Anyone following closely the evolution of economic thought would have to agree that the most dominant paradigm which has shaped macroeconomic and structural policies since 1980 has to be that of neoliberalism. But what really was, and is, neoliberalism? What are its main elements or characteristics?
Neoliberalism involves a package of measures, which will be presented and discussed in a two-part series. This week focuses on two such measures: deregulation and trade liberalisation and globalisation.
Deregulation means substantial reductions in financial and other regulatory bodies’ power to intervene in the market (in matters such as worker safety and other protections, consumer protection, protection of the environment, preventing the emergence of monopolies through mergers and acquisitions harmful to competition, regulating the activities of banks and other financial entities, and so on).
This policy, it has been forcefully argued by many, eventually lead to the American and near-global financial meltdown of 2008/2009.
Indeed, it was under former United States President Bill Clinton, in the 1990s, that the Glass-Seagall Act was repealed as part of this neoliberal cutback of regulations, supposedly stifling “business”.
But it was precisely such regulation of the financial sector which prevented the banks of America from engaging in reckless, speculative investments of people’s hard-earned savings deposits as they had done at the time of the Great Depression of 1929-1933.
Congress, with President Barack Obama, has had to restore key regulations which had been removed during the Clinton years, following the banking crash of 2008.
The establishment of the World Trade Organisation (WTO) was a major plank of the neoliberal agenda, as is the wider objective of globalisation.
Worldwide trade liberalisation is a major plank of globalisation, along with global financial deregulation, integrated production of goods and services on a global scale, and the global information revolution.
However, after several rounds of negotiations with well over 100 countries, and the economically developed countries failing to get their way on key matters, these very founders and sponsors of the WTO abandoned that global approach to achieving the removal of tariff and non-tariff barriers and have since embarked on a strategy of bilateral, regional and inter-regional trade agreements, so as to circumvent those countries which had been blocking them from having things all their own way.
The North American Free Trade Area (NAFTA), Central America Free Trade Agreement, the Canada-European Union recently signed inter-regional trade agreement, and the now-endangered Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership, are all examples of the growing trend around the obstacles encountered at the WTO negotiating level (although the first two listed predated the complete breakdown in WTO negotiations).
It is important to note that critics of these several trade-bloc agreements have drawn attention to their allegedly anti-worker (in terms of wages, working conditions, trade union rights), anti-environmental protection, pro-big business orientation; and to the loss of millions of jobs in America; for example, as a result of NAFTA, and to the depressing effect on American workers’ wages in the case of those not laid off as a consequence of this neoliberal trade agreement.
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