Neo Liberalism

Neoliberalism has now been imposed on the world for more than 25 years. The basic tenet of the doctrine is that governments should get out of the way of business and let the private sector be unfettered from any sort of regulation. The idea is that the Market can allocate scarce resources far more efficiently than government. Individuals in their private capacities should be unleashed to earn as much as they can.

On the surface, this doctrine is all about freedom and that is how it is communicated across as. But outward impressions can be deceptive. This doctrine rests on a number of assumptions. First and foremost, despite its claims to the contrary, this doctrine requires a large, strong, centralized government. Markets are touted as magical entities that arise spontaneously once the dead hand of the government is removed. This is total nonsense that has been repeatedly disproved in country after country. The truth is that while markets can operate efficiently and can allocate resources in a manner that reasonably reflects the wishes of the paying public, they require a strong government. In the absence of such, markets degenerate into a free for all in which the consumer is fleeced for all (s)he is worth. Other abuses like insider trading, embezzlement etc. also occur.

A second assumption of this doctrine is that the government can and will enforce private property rights. In the absence of such, markets simply cannot endure in any form. These rights have evolved over time to encompass a wide range of subjects many of which previous generations would have considered to be in the public domain. For example, take the case of basmati rice. A variety that has been grown in certain parts of Pakistan and India for centuries. Yet an American company tried to copyright its genetic structure. Success in this and its enforcement would have meant that farmers who had been growing this for generations would then have had to pay the company in order to keep growing this variety.

So neo liberalism is all about private property and private markets acting in concert to produce economic growth. Since its inception, this doctrine has been touted as not just a cure-all for everyone everywhere. It has been presented as the only viable (indeed the only) economic system. So the natural question is: what is its track record? It is all very well to ask people to endure economic pain in the present in exchange for economic well-being in the future, but for how long is the economic pain to be endured? This doctrine has been imposed on the world for a generation now under the label of "Washington Consensus". This is a long enough time to look back and in doing so, what do we see?

The picture is bleak. As Mr. Noam Chomsky has pointed out in many of his writings and speeches, this doctrine and the agreements that are imposed on countries locks them into a low wage / low growth model. It results in increasing poverty for the majority and increasing affluence for a minority. What is worse is that it tends to squeeze the middle class out of existence. Usually the former middle class people find themselves in the ranks of the poor. This is a disastrous effect because it removes hope for economic advancement. A large middle class gives hope to the poor that one day they or their children can join these ranks. Similarly, the middle class can hope to join the ranks of the more affluent. An absence of a middle class usually means greater repression in the end. Furthermore, the domestic economy shrinks as the bulk of goods and services are consumed be these people.

Up until fairly recently, these negative effects were felt primarily in the lesser developed, peripheral countries. Now however these pernicious effects are being felt in the developed economies as well.