MWF: Is neo-liberalism finished?
MWF: Is Neo-liberalism Finished?
Robert Manne’s lecture was by far the most informative and interesting session I attended at the writer’s festival. I was actually going to also attend Does democracy have a future? but got the dates wrong in my diary. So if anyone went to that lecture I’d really appreciate the key points you came away with. The lecture I attended, which formed part of The Quarterly’s lecture series, explored non-liberalism (free markets) and whether or not they would survive.
Mr Manne began his talk by reflecting on the past and the end of the Great Depression when the Keynesian theory emerged. This theory is similar to neo-liberalism – its principles on capitalism are similar but where they differ is that Keynesian’s don’t believe the market is self-correcting and believe there should be government intervention whereas neo-liberalists don’t. Thirty years after the Great Depression, when Thatcher came into power in the UK, she favoured neo-liberalism and so Keynesianism was thrown out the door while she privatised government-owned enterprises. This was the period were neo-liberalism was embraced by Western governments and we can look at our own government privatising Telstra as an example of this.
Neo-liberalism is essentially individuals pursuing self-interests in free markets. Global trading takes place freely without government intervention. Competition is necessary so monopolies are prevented from happening. Trade-unions are tamed by governments because labour should be market set. An example of this would be a corporation outsourcing to India because the labour is three times cheaper. Markets should be deregulated because they are self-correcting.
Socialism and the quest for equality conflict with neo-liberalism. But while the average worker’s wage stayed stagnant the rich were getting richer. Mr Manne presented some statistics that made my stomach turn:
• In the 1970’s CEOs in America made 25 – 30 times the salary of their average workers. Today, CEOs in America make 300 – 500 times the salary of their average workers and one CEO was reported to be making 900 times more.
• In the 1970s 1% of the richest in the US had total combined assets that made up 20% of what the US is worth. Today, the 1% of the richest own 40% of the US.
Mr Manne talked about the derivatives market and how this unregulated market and betting on the sub-prime real-estate market contributed to the financial crisis. While people were speaking out about these derivatives labeling them “financial weapons of mass destruction” the head of the US Reserve Bank, Alan Greenspan was praising them and saying that they “transfer risk from those who can’t carry it to those who could.” When the market collapsed Mr Greenspan was left tongue-tied.
The good news is the Mr Manne believes that neo-liberalism is coming to the end of its era. When the market crashed governments and corporations that were so adamant that the market was “self-correcting” were in panic mode. Corporations that had been ruthless and greedy were begging for money from the government. The Keynesian mentality was once again adopted.
Now the questions seem to be pointed at these CEOs that are racking it in. These big shots are putting their hands up in defence saying that it’s not them, it’s the market. But then why do US CEOs make so much more than CEOs in Japan? When are these CEOs going to take responsibility for their actions?
Mr Manne left us with a chilling statistic: London’s ARG financial services is a subsidiary of ARG global. The government bailed them out when they almost went bust by giving them $152 million dollars. Of this, $30 million dollars went to the CEO – his golden handshake for leaving the company. It just makes you cringe.
