The Strange Non-Death of Neo-Liberalism [Paperback]

If you want to understand why, despite the failure of the financial system, the model of neo-liberalism continues - read this book.
Firstly it explains what neo-liberalism means and how the concept of the `free' market has been distorted through its use to expand and embed the political, as well as the overwhelming economic power, of large corporations. In particular, the banks believed that they had become so powerful that governments would not allow them to fail (one weapon of the free market). In the meantime, individuals have been left to suffer the consequences of the shift of wealth to the those who run the large corporations and bailing out the banks through the tax system and cuts in public expenditure.
Crouch points to the continuation of the system; fantastic bonuses are maintained and the failure of the financial system has been re-written as a failure of governments to curb their spending.

Neoliberalism is a strange doctrine. It sees market forces as a solution to all problems. If schools are inefficient, introduce market forces. If the water supply is run inefficiently, introduce private monopolies and let market forces work. If the banks collapse, there clearly weren't enough market forces operating: clearly government intervention and tampering were to blame! If a firm pollutes a river and kills the fish downstream, let the fishermen pay the firm enough not to pollute it: let market forces work things out.

In case you think I am taking the Mickey, or living in some parallel universe, let me say that all of the above arguments have been and are being made by neoliberals. So they are a weird, fringe group, right? On the contrary, they are at the centre of economic thinking today, and have been at the forefront of economic philosophy for some thirty years!

Colin Crouch has written a compelling book here, which charts the rise and development of neoliberal thought, which is at the heart of privatization, PFIs, targets, outsourcing and all the other responses to the inefficiencies inherent in the megalithic nationalized industries we inherited here in the '80s. His message is, not to go back to those days, but just try to logically analyze the thinking behind "market forces" and see whether those are really being applied in our current solutions.

Chaper 1, "The Previous Career or NeoLiberalism" is a primer in the rise of the new doctrine, a reaction to the inflationary pressures inherent in the Keynsian approach. He also covers Social Democracy in passing.

Chapter 2, "The Market and its Limitations", examines how the market operates and how it can fail. It is known mathematically that, under well-defined conditions, there is an equilibrium between supply and demand, leading to an optimal "price for everything." However, as Colin points out in this chapter, those preconditions are certainly not met in many situations where its mantra is blindly applied, such as in local monopolies (water), or where there are large barriers to entry to the market (aircraft manufacture). Moreover, not everything has a price (health, education, fresh air and water: my personal list). There are further problems with the mathematical foundations of the market where the volume of transactions is low (housing) because there are then sudden shocks to the market. Customers also need perfect information to make their choice, but this can be manipulated by the big players (Apple, Microsoft), by the media (News International?) and also by large corporations being able to influence government. I might add that, even when there is an equilibrium point in a mathematical system that is of course no guarantee that the system will settle down in that equilibrium, or that such an outcome is desirable: there can by cyclical or chaotic behaviour instead.

Chapter 3, "The Corporate Takeover of the Market" tackles the problems of international corporations that are so big that they can decide the market, influence governments by lobbying and funding election campaigns, and threaten to move abroad if they do not get their way. As of writing (2011) we can see this at work as the banks in the UK fight to avoid being split up, or to have their bonuses curbed. They see themselves as too large and important to the economy to be tampered with and nobody doubts their ability to campaign, overpay, lobby or threaten to move offshore! Plus, they are almost immune from market forces.

Chapter 4, "Private Firms and Public Business", examines the contrast between marketization and privatization. It is one of the most interesting chapters to me. Privatization often did not introduce a market into a nationalized industry (utilities) and moreover was often no better, because of that, than what it replaced (rail). We also see here the neoliberal idea that if a privatized industry fails, it is because of all that interference from the state (regulations) rather than a failure of the philosophy or its application.

Chapter 5, "Privatized Keynesianism: Debt in Place of Discipline", examines a curious artefact of the belief that the state should not intervene in economic cycles. The Keynesian tendency to spend your way out of a depression has been replaced by a privatized version: instead of state debt, individuals themselves take on debt to prime the market multiplier (credit cards, re-mortgaging). This dampened down the boom-bust cycles that plagued earlier years, but led to an even more catastrophic crash in 2011, where even ostensibly well off people faced ruin through debt. The rescue of the banks was totally anti-neoliberal, and yet seen as totally necessary.

Chapter 6, "From Corporate Political Entanglement to Corporate Social Responsibility", looks at some ways in which large corporations make themselves more palatable to the public. Rather than interfere in politics, they take on public charitable work themselves. Of course, this is in direct opposition to the neoliberal view that the firm's sole objective is to maximize shareholders' returns, except that indirectly, for example, Bill Gates' gigantic spending on his charitable foundation might encourage more customers to buy goods from him, and so increase share dividends! The worrying aspect is that what should be public decisions are left to the whim of these profitable enterprises and their captains.

Chapter 7, "Values and Civil Society", was, for me, the weakest part of this book. It looks at how certain professions have their own organizations and code of conduct, and various other "value systems" in society. In a situation where a multinational can impose its will on a nation state and where political parties have lost any contact they once had with the people they represent, it tries to find a meaning for the belief of neoliberals that free markets are "best" for society.

