I read a lot of material from experts on politics, economics and international affairs. As a result, I think I have a pretty good idea of the consensus views of respected pundits, which are sometimes called the “Very Serious People.” Here I’d like to discuss two views that seem increasing popular, which I view as extremely misguided. Feel free to correct me if I’ve misjudged the zeitgeist; if these are not two widely held views.
The first consensus view is that neoliberalism is passé. Tyler Cowen recently linked to a Wall Street Journal article that made this claim:
“The zeitgeist of globalization and liberalization is over,” said Ralf Stegner, vice chairman of the 130-year-old Social Democratic Party, the junior partner in Chancellor Angela Merkel’s government coalition. “The state needs to become much more involved in key areas such as work, pensions and health care.”
The policies mark the end of an era in Europe that started four decades ago, with the ascent of former British Prime Minister Margaret Thatcher and her U.S. ally, President Ronald Reagan. . . .
The reaction from European economists is decidedly mixed.
Some have greeted the shift as a welcome correction to years of pro-business and free-trade policies they think have dug deep rifts in Western societies.
If “economists” have mixed views, you can imagine the views on neoliberalism from other pundits, such as experts on politics and foreign affairs. Economists are practically the only intellectuals for whom neoliberalism is not a swear word.
Of course people have announced the end of Thatcherism for 30 years, ever since she lost power in 1990. Here’s the Financial Times in 2009, for instance:
“The British people had given up on socialism. The 30-year experiment had plainly failed – and they were ready to try something else.”
So mused Margaret Thatcher on the eve of her first general election victory on May 3 1979. But as we approach the 30th anniversary this weekend of the Iron Lady’s arrival in Downing Street, many British people have concluded that once again “a 30-year experiment” has “plainly failed”. This time, however, it is the experiment with Thatcherism.
The closing of the Thatcher era is an event of global significance. Many of the policies pioneered by her government in Britain were copied in the rest of the world: privatisation, deregulation, tax cutting, the abolition of exchange controls, an assault on the power of the trade unions, the celebration of wealth creation rather than wealth redistribution.
And the actual data in the WSJ article shows pretty much the exact opposite of what they claim; one graph shows that German government spending over the past 7 years has been growing at a very slow rate (and indeed it has grown far slower than German GDP), and another graph shows that European privatizations continue to occur at a healthy rate.
Even though the WSJ was unable to provide a single graph supporting their claim, I’m willing to entertain the possibility that the neoliberal era is finally over, as there are indeed some signs of a backlash. So let’s move on to the second view held by Very Serious People.
China must become a neoliberal nation! The Chinese government is far too involved in the economy, and they must move toward a free market regime without foreign investment barriers, government subsidies, state ownership of firms, capital controls, and other forms of interference in the economy.
Not only must China become a neoliberal nation; it’s the duty of the US (the world’s leading superpower) to force China to become a neoliberal nation. If they refuse, the US should launch an economic war against China, and force other countries to join us in that war.
I strongly dissent from both views. I believe that neoliberalism is still the way to go, and indeed Europe would be better off becoming far more neoliberal. Learn from Switzerland. I believe the relatively neoliberal regimes of northern Europe are far superior to the more statist regimes of southern Europe. I believe that Germany’s neoliberal reforms have been a huge success, as what was the “sick man of Europe” in 2004, with unemployment stuck at double digit levels, now has some of the lowest unemployment in the world (3.1%).
I also believe that while China itself would be better off adopting a more neoliberal policy regime, it’s not the job of the US to bully other countries into adopting the sort of policies that we favor, and it’s certainly not the job of the US to bully third parties into agreeing to help us bully China.
Why do the Very Serious People believe that it is time for Europe to abandon neoliberal policies and return to a mixed economy, and also that the US must bully China into moving from a mixed economy to a neoliberal regime? You’ll have to ask them—I’m not a mindreader.
PS. And I haven’t even addressed the absurdity of the claim that Europe went too far toward laissez-faire capitalism. We are talking about a continent that has close to 50% of total global spending on social programs, where many governments spend roughly 50% of GDP, and where countries such as Greece and Italy continue to have highly statist policy regimes. It would be like someone in the year 2019 claiming that New York City’s problem was that they didn’t have enough rent control.
READER COMMENTS
Brian Donohue
Jul 1 2019 at 7:05am
The original NAFTA was signed just over 25 years ago. The American people didn’t like it. Ross Perot got 20% of the vote running against this one issue. Every living ex-President, D or R, was trotted out on stage to support the deal against this populist uprising.
It was the original “elites vs. masses” tilt. The elites aren’t always wrong, but it’s easy to bash those who agree with the elites on anything. Populists and cool kids get it.
robc
Jul 1 2019 at 8:44am
I was pro-NAFTA (sorta) and voted for Perot in 92, so he didn’t get all his votes from that bin.
The sorta, is in a good/perfect scenario. It is better than not having NAFTA, but not as good as true free trade. I rank as follows:
Multilateral free trade
Unilateral free trade
Whatever NAFTA is
Everything else
So going from 4->3 is a good thing, but we could have just as easily skipped ahead to 2, and negotiated for 1.
Scott Sumner
Jul 1 2019 at 9:34am
I disagree with the claim that Americans opposed Nafta. After the debate between Gore and Perot, polls swung in support of Nafta. It’s more accurate to say that views were fluid.
