Thursday, April 25, 2024

AS I SEE THINGS: Neoliberalism – Part 2


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Last week’s contribution focused on two broad measures which characterise neoliberalism – deregulation and trade liberalisation and globalisation. This week, I will pay attention to two other broad areas of focus: massive tax cuts for the wealthy and smaller government/cutbacks in social programmes.

The tax rate for the highest income brackets in Britain was, at one time, 19 shillings and six pence in the pound sterling for income over a certain substantial amount. This was a marginal tax rate for the wealthiest of 97.5 per cent.  The late British prime minister Margaret Thatcher and those following her (John Major and Tony Blair), reduced the top tax rate to less than 40 per cent. The United States (US) tax rate for the wealthiest had once been as high as 91 per cent. It was reduced to 71 per cent by the time Ronald Reagan took office but, when he left, the tax rate was between 28 per cent and 33 per cent.

In practice, because of numerous loopholes deliberately placed in the tax laws, the effective rate of income tax for the wealthiest Americans is around 15 per cent, and many pay no income tax on the billions they earn each year. It is argued in some circles that this approach to taxation does have a “trickle-down effect” on society because it is believed that if the wealthiest have more disposable income, they will invest more and economic activity and jobs would be generated to help the poor. But this is a moot point.

Additionally, the Reagan and others calls for “smaller government” meant, from day one, a huge growth in defence spending, to be paid for, along with finding the money to run the government after the tax giveaways to the wealthiest, through cutting social programmes which benefit the poorest and most vulnerable in the society. Examples of these cuts – many of which occurred under the neoliberal, Bill Clinton – have been restrictions on unemployment benefits, cuts in food stamp provisions, raising the retirement age before workers can receive their pensions; and, in Britain, cutbacks in a range of child welfare and unemployment benefits for the most vulnerable economically.

What, then, have been the economic, social, and political consequences of 35 years of neoliberalism in the US, United Kingdom and some other economically developed countries? In no particular order of priority, these fallouts can be cited as truly massive growth in income and wealth inequality; shrinking middle class; loss of manufacturing (well-paid) jobs in the economy as a consequence of globalisation (linked to cuts in the size and circumstances of the middle-class), and replacements for some of these jobs with low-paying service-industries jobs; and reduction of wages by on average 20 per cent for those manufacturing workers who got alternative jobs when their industries folded or shrunk.

Also, a steady fall in trade union membership and in the power or influence of the trade union movement; periodic stock market “bubbles” and continuing uncertainty over the solidity of the financial sector (are the banks still “too big to fail”?); environmental degradation (fracking, new oil pipe lines); continued erosion of worker safety and consumer protection; growth in “ownership” of congress and the presidency by the top one percent of America’s income earners through campaign financing of all candidates for office and the huge lobbying scandal that is today’s Washington, DC; the rise of left and right wing popular movements, capitalising on the disaffection of large segments of the white working class and even sections of the white middle class.

Clearly, neoliberalism, as much as it has been touted as a reasonable, alternative economic paradigm that can drive growth and development, has its problems and hence must be taken on board with care by small and already highly vulnerable economies like ours in the Caribbean.




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