and not just itself, have the right to use a pragmatic mix of the market and state intervention according to their own "necessities", as Mr Bush put it so succinctly.10”
Perhaps though neoliberalism would make no apology for this hypocrisy, it being a system put in place to maintain a political/social order, on a national and global level. It depends, in neoliberal parlance, on the individual’s cost/benefit/analysis of neoliberalism.

In conclusion then how is neoliberalism discredited? It is a subjective question. Ultimately if one believes in neoliberalism, as defined by Brown, that the state should be subjugated to business interests and that individuals are all rational beings, accountable for their own specific situations in life, then neoliberalism is not discredited at all, further to this neoliberalism could be said to be serving its purpose, towards a political social order.

If one however is to believe in a world beyond the importance of the market, and see the inherent contradiction between how individual and market responsibilities are treated neoliberalism begins to be discredited. Neoliberalism can then said to be hypocritical.

There is also an inherent hypocrisy in how countries experiencing their own financial crises have been forced to act, as opposed to the way the US chose to act during its own financial crisis, through pragmatic measures. Hypocrisy then plays a large part in the discrediting of neoliberalism. One can take this one step further and say that neoliberalism is part of a political and social order that does not take into account the equality of nations and the importance of individuals, their education, health or social welfare, but is rather a part of a hegemonic order devised to keep power in the hands of the so called powerful.

It is hard to offer an alternative to a behemoth such as neoliberalism, countless books could be written on the subject, but what does seem evident is the need to move away from a market emphasis, where market rationale is applied to all spheres of life, perhaps in some way the political and social order that neoliberalism encompasses could be slowly weakened.

Neoliberalism’s stranglehold on the state must be curbed, costs/benefit analysis should be made more holistic, in the case of healthcare the benefit of providing free health care to citizens should be seen as a benefit both in the short and long term rather than a short term cost, thinking such as this is too short term. The focus of the state should be its people and the market, not the market solely. The case of the GFC is one of market failure and greed and an indictment on American neoliberalism. The state should not be made subservient to the market, helping out only when the market needs and looking away the rest of the time. Regulation should be put in place to stop future abuses of the system occurring again. Obama’s attempts at regulation should be welcomed. Ultimately the hypocrisies of neoliberalism need to be eliminated, as well its strange hold on the current political social order of the world, towards a more democratic, holistic, socially viable state.




References

1) Manne R, 2010, Goodbye to all that, On the Failure of Neo-Liberalism & the Urgency of Change, Penguin Books.
2) Brown, W, Neo-liberalism and the End of Liberal Democracy, Theory & Event - Volume 7, Issue 1, 2003
3) McGregor, S, 2001, Neoliberalism and health care, International Journal of Consumer Studies - Special Edition on ‘Consumers and Health, 25:2, p. 84.
4) Credit Crisis – The Essentials 2010, The New York Times, viewed March 21, 2010, http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_crisis/index.html?scp=1-spot&sq=credit%20crisis&st=cse
5) Subprime Lending, Federal Deposit Insurance Corporation, viewed May 3, 2010, http://www.fdic.gov/news/news/press/2001/pr0901a.html
6) The Reckoning, The New York Times, viewed May 1, 2010, http://www.nytimes.com/2008/10/23/business/economy/23paulson.html?pagewanted=all
7) Lehman Files for Bankruptcy, Merrill Is Sold, New York Times,viewed May 1, 2010, http://www.nytimes.com/2008/09/15/business/15lehman.html?pagewanted=all
8) Fed’s $85 Billion Loan Rescues Insurer, New York Times, viewed May 5, 2010, http://www.nytimes.com/2008/09/17/business/17insure.html?pagewanted=all
9) Bipartisan pact on “too big to fail,” Reuters, viewed May 5 2010, http://www.reuters.com/article/idUSWAT01440920100504
10) The economics of hypocrisy, The Guardian, viewed May 5 2010, http://www.guardian.co.uk/commentisfree/cifamerica/2008/oct/20/economic-policy-us-bailout