Thursday, 21 July 2016

Neoliberalism: Coming And Going.

The Beneficiary Of Chaos: Television New Zealand’s current affairs flagship, Q+A, interviewed Stephen Jennings, the former Treasury official and New Zealand investment banker who took advantage of the collapse of the Soviet Union to make himself a billionaire.
 
IT WAS A LONG TIME AGO, the late-1970s, possibly, or the very early 1980s. My father and I were watching one of the many current affairs shows then broadcast by the state-owned television network. The guest was a very young Alan Gibbs – at least that’s the way I remember it. If it wasn’t him, then it was someone who looked and sounded very much like him.
 
It was an odd interview. Not in terms of the production itself, but because in those days people espousing the views of businessmen like Alan Gibbs were very few and far between. In New Zealand, at least, the post-war Keynesian settlement still reigned supreme. Lassiez-faire capitalism was something students read about in economic history textbooks. In the 1970s, most responsible intellectuals dismissed unregulated capitalism as a ruthless and highly exploitative form of economic management, long since discarded by civilised nations.
 
That’s what made the interview so memorable. The young businessman (Gibbs?) withstood the interviewer’s rather condescending line of questioning without flinching. Every aspect of the post-war settlement: the welfare state; public ownership; compulsory unionism; import-licencing; guaranteed prices; came under his withering critique. My father and I looked at each other in alarm. We’d never heard anything like it. At the conclusion of the interview, my father turned to me and said: “Men like that are dangerous, son. If they ever gain a serious following in this country they will cause tremendous harm.”
 
It was New Zealand’s first encounter with what we today call “neoliberalism”. Within five years of that interview, however, Keynesianism was on the defensive. Businessmen like Gibbs and his fellow asset strippers were being lionised in the business press. Defenders of the status quo, like Rob Muldoon, were being pilloried. The new economic order, guarded by Margaret Thatcher in the UK, and Ronald Reagan in the USA, had made the world safe of dangerous men. Here in New Zealand – just as my father had predicted – they were all getting ready to inflict tremendous harm.
 
What made me think of this prophetic television encounter from 40 years ago? Unsurprisingly, it was another current-affairs interview.
 
On Sunday’s Q+A (17/7/16) Corin Dann interviewed Stephen Jennings, the former Treasury official and New Zealand investment banker who took advantage of the collapse of the Soviet Union to make himself a billionaire.
 
Jennings’ firm, Renaissance Capital, made five billion dollars buying and selling the property of the Russian people. The new, laissez-faire economy Jennings and his fellow oligarchs constructed on the ruins of the USSR proved to be more than usually dangerous. Perhaps the most dramatic measure of the tremendous harm it inflicted was that, as the Oligarchs and their kleptocrat political allies imposed capitalism on their nation from above, the life expectancy of the Russians actually fell.
 
Today, Jennings oversees a continent-wide property development enterprise constructing massive suburbs on the outskirts of African largest cities. As low-wage economies cascade out of Asia and into the last, great, untapped pool of cheap labour on the planet, Jennings will be there to ensure that their new, middle-class overseers have somewhere suitable to live.
 
Whether Africans prove to be as biddable as Russians remains to be seen. All the signs point to the great wave of globalisation, out of which Jennings extracted his super-profits, as having already broken. As it recedes, the neoliberal doctrine, which for forty years has been used to justify the globalisers’ moral and environmental excesses, is beginning to sound increasingly hollow.
 
Not, of course, to the members of the NZ Initiative (successor organisation to the NZ Business Roundtable) who were happy to provide an audience for Jennings’ unreconstructed neoliberalism. Nor, indeed, to Act’s David Seymour, in whose “Free Press” newsletter Jennings is lauded like a rock-star. But to those of us who have heard enough neoliberal rhetoric over the past 40 years to last several lifetimes, Jennings performance came across as just one more iteration of a policy prescription that has succeeded only in making the world a less equal, less habitable, and less free place in which to live.
 
As Dann concluded his interview with Jennings, it occurred to me that I had been witness to both the beginning and the end of an era. Gibbs and Jennings are neoliberal proselytisers of formidable energy and unwavering certainty. That much, at least, remains unchanged. The difference, of course, is that in that first interview the ideas expressed had yet to be tested in a modern context. In Jennings’s case that is obviously no longer true. The world now knows what happens when capitalism is unbound. Its harm is all around us.
 
