This post is part of the A to Z 2020 Challenge. I have decided to theme the posts around personal and societal responses to the Covid 19 crisis, including my resumption of Blogging!
What the heck is neo-Liberalism and why should I worry about it?
Don’t worry – it’s not so long ago that I had to look it up because I had seen it mentioned in so many articles as if it was a given that everyone understood. Sadly it is not and the people who espouse it do not want you to know about it, because it is not a good thing!
You can find a full definition of neo-liberalism here but in a nutshell – it is a revival of 19th-century ideas about free-market economics – that allows the market to determine economics – government should not interfere – in fact, the government should de-regulate wherever possible as regulations just get in the way of productivity. This is sometimes called laissez-faire capitalism.
De-regulation
Margaret Thatcher in Britain and Ronald Reagan (or more probably his advisors) became taken with the works of Friedrich Hayek on neo-liberal policy and it has dominated British and US not to mention European and many other countries’ politics ever since. I say politics rather than policies because neo-liberalism is a favourite of the right-leaning political parties – for which you can read – “supporters of the rich”. Even New Labour under Tony Blair went so far as to embrace it, because superficially, it doesn’t sound unreasonable. Look at the butter mountain of Europe – a result of governmental interference in the form of agricultural subsidies. Let the market sort out the price and if farmers can’t get the price they need for butter – let them grow what the market says it really needs instead. Who in their right mind wants unnecessary paperwork due to overbearing bureaucratic governance? Ditch those pesky regulations!
However! It is the de-regulation of banking – allowing banks to have both a lending branch and an investment (gambling on an unimaginable scale) branch with only their own promise that they would keep the two halves separate. Another story, but that is what led to the financial crisis of 2008. De-regulation in neo-liberal terms means removing all the regulations that restrict how the rich can get richer – pesky things like worker’s rights, health & safety, environmental protection – can you see where this is leading? Well for Britain it led to Brexit, softened up by stories penned by our now Prime Minister, about the EU calling for Straight Bananas (a complete fiction), the Europhobes who hate all those great areas of regulation which have built up in the EU, sold Brexit to the public on the strength of “taking back control”. The only people taking more control as a result of Brexit, are the rich supporting right.
Austerity
The greatest tool in the arsenal of neo-liberals which they tell us is for our own good but which is really another self-serving ruse of the rich, is Austerity. Who would not agree that being in debt is a bad thing and that the answer to debt is to tighten your belt and spend less? This might work for an individual, but it does not work in the same way for businesses or nation-states. When a government borrows money to spend on an infrastructural project such as a new motorway, a lot of that money comes back straight away in the form of tax from companies and workers and in the long run, the project creates greater productivity for the country and that allows the debt to be repaid. But this is against the neo-liberal agenda – it is tantamount to interference in the market by the government. If a motorway is really needed, the market will spot the opening and a consortium will be formed to construct it. Austerity decrees that we save money by cutting spending so the funding to local government is cut forcing them first to become more efficient and then to cut anything which is not absolutely essential. Collecting waste is essential, support for drug or alcohol dependence is not so facilities for them are closed. In the short term, this does not create problems except for individuals, but the long term impact on health services and broken families and damage to the next generation and cyclical problems – you get the picture – costly…
Then there is the stealthy theft of the NHS – it goes like this – first you starve it of cash till it creaks at the seams, then you sell the parts that can make money for private companies (market forces right!) to your rich mates. Result – the underfunded NHS was totally unequal to the task of fighting Covid 19 as it is well into the starvation phase.
The great choice
One of the great lies of Austerity has been exposed by the Covid 19 Crisis. Tories derided Labour plans for increased spending on social welfare and infrastructural development. “There is no Magic Money Tree” they said. Now they are proposing borrowing our way out of the crisis at levels not seen since the Second World War. They are doing some complicated shenanigans with the Bank of England which, however, they deny it, amount to MonetaryFinancing which amounts to a magic money tree. Most people in the Tory party would like to see a return to the good old days of neo-liberal free-for-all which in the wake of Brexit, offers rich pickings for those who have plenty of money already (money comes to money). There has never been a time more urgently requiring the very opposite. Austerity was wrong before the crisis and it will be worse still afterward. We must not be persuaded that the only way to pay off the debt incurred is to tighten our belts for generations to come.
What are the alternatives?
An organization called Sovereign Money has detailed the problems that led to the 2008 financial crisis and what they propose by way of a solution remains valid in the recovery after Cocid 19 – if not more so. They say that there are two sources of money in the economy – money created by banks when they lend money – and money created by the Bank of England on behalf of the government which up to now has been a tiny proportion. Because austerity led governments believe consumer spending is the way forward, they have been happy to see banks lend to individuals which has led to repeated housing price rises (bubbles). At the same time, the banks have not lent freely to businesses – the real economy.
Now that the virus has shut many businesses down and locked-down debt-ridden individuals in enforced unemployment, more of the same must not be an option. The government must use its power to create money via the banks and must return to the real purpose of governance which is to take meaningful decisions about the post-virus world.
You can find much more detail at Sovereign Money – I have only offered a signpost but I urge everyone to quaint themselves with the issues and not allow us to be marched blindly into the same old problems that suit a small minority of the already rich.
