10/3 Mark Weisbrot, "The Ignorant Elite: Neoliberalism and Its Consequences"
Guest writer: Arnaud Pascal Perret

Friday, October 7, 2011

[On Monday, October 3, the Unit for Criticism hosted "The Ignorant Elite: Neoliberalism and Its Consequences," a lecture by Mark Weisbrot, Co-Director of the Center for Economic and Policy Research in Washington, DC. The below contributions is from Arnaud Pascal Perret. The event was the second of three celebrating the Unit for Criticism's thirtieth anniversary.]

"The Ignorant Elite: Neoliberalism and Its Consequences"
By Arnaud Pascal Perret

Most politicians and media analysts who discuss the troubled global economy focus on high national debt, prescribing reductions in government spending and fiscal austerity overseen by policy experts like those at the International Monetary Fund. However, Mark Weisbrot, Co-Director of the Center for Economic and Policy Research and a recent Nicholson Distinguished Visiting Scholar for the Unit for Criticism, rejects this mainstream approach to current problems. In his October 3 lecture, “The Ignorant Elite: Neoliberalism & Its Consequences,” Weisbrot demonstrated a sharp decrease in economic growth during the period of neoliberalism’s economic heyday, 1980-2000. This pattern continues to affect the richest part of the world. Weisbrot’s October 4 seminar on US foreign policy in Latin America also illustrated the problems of right-wing ideology and its influence on Washington.

Weisbrot used a macro-economic perspective to show that despite much talk of an international debt crisis, economic growth is in actuality being hindered by implementation of neoliberal economic policies, especially in Europe. According to Weisbrot, the high unemployment and economic collapse of Greece, for example, is only worsened by the austerity approach of European authorities. The imperatives put forth by a “Troika” that includes the European Central Bank, the European Commission, and the International Monetary Fund, have created a vicious cycle in which fiscal retrenchment decreases revenues and thus makes necessary even more fiscal retrenchment—turning a once manageable debt-to-GDP ratio into a veritable crisis. At best, the elites recommending these policies are “ignorant”; at worst they are flacking for the interests of creditors who do not like alternatives such as money creation, slightly higher inflation, and currency devaluation which decrease the value of what they are ostensibly owed.

Weisbrot argued that neoliberalism should not be confused with a doctrine, an ideology, or a school of thought. It represents a “set of policies or reforms” that were implemented initially in the late seventies and with increased frequency during the eighties and the nineties. These reforms deal predominantly with fiscal and monetary policies as well as the exchange rate. In most cases, neoliberalism recommends tight fiscal policies and discourages budget deficits, even when they are necessary to counter recession, and is obsessively concerned with minimizing inflation. For example, the treaty of the Euro-zone allowed for deficits of no more than 3% of the GDP (Gross Domestic Product). In regard to monetary policy, the goals are to keep very low inflation even at the cost of high unemployment. Under neoliberalism more independence has been granted to the Central Banks—undermining democracy since elected representatives do not control the activities of these relatively autonomous financial institutions.

Weisbrot looked at macro-economic data for a set of 191 countries across a fifty year period divided into three distinct phases. Although he focused on one particular metric, economic growth measured as per capita income, he also described the many social indicators that correlate with economic growth. There was a sharp downturn in economic growth in the vast majority of countries from 1980-2000, during and after the period of neoliberal reforms. In the past decade, growth rebounded, but this was mostly because of the rapid growth of China and its demand for imports from many developing countries. His analysis led him to conclude that the exceptional growth of China has depended on statist economic policies including state-ownership of four major banks—this in contrast to a neoliberal prescription that curbs state interference except to preserve elite property rights such as patents.

Likewise, Weisbrot linked South Korea’s dramatic economic growth over the last half-century to the country’s use of non-neoliberal policies, and argued that Argentina’s default on its debts led to growth, not disaster. Ironically, Europe itself has suffered the worst results because it has adhered the most closely to neoliberal orthodoxy (in contrast to the US where the Federal Reserve has done what it can by keeping interest rates low and creating more than two trillion dollars since the 2008 economic crisis began).

In the seminar on recent US foreign policy in Latin America Weisbrot took a more political approach, albeit one focused on the Obama administration’s continuance and sometimes exacerbation of the Bush White House’s anti-democratic policies. Here Weisbrot followed the lines of his paper on the topic by describing US support of the coup in Honduras on June 28th, 2009. According to Weisbrot, while Latin American leaders saw Obama’s election as marking a progressive change in US foreign policy, they were soon disappointed. Indeed, Weisbrot’s study of US political discourse (in, for example, the Wikileak cables) suggests consistent support for military control of Latin America when it aligns with perceived US interests, along with a near total disregard for democracy and human rights violations.

Weisbrot believes that there is simply not enough political capital to be gained from a more progressive foreign policy while there remain certain risks. Only concerted grassroots lobbying of individual members of Congress, he believes, can help to reverse Washington’s tendency to continue its reactionary influence over the region. Nonetheless, many Latin American countries have become more independent form the US while strengthening relations among themselves. While a certain delinking can be seen in the adoption of economic policies that diverge from the neoliberal model, political independence shows up in the refusal, for example, to comply with US desires such as the recognition of the coup government in Honduras.

Weisbrot’s counter-perspective on economic and foreign policies certainly reveals a wide range of failures on the part of the US and Europe, such as the policies implemented by the governments of wealthier countries for the last thirty years, the elite that disregards the needs of the people, and also the failure of the media to challenge the opinion of economic and foreign policy elites. In furtherance of his belief that it is important for actual citizens to lobby their lawmakers he is involved in a blog, "Just Foreign Policy," devoted to informing the demos of what kinds of activities are being undertake for their supposed good


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Rob Rushing said...

A lovely summary and commentary—thanks, Arnaud. And I'll be sure to check out the blog.

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