The International Monetary Fund (IMF) in a new report entitled, Neoliberalism Oversold (read here)? for the first time, officially names neoliberalism as a coherent set of economic policy objectives. It accepts that the main economic policies of neoliberalism and austerity that the organisation has been forcing governments around the world since the 1970s to implement (including Ireland as part of our recent Troika bailout) do not actually work.
But even more importantly, the use of the term ‘neoliberalism’ by the IMF creates a wider public space and legitimacy for discussion of what neoliberalism actually is (and how austerity is part of the neoliberal policy agenda), who is promoting it and who it benefits. Such a discussion of neoliberalism, up to this point, has been marginal to mainstream economic and political debates. In fact, most mainstream economists have, up to this point, denied even the existence of neoliberalism and have tried to de-legitimise any debate of the subject.
Take, for example Dan O Brien, who wrote in the Irish Times in 2013:
“Reactionaries on the left of the political spectrum increasingly describe others very critically as “neoliberals” and policy proposals that are not state-led as forms of “neoliberalism”. The private creche scandal revealed by RTE is the most recent example this sort of name-calling, and it happens even though no political party, grouping or individual in Ireland describes itself/himself/herself as “neoliberal”.
Neoliberal policies, known as “the neoliberal agenda” or the “Washington Consensus” are essentially policies that promote a free market or laissez faire form of capitalism. Neoliberalism was first implemented in Chile in the 1970s through the brutal regime of General Pinochet (which the IMF conveniently fails to mention) and then advocated for by ‘free’ market economists such as Friedman and Hayek and was implemented savagely in other developing world countries under the Structural Adjustment Programmes of the World Bank and IMF, and under Reagan and Thatcher.
Neoliberal policies include introducing market competition into all aspects of the economy and society (such as de-regulating the financial sector and opening up economies to foreign investment and capital flows, changing the role of the state to act primarily in the interests of private corporations and enforce markets (reducing worker and environmental protections seen as a barrier to profit and enterprise); also privatisation, public spending cuts, and limiting borrowing. It also includes the commodification of natural and public resources like water, housing, education, health care, that is, opening them up to private companies to convert everything into a commercial product that can be bought and sold for profit.
The IMF Report highlights that two aspects of the neoliberal agenda (removing restrictions on the movement of capital across a country’s borders and austerity (public spending cuts and repaying debt) are the policies that have caused the most problems. In particular, they are critical of capital flows such as “portfolio investment and banking and especially hot, or speculative, debt inflows” as “Surges of foreign capital inflows increased the chance of a financial crisis, and such in-flows worsen inequality in a crisis”.
This has significant implications for Ireland. Ireland has one of the most globalised economies that is built around an openness to foreign capital and financial flows.
Ireland experienced this through the flow of investment from across the world (and particularly from European banks) that inflated our housing boom in the 2000s and we are now again experiencing it through the flow of speculative finance into housing through NAMA and financial capital flows through the IFSC, one of the largest hubs for financial flows in the world.
Ireland is, in fact, a study in failure of the neoliberal model. The Celtic Tiger was built on belief in the private market and in complete integration with globalised markets and this has continued after the crash. The Irish economic model is thus still built on the strong potential of crises and inequality.
Underneath the glow of the economic recovery, therefore, lies these dark clouds of potential financial crisis and growing inequality that suggest major problems lie ahead.
And yet no Irish media outlet (as far as I can ascertain) has covered the findings of the IMF report in any way. This reflects a major failing in the Irish media to provide any serious analysis or critique of mainstream economic policy, despite the central role that neoliberal economic policies played in causing our crash and the devastating impact of austerity on Ireland.
The IMF do point out that some neoliberal policies have worked well such as privatisation of state enterprises. However, in my book on neoliberalism in Ireland published in 2011 (https://www.manchesteruniversitypress.co.uk/9780719084874/) I highlighted how neoliberalism was pursued through the use of privatisation policies such as Public Private Partnerships (PPPs) in Ireland. I found, in contrast to the IMF claims, that these policies primarily profit corporations and financial investors, and result in rising costs and ineffective services for public service users, and the erosion of workers’ rights.
The IMF report is very important because these mainstream economists have actually used the term neoliberalism to describe these policies. Up to this point those of us who used the term neoliberalism to describe the phase of global capitalism post 1980s were dismissed as simply being overly ideological or political. This article gives important legitimacy to the critique of this policy.
There is in fact a strong political ideological project underlying mainstream neoliberal economic policy – it is not an objective science but based around a belief and perspective that corporate capitalism is the best way to organise the economy and that this ideology best benefits corporations and wealthy classes.
The problem is, as the IMF paper explains, neoliberal economic policies are not even working to reach their own narrow goals of increasing economic growth. Global growth is sluggish (Ireland is an outlier and our economic growth has a lot to do with profit shifting by multinationals rather than real economic activity).
In the 2000s, critics (e.g. David Harvey) demonstrated the unprecedented rise in inequality in countries that had most intensely implemented neoliberalism and that neoliberalism was actually a political project using the guise of free market ideology to use the state to redistribute wealth away from the welfare state and worker’s and back to the wealthy. Although there is a lively debate on what is neoliberalism and how progressives using the term do not fully understand that neoliberalism is a political project to re-shape the state and make it stronger, not weaker, to act in the interests of corporations and ensure the smooth operation and implementation of private 'free' markets (see Philip Mirowski's INET working paper: The Political Movement that Dared not Speak its Own Name: The Neoliberal Thought Collective Under Erasure; for more fascinating discussion on this)
Neoliberalism has worked very well for the the wealthy 1%, the bondholders, private multinational corporations, financial markets, global wealth funds etc. It has worked for the private firms profiting from the commodification and commercialisation of water, housing, education, health etc. It has certainly not worked for the poor and middle classes of Europe and the US who have lost wages, working conditions, public services and face increased insecurity and poverty.
By the 1990s neoliberalism had achieved global hegemonic status as the dominant political and economic policy and ideology. Francis Fukuyama wrote in 1992 that, "What we may be witnessing is not just the end of the Cold War…but the end of history as such: that is, the end point of mankind's ideological evolution and the universalisation of Western liberal democracy as the final form of human government." Thus neoliberal capitalism had apparently triumphed. Now, even the IMF are beginning to realise that aspects of these policies do not work. There is growing realisation that an alternative macro-level economic and political framework and associated policies based on equality and sustainability is urgently required.
Dr Rory Hearne is a Senior Policy Analyst at TASC.