My father knew, instinctively, that business leaders like Gibbs and Jennings were dangerous men. Would that he had lived long enough to see the self-serving character of their ideology made obvious to everyone.
 
This essay was originally posted on The Daily Blog of Monday, 18 July 2016.

29 comments:

peter petterson said...

Well said Chris. When Bill Rowling was leader of the Labour Opposition he read that booklet written by Roger Douglas, called, "There has to be a better way!" Rowling dismissed Douglas from his Shadow Cabinet. Bill Rowling foresaw the future. He knew in his own mind the coming of neoliberalism. I didn't, I'm not into finance. I thought it was a load of crap. I spoke to Roger during the Lower Hutt council elections in 1983. I actually liked him. I didn't get elected, not that I expected to.But during that time I knew something was about to happen. The attitudes of some Labour Party members was changing. I let my membership of the party lapse, because of the dictatorial attitude of our mayoral candidate. I have not been a member of the Labour Party or any other party since. A supporter and voter,yes,except in 1990. I wonder why?

David Stone said...

Hi Chris
I really like this one. It deserves an international readership.
Cheers D J S

Anonymous said...

'.....a policy prescription that has succeeded only in making the world a less equal, less habitable, and less free place in which to live.'
I doubt any of the three claims you make here can be substantiated, so are you too guilty of post truth politics?
The world overall is more equal than 40 years ago but in our first world, economic inequality has increased. That is only a small proportion of the world, and only about money. Women have more equality with men that 40 years ago almost everywhere, except in the Islamic countries which have gone backwards consistently. Can’t blame liberalism for that.
Less habitable? For people I presume you mean? No not at all. Living conditions have improved for the majority hugely. But it may not be sustainable and the environment may deteriorate in due course, yes, making the planet less inhabitable. But currently air pollution is way less than 40 years ago, but low land and coastal water more polluted. But biodiversity in the first world has improved in the last 40 years as farming has retreated to less land more intensively farmed, hence the water pollution to lowland rivers and the coastal waters. Warming may improve habitability in places but overall perhaps not. Too early to tell.
Less free? Well no. Soviet Union gone and China has some economic freedoms now... India too. Almost none 40 years ago in both countries.
I thought according to you we are as a planet too free. So you are wrong and confused.
But nice essay on your world view, though a fail on the facts.

Anonymous said...

Well said,
The Labour Party still has it fair share of these clowns.
Thank you for not asking us to vote Labour.

fegimon said...

Could he be the harbinger of the demise of neoliberalism as we know it? I for one certainly hope so but am cynical about the political will to reverse the entrenched ideology that is so pervasive in our daily environs, ie unbalanced reportage from the MSM, being surrounded by systems that are mostly monetized and accepting punitive attitudes towards the vulnerable as normative. As long as the two main parties subscribe to the same economic prescription, reinserting the 'care' to our citizenry and environment will take a back seat. I think it's too early to read the tea leaves and conclude that the end is nigh for neoliberalism. I suspect, the ideology will have some legs left and the establishment who benefit from it may adopt a scorched earth mentality than see these power structures being inverted to serve us common folk. Still, the optimist in me could surmise that the elites have had an epiphany moment and come to the realisation that the growing divide could be just as fatal for them and that they need to stem the tide before they get dragged out like the rest of us ...

jh said...

The world now knows what happens when capitalism is unbound. Its harm is all around us.
......
The similarity between a natural ecosystem and the human economy is striking. It is just that capitalism is a more efficient way for the human organism to exploit the environment. The left-wing parties bang on about the environment except when it involves immigration, how many children a woman chooses to have or the high carbon -low value tourist industry.

Dennis Frank said...

No matter how distasteful neoliberalism is to some of us, it will continue to win by default on the global stage. The failure of those opposed to it to provide a positive alternative leaves most countries with no choice.

As long as the prescription keeps pulling the poor out of poverty, it doesn't matter that the system primarily rewards owners. The poor will keep choosing to be wage-slaves over the traditional option of subsistence. One hardly need mention the rapid failure and descent into savagery of the African countries de-colonised with a bequest of socialism.