Chapter 8, "What's Left of What's Right", tries to come to some conclusions about the way we should view the aims and methods of society, either global or nation state. Colin seems to reach a conclusion that there are conflicting issues and that neither a massive state nor a massive private sector will deliver all the goods. We the consumers are the powerless ones caught in the middle.

I thought the last two chapters weaker than the first six, but the book is certainly well worth reading. At only 180 pages, it is not difficult to tackle. It certainly gives a better understanding of many issues that all political parties seem quite confused about. Communism isn't the answer, nor is neoliberalism, nor even the lip service paid to neoliberal ideas once they have navigated the political process.

Recommended!

Mr Crouch has presented a clear, readable and I think very important look at the socio/economic structure of modern capitalism over the last three decades or so since the laisez faire, neo liberal, neo conservative, call it what you will, ideology of basically unregulated, free market trading has come to dominate governments, public authorities, political parties and politicians almost the world over. I pause for breath.

The author seems to be well qualified academically for his opinions, he is Professor of Governance and Public Management at Warwick University's Business School. He is a member of the Royal Academy, has worked at the European University Institute in Florence, worked and taught at both Oxford and the L.S.E., has several books and a 194 recorded publications to his name mostly in the field of economic sociology, governance, industrial and labour relations etc. etc.. Hell, he even looks like a Professor on his web site photo!

What he probably does not have experience of is working in some low paid macjob, seeing his job 'outsourced' to a cheaper labour country, seeing his wages and pension rights being squeezed till the pips squeek - if he is lucky enough to have a job, had to survive on sixty five quid a week dole, spent months in the soul destroying search for any employment that will put food on the table. Seeing his kids get qualifications but not a job, ending up slinging pizzas in a hut or retail drudgedy - if they are lucky!

What he has seen in the last 30 years or so is the total demise of those ocupations that soaked up those in the U.K. population who had few or no qualifications. The mining industry, the shipyards and car factories, heavy and light engineering, the merchant navy, product assembly, the hundreds of thousands of clerical and office jobs in insurance companies and banks etc. All gone because the Government is controlled by what is good for big corporations, not what is good for the people.

We elect the governments, pay their wages and expenses. The lobbyists working for big business, the banks and other vested interests pay the 'election', 're-election' and other politican and political party running costs. Urr... sorry, I meant 'donate'. They also pay the fabulous 'consultancy' fees and provide the high paying directorship gigs the politico gets for introducing or voting for business friendly law or regulation. Big business controls more and more of government policies especially in the United States where democracy is but a farce. Difficult to become a candidate, let alone get elected unless you are rich or have some corporation or vested interest bunging millions into your campaign chest.

Professor Crouch expains this a clear and very straightforward way avoiding specialist jargon. He also explains that now some corporations are so big, there is virtually no competition in many markets allowing one conglomerate to dominate - and make up their own rules! Also the power exercised over public policy by corporations whose government service 'contracts' allow for a 'special relationship' with governments and ministers.

One good example, not really touched on in the book is the NHS. Did you vote for a total re-organisation, probable destruction and privatisation of the NHS in the 2010 election? Was it in any Tory or LibDem manifesto, part of the campaign? No, it was bought on by the private healthcare lobby and big business consultants like Ernst & Young - just an example of the power of big business in getting the government to formulate policies that increase or create new profit streams at consumer expense. It is reckoned that at least 20% of taxpayer money spent on the 'reformed' NHS will go straight to massive director salaries and shareholder or private profit. At todays NHS costs that is getting on for £20 billion p.a. that will not be spent on healthcare for the British public. Austere times indeed - for some! Be interesting to add up how much has been 'donated' to Tory party funds, individual ministers and M.P.s by private healthcare firms and their front organisations over the past ten years or so. How many former health ministers and secretaries of state are now in the pay of the private healthcare sector? At least three I know of. Probably a good few 'Lords' as well. Some people might call it corruption on a massive scale, the government calls it lobbying.

However, the Professor does point out that public authorities have been given incentives to open up details of their work to private firms in order to allow said private firms to bid for the same work. (Who says Cameron's 'reforms' are not about selling the NHS off?) We also know the coalition has been talking to German and American firms about running NHS hospitals. The race to the bottom and a two tier system are well under way. To me that just says this was being planned and put into operation long before any new bill was passed by both houses in Westminster.

So far so good. Or not so good depending on your political outlook.

Where I part company with Prof Crouch and why I cannot give the book five stars, is with his so called 'solutions' or lack of them. He thinks that these monster corporations will listen to some sort of reason in their never ending search for that elusive 3% year on year capital accumulation that is basically needed to keep capitalism alive and ticking over. He seems to think we can tame these greed driven beasts by shaming them or dragging them into 'political controversey'. Sorry, does not wash with me, slight reformist tinkering at the edges will not work. I know Marxist/Socialist answers are not the flavour of the day but the only way I see corporations, banks and service companies being put to work for the good of all mankind is by breaking them up and nationalising them, run by the people for the people. Sounds a bit simple but I am but a simple man, a retired working prol who converted to Socialist and Marxist ideas since taking part in the 1966 Merchant Seaman's strike.

Read the book, it is not heavy going, anything but, couple of hundred pages that really are an eye-opener. Read it, get angry and get involved, I believe the author is right that this whole ideology which has so far failed miserably for the vast majority of us, is a threat to democracy and only serves the uber rich elite that own and control the vast proportion of world capital. Then you must decide the way out of this mess.