Alan Goldhammer
Jul 1 2019 at 9:31am
I like the ‘PS’ and the resulting link. I wish someone had a good solution to affordable housing. A neighbor just stopped by this AM and her daughter is up at NYU going into her junior year. She and three others are sharing a $8K/month apartment in the East Village. this is about four times what we were paying for our home mortgage. My frugal daughter who lives in Oakland and works in San Francisco (where she cannot afford to live) pays about $2K/month with a parking space. Apartments in our area of Bethesda are disappearing and being replaced by high rise condos and luxury apartments. I’m happy to be living in a paid off house but certainly we could not afford to move into something newer in our area because of the sky high prices.
Floccina
Jul 1 2019 at 2:29pm
Let people subdivide and build. End euclidean zoning.
robc
Jul 1 2019 at 10:31pm
There is no need for non-euclidean zoning either.
nobody.really
Jul 2 2019 at 12:06am
Good point. Zoning applies to land surfaces–and the face of the globe is curved, not flat. Ergo, whatever zoning we have should be non-Euclidean.
Matthias
Jul 4 2019 at 5:41pm
Pun aside, Euclidean zoning is named for the town of Euclid.
Thomas Sewell
Jul 4 2019 at 1:57am
Judging by empirical results, the solution for affordable housing is to elect non-Democrats to run your city for a while.
stubydoo
Jul 4 2019 at 3:21pm
Which empirical results?
Mark
Jul 1 2019 at 9:31am
I don’t think the Very Serious People want China to be more neoliberal. They want China to have massive state-directed purchases of our agricultural goods and natural gas to reduce the trade deficit, which would crowd out the imports that Chinese businesses and consumers want. They want to prevent Chinese companies like Huawei from doing business, including buying American exports, again trying to steer China’s trade from what their companies want to what our government wants. And there is even talk of kicking Chinese companies off the NYSE even though those listings are a way for foreign investment in Chinese companies like Alibaba, which now probably has more American than Chinese ownership. None of these things are very neoliberal. The Very Serious People do not seem to be pushing for a neoliberal China but a world where our government dictates what Chinese people get to buy and sell.
Scott Sumner
Jul 1 2019 at 9:38am
Maybe, but I have heard dozens of pundits say that we should pressure China to open their markets and reduce government control of the economy. So if you are right then these pundits are extraordinarily poor at articulating their views.
TMC
Jul 1 2019 at 1:47pm
I don’t see anything wrong with using trade to get them to open their markets as much as we have. Reducing government control of their economy is none of our business.
Scott Sumner
Jul 1 2019 at 5:39pm
China’s trade barriers are not at all atypical for a developing country. Should we launch a trade war against dozens of other countries?
Mark Z
Jul 1 2019 at 10:34am
I wouldn’t worry too much about it. Expert consensus seems rather cyclical. There’s been a healthy industry in predicting the wane of capitalism for decades. It’s been ‘late capitalism’ for what, about a century now? Though I’m a bit inclined toward Ben Rogge’s pessimism, I think one reason he’s too pessimistic is that, should a true break away from (classical) liberalism take place, once it becomes clear to yet another generation that the grass isn’t in fact greener on the other side, the zeitgeist will turn back in the liberal direction. Unfortunately, there are just some lessons it seems every generation or two needs to relearn from experience.
I might also speculate that the apparent contradiction between the two positions you describe (“economic liberalism is dead; China must embrace economic liberalism”) suggests people may not believe the first one as sincerely as they let on.
Nick R
Jul 1 2019 at 6:31pm
Seems to me the claims that neoliberalism is passé is just a current example of the continuing partisan wars with rhetoric as weapons. Most pundits, and perhaps “Very Serious People”, are left-of-center. They will seize whatever rhetorical opportunity comes to hand to advance the cause. Any and all economic and financial problems are blamed on the “excesses of capitalism”, “unfettered capitalism”, “neoliberalism” or some other wicked-sounding label. This tactic is hardly new. When I was in high school in the late 1960s I learned that the depression was caused by the excesses of capitalism and that FDR saved capitalism from those excesses. More recently, isn’t the most popular explanation for Global Financial Crisis that it was caused by deregulation, or unfettered capitalism–or neoliberalism? Plus ça change. I think readers of this blog have a slightly different understanding of the causes of the Great Depression and the GFC.
Regarding China, seems to me there are plenty of pundits who think the U.S. should stop thinking it can impose democratic liberalism around the world. In fact, isn’t that widely regarded as a remnant of the passé and discredited view of Fukuyama’s “End of History”? (Whether fairly or not is another question.)
Of course, pundits have to opine for their deadlines, whether or not their arguments are good. Maybe that’s part of the problem.
Benjamin Cole
Jul 2 2019 at 8:45am
“A neighbor just stopped by this AM and her daughter is up at NYU going into her junior year. She and three others are sharing a $8K/month apartment in the East Village. this is about four times what we were paying for our home mortgage. My frugal daughter who lives in Oakland and works in San Francisco (where she cannot afford to live) pays about $2K/month with a parking space.”–Alan Goldhammer.
You see, we just need to convince these people who paying $8,000 a month for an apartment that the solution to high housing costs are no more rent control combined with “free trade.”
BTW Here is an ad for a new apartment complex just east of downtown L.A.:
“The project has studio to two-bedroom apartments. Units have quartz countertops, electric stoves, LED lighting and washer and dryer systems; there are different finishing options, depending on a resident’s tastes. A 479-square-foot studio starts at $2,330.”
Not quite to Hong Kong nano-flat sizes and rents, but we are getting making progress to that goal. Hong Kong is often genuflected to as a free-trade citadel.
PS. Yes I know rent controls do not encourage new production of housing. But it is a criminal act to develop dense housing on nearly all property in LA County. Given that much new supply is effectively outlawed, and rent control does not apply to new construction, is rent control to worst option?
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