As James Shaw said in his victory speech, we actually have a hybrid socialist/capitalist system now in western countries post-gfc - and the collapse of economic growth keeps trending it ever-greener (despite media folk being too stupid to notice this). The trickle-down myth is now seen as such by many in the civilised world, yet peasants elsewhere are motivated by the allure. In sum, I think the bilderberger agenda remains intact. Let's see how the new glove-puppets perform.

Jens Meder said...

The economic function of capitalism - the creation (saving) of capital and the useful(profitable) application of it - started with the first laboriously finished stone axe - and is the outstanding difference of human behavior on the material level compared to the overwhelmingly "hand-to-mouth" consumption based survival in the animal kingdom.
In other words - capitalism is a basic economic reality that cannot be altered by human ideology or legislation.
Under free market liberalism it is almost inevitable that persuasive salesmanship to consume even on credit divides the nation increasingly into Haves and Have Nots with mutually conflicting interests.
Overcoming that potential disunity is not in reversing to the situation of 60 years ago which became unsustainable when too many began to rely on what capitalism delivers, without adequate direct participation (saving and investing)in it - but in getting 100% of us to participate in wealth creation and ownership through a basic universal (retirement) wealth savings rate built into the taxation system for contributions into a permanent NZ Super Fund - and by resuming the $1000.- Kiwi Saver kick-start (without a compulsory savings commitment) to all who have not received it yet - from "cradle to grave", which can be done not costinga cent extra to govt. or taxpayer, in the form of $1000.- accounts within the NZ Super Fund, the money we have saved already.

Jens Meder said...

The economic function of capitalism - the creation (saving) of capital and the useful(profitable) application of it - started with the first laboriously finished stone axe - and is the outstanding difference of human behavior on the material level compared to the overwhelmingly "hand-to-mouth" consumption based survival in the animal kingdom.
In other words - capitalism is a basic economic reality that cannot be altered by human ideology or legislation.
Under free market liberalism it is almost inevitable that persuasive salesmanship to consume even on credit divides the nation increasingly into Haves and Have Nots with mutually conflicting interests.
Overcoming that potential disunity is not in reversing to the situation of 60 years ago which became unsustainable when too many began to rely on what capitalism delivers, without adequate direct participation (saving and investing)in it - but in getting 100% of us to participate in wealth creation and ownership through a basic universal (retirement) wealth savings rate built into the taxation system for contributions into a permanent NZ Super Fund - and by resuming the $1000.- Kiwi Saver kick-start (without a compulsory savings commitment) to all who have not received it yet - from "cradle to grave", which can be done not costinga cent extra to govt. or taxpayer, in the form of $1000.- accounts within the NZ Super Fund, the money we have saved already.

Guerilla Surgeon said...

"The economic function of capitalism - the creation (saving) of capital and the useful(profitable) application of it - started with the first laboriously finished stone axe - and is the outstanding difference of human behavior on the material level compared to the overwhelmingly "hand-to-mouth" consumption based survival in the animal kingdom."

Nonsense. You obviously don't know the proper definition of capitalism.

"In other words - capitalism is a basic economic reality that cannot be altered by human ideology or legislation."

You're on slightly safer ground here. But neoliberalism is basically unregulated capitalism, and regulations are needed to stop the strong preying on the week.

Jens Meder said...

Guerilla Surgeon - what else can you call saving (capital?)for security reserves and investing in something that increases productivity or makes life more comfortable - than capitalism, which is needed even by a Socialist community to get anything done?

The common usage of capitalism as private ownership based enterprise is a misleading legacy of Marxism, reflected in the economic failure of Socialism, apparently not aware, that the priority need to meet all other needs in a sustainable way is profitable capitalism, which up to a point can subsidize unprofitable enterprise and increased consumption potential.

Yes, neoliberalism is unregulated capitalism that increasingly polarizes society into Haves and Have Nots -

but stopping the strong preying on the weak alone does not heal the socio-economic rift between those that have, and those that don't.

That's why the measures as suggested would be an improvement on both the current liberalism and the stalling welfare system of the past, as the "Third Way" not to the Right nor Left, but upwards for all towards what Dr. Skilling of the (now defunct) NZ Institute over 10 years ago termed "Ownership Society", to be initiated by a reasonable retirement "nest egg" to all citizens from birth.

Guerilla Surgeon said...

