Are economists waking up to the falsehoods of neoliberalism?

IMF managing director Christine Lagarde with George Osborne. ‘Since 2008, a big gap has opened up between what the IMF thinks and what it does’ [Image: Kimimasa Mayama/EPA].

IMF managing director Christine Lagarde with George Osborne. ‘Since 2008, a big gap has opened up between what the IMF thinks and what it does’ [Image: Kimimasa Mayama/EPA].

This important piece in The Guardian by Aditya Chakrabortty suggests that the IMF is admitting that neoliberalism doesn’t work; it makes a few people very rich but devastates economies.

Better late than never, eh?

In the IMF’s flagship publication, three of its top economists have written an essay titled “Neoliberalism: Oversold?”.

The very headline delivers a jolt. For so long mainstream economists and policymakers have denied the very existence of such a thing as neoliberalism, dismissing it as an insult invented by gap-toothed malcontents who understand neither economics nor capitalism. Now here comes the IMF, describing how a “neoliberal agenda” has spread across the globe in the past 30 years. What they mean is that more and more states have remade their social and political institutions into pale copies of the market. Two British examples, suggests Will Davies – author of the Limits of Neoliberalism – would be the NHS and universities “where classrooms are being transformed into supermarkets”. In this way, the public sector is replaced by private companies, and democracy is supplanted by mere competition.

The results, the IMF researchers concede, have been terrible. Neoliberalism hasn’t delivered economic growth – it has only made a few people a lot better off. It causes epic crashes that leave behind human wreckage and cost billions to clean up, a finding with which most residents of food bank Britain would agree. And while George Osborne might justify austerity as “fixing the roof while the sun is shining”, the fund team defines it as “curbing the size of the state … another aspect of the neoliberal agenda”. And, they say, its costs “could be large – much larger than the benefit”.

Two things need to be borne in mind here. First, this study comes from the IMF’s research division – not from those staffers who fly into bankrupt countries, haggle over loan terms with cash-strapped governments and administer the fiscal waterboarding. Since 2008, a big gap has opened up between what the IMF thinks and what it does. Second, while the researchers go much further than fund watchers might have believed, they leave in some all-important get-out clauses. The authors even defend privatisation as leading to “more efficient provision of services” and less government spending – to which the only response must be to offer them a train ride across to Hinkley Point C.

At last a major institution is going after not only the symptoms but the cause – and it is naming that cause as political. No wonder the study’s lead author says that this research wouldn’t even have been published by the fund five years ago.

Economists don’t talk like novelists, more’s the pity, but what you’re witnessing amid all the graphs and technical language is the start of the long death of an ideology.

Source: You’re witnessing the death of neoliberalism – from within | Aditya Chakrabortty | Opinion | The Guardian


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5 thoughts on “Are economists waking up to the falsehoods of neoliberalism?

  1. hayfords

    The full article is worth reading as is not as damning as might be thought. It is also th views of the authors and not of the IMF as a whole.

    Here is one part:-

    ‘There is much to cheer in the neoliberal agenda. The expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and know-how to developing economies. Privatization of state-owned enterprises has in many instances led to more efficient provision of services and lowered the fiscal burden on governments’.

    1. Mike Sivier Post author

      Just to take issue with one of the points you quote: Transferring “technology and know-how” to developing economies is a great way to get Johnny Foreigner to do lots of work for less pay than anybody in the developed countries would accept. That’s why the neoliberals have done it. It has nothing to do with improving the global economy and everything to do with increasing the profits of a very few, very rich people.
      You can’t pull the wool over my eyes.

      1. hayfords

        I am not pulling the wool over your eyes. The quote is from the article that you are posting about. There are several plus points about Neo Liberalism mentioned in the article. I know you won’t agree with them, but the article is not black and white against Neo Liberalism.

      2. Mike Sivier Post author

        My point – as you are perfectly aware – is that your so-called ‘plus points’ are masking the facts of these matters. Understood properly, they are ‘minus’ points.

  2. casalealex

    The IMF is a bastard-child of the Federal Reserve, whose real head, Stanley Fischer, was first Deputy Director of the IMF 1994-2001, just before heading up the Bank of Israel. He’s a bona fide economic hit man for the IMF.

    It’s the same old scam of cannibalising countries with IMF debt. Real reform of deep rooted problems is a partnership where both the country and the lender are benefitted. But with IMF ‘reform’ the lender ends up with the assets and the country gets raped.

    The IMF starts by writing up glowing reports by Goldman Sachs experts. “Investments will improve your revenues.” they promise.

    But when the revenues fall short IMF snivels, “We’re so sorry you screwed up. Give us your national treasures and we’ll renegotiate.”

Comments are closed.