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Saturday, September 24, 2011

Mixed Economy vs Neoliberalism

British economist John Maynard Keynes,highly influential
in the creation of the Post-War consensus mixed economy.
I decided to make this comparison after reading yet another baseless and generalised attack on the concept of socialism, which went along the lines of:

"Government's are not very good at spending money. This is one of the reasons socialism doesn't work".


So how about looking at the track records of state socialism and neoliberalism in the contexts of UK public spending and socioeconomic trends before we start accepting sweeping generalisations like this?



The Post-War Consensus mixed economy (a mix of state socialism and regulated capitalism).
  • 1947-1979 (32 years).
  • Key influences & personalities: John Maynard Keynes, R. H. Tawney, William Beveridge, Clement Atlee, Nye Bevan, Harold Macmillan.
  • Origins: Started in the wake of a massive debt crisis (WWI + inter-war economic chaos + WWII).
  • Budgetary responsibility: 28 consecutive years of budget surpluses, only three years of budget deficits.
  • Government Debt: Reduced national debt burden from 237% of GDP in 1947 to 43% in 1979.
  • Economic stability: Other than the economic turmoil of the mid-late 1970s which was used as excuses to destroy the Post-War Consensus, an era of relative economic stability despite the loss of Empire and the Cold War partition of Europe.
  • Poverty: Massive reduction in levels of absolute poverty.
  • Consumer spending power: Provided ordinary working people with levels of discretionary income never seen before (or since).
  • Employment: Kept unemployment low on a long term basis.
  • Housing: Massive reduction in levels of slum housing and gradually improved access to decent housing for hard working people.
  • Public Health: Introduction of the National Health Service to provide health care "free at the point of use".
  • Overview: Long term economic stability, massive public debt reduction, commonly referred to as "the golden age of capitalism".
The neoliberal experiment (based on the bankrupt ideological dogma of amoral neoliberalism).
  • 1979-2011 (32 years)
  • Key influences & personalities: Milton Friedman, Frederick Hayek, Margaret Thatcher, Ronald Reagan, Augusto Pinochet, Gordon Brown.
  • Origins: Started in the wake of a few relatively* minor crises (1973 oil shock, late 70s industrial unrest) with the lowest levels of government borrowing in over a Century.
  • Budgetary responsibility: Only managed to record budget surplus in 17 of 32 years with a best run of 7 consecutive years (1983-1991) which was partially funded by the firesale of heaps of state infrastructure (privatisation).
  • Government Debt: Increased levels of national debt from 43% to 164% (including bailouts 91% GDP & PFI scams 15% GDP, which are misleadingly kept off the national debt figures).
  • Economic stability: A period of increasingly violent economic instability despite the end of the Cold War partition of Europe, exponential improvements in IT capabilities and the influx of cheap Asian commodities.
  • Poverty: Massively widening of the poverty gap and the creation of pockets of absolute poverty in formerly industrialised areas.
  • Consumer spending power: Squeezed levels of discretionary income, especially since Osborne's "self defeating austerity" programme and VAT rises kicked in.
  • Employment: Kept unemployment high on a long term basis, with several nasty unemployment spikes during recessions caused by the instability of deregulated markets.
  • Housing: Increased levels of slum housing (via unregulated something-for-nothing slumloring) and increasing difficulty for working people to find access to decent housing due to unsustainable speculative house price inflation.
  • Public Health: Erosion of free public health provision (dentistry & eyecare), and the gradual privatisation of the National Health Service (PFI hospitals, private sector providers, 2011 Health & Social Care Bill).
  • Overview: Resulted in the Neoliberal Economic Crash and "the crisis of capitalism".
* = By "relatively" I mean in comparison to the economic consequences of the World Wars or the Neoliberal Economic Crisis.

Conclusion

Despite the demonstrable failures of militant neoliberalism
over the last 32 years, the UK is stuck with a government
that adheres to the defunct economic dogma of Milton Friedman.
Although there were still plenty of political and socioeconomic problems during the Mixed Economy years I'd say that overall this basic comparison makes a pretty convincing case for a return to the mixed economy. However the ruling Tory led coalition are insistent that the bankrupt "greed-is-good" neoliberal show must go on and that ordinary working people are going to have to pay through the nose for the huge economic failures of the establishment's defunct neoliberal dogma via deliberately stagflationary economic policies, while the financial sector elite laugh all the way to the (taxpayer subsidised) bank.

3 comments:

Bitterweed said...

....Great article. Just saw you over on the UT site. Did you see Stuart Hall in the Guardian last week ?

Thomas G. Clark said...

Yes mate, I somehow missed it last week but my brother told me about his amazement at the fact that the Guardian had featured an above the line criticism of Neoliberalism, so I dug it out a couple of days ago.

Overall a great piece, clearly Stuart Hall is a much more polished writer than I am but sometimes I think simplicity (basic comparisons, bullet points) can deliver a message just as effectively as a long carefully constructed essay. Not that I'm averse to writing articles that turn into stonking great essays, check out the Great Neoliberal Lie if you enjoy reading longwinded criticisms of neoliberal economics (its been at the top of my most popular posts column since I wrote it).

Cheers for your comment and feel free to stick around here. (Constructive criticism is as welcome here as praise!)

Bitterweed said...

I agree that the comparison method is useful, and powerful.

What I liked about Hall's piece is ability to put it all in the round... I have been astonished and dismayed at how little the Guardian has taken Eric Pickles' cuts to task on an ideological level. Of course they're front-loaded to the first financial year out of four - so that local authorities will have to make permanent changes - the deletion of services and creation of mass unemployment. Even the fucking DofH stepped in, pronto- see the Secion 256 arrangements brought in to mitigate / ameliorate the worst vandalsim of services of the vulnerable. (PCTs are given £££millions to spend on Health and Social Care initiatives - and pay on the cash to County Councils / local Authorities. OK, it amounts to one or two percent of the overall cuts, but is shows hoe even WHITEHALL couldn't stomach this massacre of the state) Where *the fuck* is the comment about that ? Pickles wanted the cuts to go further and deeper. It was clear as day the first minute I heard my Director of Adult Social Services announce the impact at a meeting I attended last December that this is purely ideoplogical. Those slack jawed fuckers in NL and the Guardian daren't even go there. Daren't, or are too deeply invested. The BBC daren't challenge this orthodoxy, as if it's some kind of natural law, rather than a set of theories hitched to a dogma whose time has clearly come and gone.

....Sorry, I'm a bit raw at the minute. Keep up the good work mate.