Capitalism cannot take place as early as you say it does, simply because when the first man made the first stone axe, everybody could make stone axes, so it's not as inherent in human society as you seem to think. It only arises when you have surplus value. Who gets this surplus value, and what it's used for is for ever after a matter of debate.
Ownership society? Well maybe. But isn't that what Tony Blair promised, and was it ever achieved? It was not. And it cannot be realised without some deep thought and some radical changes in society. Maybe as suggested by Thomas Piketty.

Jens Meder said...

But Guerilla Surgeon - precisely because practically everybody could freely choose to take the time off to create the unconsumed "surplus value" of the stone axe, it is the defining difference between human and animal behavior on the material level.

Of course (like say bees & ants) animals also create or save "surplus value" like bears are programmed to store fat for hibernation, and squirrels try to save and store "emergency"(?) nut reserves from surpluses beyond their "hand-to-mouth " needs - but on the human level this has led to an uncountable number of different individual and cultural (social) choices of capitalism, because the "surplus value" according to Marx is nothing but the profits and savings needed for whatever is to be done or created beside the "hand-to-mouth" consumption predominant in the animal kingdom.

Marxian economics is confusingly misleading, because would not the term "surplus value" in the common mind also include impoverishing or wastefully value-less, unprofitable overproduction ?

Guerilla Surgeon said...

Nobody took time off to make stone axes. It was part of your daily life you did it whenever it was necessary. It wasn't unconsumed, it wasn't surplus value. It was a tool, it was eventually used up, and nobody bothered trading them (I imagine hardly at all anyway) because everyone had the skills to make one. There was no need to build up a reserve of axes. I don't know about Marxist economics, but I find your explanations very confusing sorry.

Jens Meder said...

Sorry, Guerilla Surgeon - would you not have to take time off from hunting and gathering to produce a neatly finished stone axe? How can anyone do it without taking time off for it ?

On what grounds do you (seem to) deny this simple reality?(Just an accidental slip?)

Furthermore - is it not "surplus value" you are creating with it, because it is additional to catering for your daily hand-to-mouth nourishment, isn't it ?

And is it not universally natural on the human level, that before long there are stone axe specialists who can make better ones than you, and you find it more efficient and profitable to save or squeeze out a "surplus" from your daily hunt to exchange it for a "professionally" made axe?

And is that not plain capitalism, defined by saving capital and trading or
applying ("investing") it for pleasure or profit?

Please ask or explain what looks dubious or false in the above to you -

and when we come to an agreement eventually, we could discuss the pros and cons about the Ownership Society concept, as the vision ahead along the "Third Way", which originally started over 100 years ago as the social democratic welfare state vision between the extremes of state monopoly capitalist Socialism, and minimally regulated free market "libertarian" capitalism or plutocratic feudalism.

Guerilla Surgeon said...

"How can anyone do it without taking time off for it ?"

Time off from what? Making the axe is part of your job. The hunting and gathering. Not to mention that from what I can gather, hunters actually spent about maybe 15 hours a week in actual hunting. They had more leisure time in theory than we do. And it's not surplus value, because you keep it for yourself. You don't sit around making axes all day hoping to "sell" them. You make it, you might give it away or even exchange it for something, but as anyone can make one – i.e. there is no real specialisation – there's not going to be any trade as such. No one makes a stone axe much better than anyone else. It's not a better mousetrap. If you invent a better one, then anyone can copy it, because the skills are ubiquitous.
Surplus value is the difference between the exchange value, and the use value. In other words, what you are given for your labour, and what the product is sold for. It's meaningless in a hunter gatherer society, because there are no wages, and there are no employers. Hunter gatherer societies are pretty much egalitarian.
I think you are trying to establish a new definition of surplus value. Simply stuff that we produce that we don't need immediately or even ever. Maybe you should describe it as something else, because basically surplus value is taken. It's a technical term.

Guerilla Surgeon said...

Here's another thought. Perhaps simpler. Without an agreed on medium of exchange – i.e. money – how do you calculate your profit? Capitalism is based loosely speaking on profit. Are you going to put everybody on the stone axe standard? If you're exchanging stone axes for mammoth skins, what happens if whoever you're exchanging them with decides they don't need any mammoth skins that year? This is not capitalism, it's just exchanging stuff.

Bushbaptist said...

