EnlargeA woman in a Brazilian shantytown (Credit: AP)
On May 31, 2016, Ben Norton writes on Salon:
The world’s largest evangelist of neoliberalism, the International Monetary Fund, has admitted that it’s not all it’s cracked up to be.
Neoliberalism refers to capitalism in its purest form. It is an economic philosophy espoused by libertarians — and repeated endlessly by many mainstream economists — one that insists that privatization, deregulation, the opening up of domestic markets to foreign competition, the cutting of government spending, the shrinking of the state and the “freeing of the market” are the keys to a healthy and flourishing economy.
Yet now top researchers at the International Monetary Fund, or IMF, the economic institution that has proselytized — and often forcefully imposed — neoliberal policies for decades, have conceded that the “benefits of some policies that are an important part of the neoliberal agenda appear to have been somewhat overplayed.”
“There are aspects of the neoliberal agenda that have not delivered as expected,” the economists write in “Neoliberalism: Oversold?“, a study published in the June volume of the IMF’s quarterly magazine Finance & Development.
In analyzing two of neoliberalism’s most fundamental policies, austerity and the removing of restrictions on the movement of capital, the IMF researchers say they reached “three disquieting conclusions.”
One, neoliberal policies result in “little benefit in growth.”
Two, neoliberal policies increase inequality, which produces further economic harms in a “trade-off” between growth and inequality.
And three, this “increased inequality in turn hurts the level and sustainability of growth.”
The top researchers conclude noting that the “evidence of the economic damage from inequality suggests that policymakers should be more open to redistribution than they are.”
In some cases, they add, the consequences “will have to be remedied after they occur by using taxes and government spending to redistribute income.”
“Fortunately, the fear that such policies will themselves necessarily hurt growth is unfounded,” the IMF economists stress — that is to say, increasing taxes and boosting government spending will not necessarily hurt growth.
These statements represent an enormous reversal for the IMF. It is somewhat like the Pope declaring that there is no God; it is a volte-face on almost everything that the IMF has ever stood for.
Since the 2008 financial collapse, widespread rebellions have been waged against these failed neoliberal policies, with Occupy Wall Street in the U.S. and similar grassroots movements around the world.
Before the 1970s, neoliberalism was relegated to the obscure margins of mainstream economics, preached by free-market fundamentalists like Milton Friedman and Friedrich Hayek.
In the last few decades, however, it became the hegemonic ideology. The IMF has been one of the most crucial institutions, along with the World Bank, in the spread of neoliberalism.
By the end of the Cold War, socialist alternatives to capitalism had been brutally crushed in a long series of wars. By the 1980s, with the rise of Prime Minister Margaret Thatcher in the U.K. and President Ronald Reagan in the U.S., neoliberalism had come to dominate the new world order.
Even before the Thatchers and the Reagans, however, there were the Pinochets. The policies the IMF advocated for decades were rooted in extreme violence and repression.
Chile was the first country to implement neoliberal policies. Still today, neoliberal ideologues quote Milton Friedman, speaking of the legacy of the reign of far-right, U.S.-backed capitalist dictator Augusto Pinochet as Chile’s “economic miracle.” What they overlook is how Pinochet used a bloodstained iron fist to implement these neoliberal policies.
A bloody CIA-backed 1973 coup toppled Chile’s popular democratically elected Marxist leader, Salvador Allende, and replaced him with Pinochet. For millions of Chileans, his “economic miracle” was a disaster.
