NEOLIBERALISM HAS FAILED

By Mario Soares Reprint | | Print |

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LISBON, Jan 1 2004 (IPS) - Neoliberalism, the economic dogma that has been the rage for the last few years, has clearly failed to solve the world\’s problems, writes Mario Soares, president of Portugal from 1986-1996. Whether in the US, Europe, or Japan, or particularly in emerging economies, the sanctification of the market, particularly as practised in the 1990s, gave what it had to give and sank the world into what Nobel economist Joseph Stiglitz described as \’\’ the first major planetary crisis of globalisation\’\’ , Soares writes in this analysis. Especially in the Third World, the free market, when untempered by any governmental regulation, leads to the creation of deep social injustices, systematically refuses to respond to the undeniable ecological needs of our day, and in the current phase of speculative capitalism has led to grave vices, as seen today in the scandals of Enron, Vivendi, etc. Bush has crowed that since the invasion of Iraq \’\’the world is much safer\’. All we need now is for him to abandon Iraq to its sad chaos and the world to an unprecedented economic crisis. Speculator-philanthropist George Soros was right to commit a large sum to the fight against Bush\’s re-election.

Neoliberalism, the economic dogma that has been the rage for the last few years, is showing signs of exhaustion. Simply put, it has failed to solve the world’s problems.

Whether in the United States, engine of the global economy, Europe or Japan, or particularly in emerging economies, the sanctification of the market, particularly as practised in the 1990s, gave what it had to give and sank the world into what Nobel economist Joseph Stiglitz described as ” the first major planetary crisis of globalisation.”

In the European Union there was additional fallout: the social democratic parties in power in 11 of the 15 EU countries, having failed to implement the social policies that made up their platforms, allowed themselves to be swayed by neoliberal theories of Anglo-American inspiration. This provided the opening for the right to come to power in many cases. If these parties –which proclaim they are leftist– are to win in upcoming elections, they must carefully analyze how they lost this opportunity and accept responsibility for their failure.

The presidency of Bill Clinton was clearly a period of economic well-being in the US, with the added bonus that the federal deficit was slashed. Clinton was convinced –though I don’t think he would still be– that market opening alone would lead to efficiency and prosperity. I remember hearing him say that in ten or fifteen years globalisation would end poverty in the world.

The opposite has proved to be true, especially in the Third World, as all now can see. In effect, the free market, when untempered by any governmental regulation, leads to the creation of deep social injustices, systematically refuses to respond to the undeniable ecological needs of our day, and in the current phase of speculative capitalism has led to grave vices, as seen today in the scandals of Enron, Vivendi, etc.

It is for this reason that Stiglitz felt it was indispensable to establish an ”equilibrium between the market and the state based on the values of social justice and equal opportunity, with job creation a priority”. It is a matter of recognising the role of the state together with citizens’ right to information regarding the needs of the economy.

George W. Bush, neoconservative standard-bearer of the neoliberal tradition of Ronald Reagan and Margaret Thatcher, was obliged by his unilateralist policies tending towards world domination to do the opposite of what he had promised. He allowed the budget deficit to grow to nearly unmanageable proportions, and only the continued massive foreign investment in the US enables the country to sustain it. These investments have flowed in as long as the US has guaranteed stability.

Meanwhile, as the US has allowed the value of the dollar to drop –particularly in relation to the Euro– in an attempt to increase exports and reduce imports, foreign investment has begun to wane, which presents a clear danger to the American economy.

On the other hand, despite the fact that he proclaimed himself the champion of opening emerging markets, Bush has proved to be rather protectionist. He didn’t waver before using neo-Keynesian interventions to defend US tourism, hotel, and aeronautic industries after September 11th. In addition, he imposed tariffs on imported steel and increased subsidies for agriculture to protect these sectors from foreign competition. The EU and so-called emerging countries protested these measures –with no effect– at the WTO Ministerial in Cancun. But the most serious reaction came from China to Bush’s measures taken to slow the import of textiles. An indignant high Chinese official (and a communist no less) denounced the protectionist scandal and argued that it was ”the end of free trade”.

The worst of it is that the Chinese are in a position to impose reprisals, as they are massive creditors of the United States with billions of dollars invested in US treasury bonds and US funds. If China were to sell these off, the US would suffer a collapse and drag down global capitalism into a crisis.

Bush has crowed that since the invasion of Iraq ”the world is much safer’. All we need now is for him to abandon Iraq to its sad chaos and the world to an unprecedented economic crisis. Speculator-philanthropist George Soros was right to commit a large sum to the fight against Bush’s re-election. (END/COPYRIGHT IPS)