Best description of the "Free Market" I have read in a while.

http://www.counterpunch.org/2016/07/28/theres-no-such-thing-as-a-free-market/

Jens Meder said...

If we have no measure of value such as money - no widely valid calculation of profit is possible apart from your personal relative needs and priorities such as in a barter economy.
It is not only capitalism that functions for the benefit of profits or fancy ideas (such as building pyramids), but the very survival (or at least physical growth) depends on the profit or surplus of energy reaped over that of energy spent on reaping it.

If there is not that profit in your hunting effort, you starve eventually regardless how long or hard you work on hunting.

An exchange of mammoth skins for stone axes can take place only if surpluses of both are available - so you see, the principle of capitalism operates even without money, and the need for profits or surpluses for energy consuming survival is a law of physics or nature, that applies to all life - and also to human economics which is subject to the laws of physics, and not alterable by ideologies or faith.

And is not an overproduced surplus of mammoth skins or whatever a common experience in capitalism within its function of catering for often unpredictable human needs and fancies ?

Jens Meder said...

With reference to the posting at 15.09 o'clock:

Yes, let us say the hunters etc. society was pretty egalitarian - with everyone owning at least a stone axe if wanted or needed.
This is also the "Ownership Society" (OS) principle - that to heal the inevitable inequality of "haves" and "have nots" resulting from unrestrained "free market liberalism", a universal systematic effort towards at least a minimally meaningful level of personal wealth ownership by all citizens eventually - would not only - to some extent - restore original egalitarianism, but also eliminate hand-to-mouth subsistence poverty in a more constructive way, than relying on poverty alleviation only through redistribution of income alone, which perversely subsidizes poverty rather than healing it.

But before discussing whether the "OS" is desirable or how to achieve it, the "surplus" still needs to be clarified:

Regardless how you survive, if it is not at (an unprofitable activity) starvation level, each one of us is capable of producing "surplus value" by consuming "hand-to-mouth" less than whatever is available for consumption - and saving it for reserves, investment, or exchange for something else more desirable - and without that surplus value or saving at the expense of consumption potential, there would be no humans apart from those living off the free gifts of nature only.

If in doubt about that, please come up with just one theoretical or practical example to refute that.

(If you have seen a smoothly polished stone axe in a museum - well, how many of us would be willing or even capable of producing one? Would not common sense have introduced some division of labour even among our pre-stone-age ancestors ?

Guerilla Surgeon said...

Jens. We are now talking past each other, so I'll just make one final comment.
1. You misunderstand Stone Age society.
2. You misunderstand the relationship between Stone Age people and animals and tools.
3. You are trying to redefine capitalism. It doesn't work.

Just one example. In hunter gatherer societies there is no surplus. If you use too much, the population eventually falls. You don't use too little, because then you starve. After killing off the mega fauna, Stone Age societies became aware that there was a balance to be struck, and they struck it. This was achieved by birth control, or at least spacing children – and limits on consumption. There have to be limits on consumption, because there was really on the whole no way of preserving surplus for later. That tended to come with agriculture.

Jens Meder said...

Still, bushbabtist's "Best description of the "Free Market" as seen by "The Fearless Voice of the American Left" as quoted - needs to be corrected in that it is not on behalf of capitalism - the creation and use of capital - but that it is on behalf of the libertarian version of capitalism that it is claimed to do away with all regulations.

Furthermore, if the American Left believes that (hard) work (labour) alone creates wealth, then that also needs to be corrected.
While it is true that without work nothing gets done at all, without capitalism you cannot even attempt to do anything that needs the input of labour, apart from hand-to-mouth consumption of everything available for that purpose.

Jens Meder said...

Guerilla Surgeon - I agree with you on not continuing the discussion on points 1 & 2, because they alter nothing about what the reality was during the early Stone Age.

But please tell us what word would you recommend to describe the action of saving capital and investing or using it for whatever purpose?

It is Marx who introduced the misleading and economic reality confusing idea (and still widely accepted definition) of equating capitalism with private ownership and enterprise while ignorantly or deliberately ignoring or suppressing the fact, that a Socialist (i.e. a State Capitalist Monopoly) economy is subject to exactly the same laws of physics as private enterprise capitalism, regardless of what people believe in.
Stock Market speculation as an act within capitalism cannot define it, because without capitalism, a stock market would not even exist, the same way as a modern day house would not exist without capitalism - even in a communist society.

