Top positive review
40 people found this helpful
Well worth reading
on 12 September 2011
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.