Yes, I am trying to correct the false concept of capitalism as projected most noticeably by Marx(ism).

And is it not worthwhile to keep exploring all the possibilities achievable (like prosperity for all?) by limiting consumption for the surpluses required for moving towards those possibilities ?

Guerilla Surgeon said...

No, I believe that within the bounds of his 19th-century upbringing, Marx did a remarkable job of clarifying capitalism as well as defining it. And yes everyone is subject to the same laws of physics, but the laws of economics – such as they are – tend to have a lot of wriggle room. Economists like to see their subject as a science, but I don't believe it is at least yet. I don't understand your last sentence, perhaps you could put it a little more simply.

Jens Meder said...

Well yes, Guerilla Surgeon - Marx certainly did a remarkable job by achieving a world-wide following in believing that capitalism is just private ownership based wealth creation, implying and leading people to believe erroneously, as if socialist and communist wealth creation is not still just capitalism subject to the same laws of physics as private wealth creation and management.

And he did correctly recognize, that liberal free enterprise capitalism inevitably tends to polarize society into haves and have nots towards almost feudalist style plutocracy, because above a certain level of wealth - becoming more wealthy is almost automatic when earning more than what you manage to consume.

So this is what I think is worthwhile to discuss in principle for a start, before examining specific policy proposals towards that end -

that the most promising future ahead (while not forgetting to attend to emergencies) - is in a systematic policy towards achieving at least a minimally meaningful level of personal(retirement) wealth ownership by all citizens eventually - not to replace, but to help keeping our universal NZ Super entitlement sustainable from age 65 also after the BBB - Baby Boomer Bulge ?

What do you think of that, Guerilla Surgeon ?

Jens Meder said...

Hi Guerilla Surgeon and all those concerned about the clear evidence of neo-liberalism increasingly converting democracy into elitist plutocracy through the economic power of capital ownership increasingly accumulating to a smaller proportion of the demos - the people.

It is not the freedom to trade that is to be blamed for that - but the liberal freedom of not being obliged to take adequate responsibility for your own prosperity and welfare "tomorrow", preferably including a better start for the next generation as well.

If that proposition is not challenged, then herewith again the simple policy proposition on how to reverse "neoliberalism" without reverting into the welfare unsustainability of 60 years ago, due to the insufficient domestic savings and investment rate in productivity and needed assets construction, so :

What are the pros and cons on a permanent NZ Super Fund, with annual contributions resumed with the help of reversing partly or totally the income tax reductions of 2009 and possibly introducing a very modest and slightly progressive "Financial (capital?) Transactions Tax" (FTT) - but leaving GST in place so the poorest are still kept with a creative function within the people - and resuming the $1000.- Kiwi Saver kick-start to all who have not received it yet - from "cradle to grave", including those over 65 years old, who unjustly did not qualify for Kiwi Saving ?

What other more constructively effective, attractive and simple ways could there be to counteract the harm done by neo-liberalism ?

Jens Meder said...

With no further comments on "Neoliberalism: Coming And Going" - does it mean the Bowalley Rd discussion on that has "fizzled out" with no alternative out of Neoliberalism other than perhaps the expectation of returning to the unsustainably increasing welfare dependency in the past(?) - or with no explicit opposition -

is there perhaps tacit agreement, that the "Ownership Society" concept is the answer to achieving a more egalitarian, fair and better sustainable welfare state ?

But if so, then should we not all be interested in the practical steps to be taken in that direction - and even if not enthusiastic about it - comment in an unbiased and rational way on the pros and cons of a permanent NZ Super Fund, and the $1000.- Kiwi Saver kick-start to all who have not received it yet - from "cradle to grave" ?

Chris Trotter said...

To: Jens Meder.

How well I remember your many contributions to the NZ Political Review, Jens. I also recall that you were arguing exactly the same points back then.

May I suggest that you take advantage of Google's super-simple "Blogger" option to set up your own blogsite to argue for and debate the merits of the "Ownership Society".

On this site, though, the rule remains: "Stay On Topic."

Jens Meder said...

Fair enough, Chris.
But in which more productively disciplinarian and egalitarian way could free market Neoliberalism wane than through a systematic capital wealth savings rate built into the taxation system, with no exemptions to anyone ?