Well to be honest, I never thought this would be so forthcoming, so, considering this crack in economic consensus has become apparent, what other models of economic growth or sustainability would be preferable? A heavy dose of Keynesianism? But we did that before and it didn’t end so well, that’s why it went out of fashion, the IMF have ran out of ideas.
On a personal note however, this is a long time coming, having read about Jeffrey Sachs, he has alot of explaining to do in regards to that disaster with Russia, in fact, he should be in prison, as he is the lynch-pin of what eventually brought about Putin, along with that other neo liberal economic master Paul Bremner for liquefying the Iraqi economy.
Does this mean, finally, finally, that the financial elites and technocrats are waking up to destabilizing effect this has on peoples lives? Or am I being naive?
I think the article in the OP is a silly overstatement of the actual IMF article. It doesn’t say Neo-Liberalism might not work. It simply raises the idea of slight adjustments to Neo-Liberal policies, not a whole sale rejection.
Neo-liberal. It’s an economic philosophy that supports privatization, deregulation, a minimal government role in economic planning, cutting subsidies to specific industries in favor of general spending on things like education and infrastructure, and free markets. The Heritage Foundation is generally economically neo-liberal, and the Republican party has a pretty strong neo-liberal wing.
As does the Democratic Party. Neoliberalism also includes economic globalization, and both Clintons have taken a resolutely neoliberal approach to trade policy – even though the result ends up being very heavily regulated, in favor of the business interests. Nobody ever said neoliberalism rules out crony capitalism.
Neoliberalism is opposed to crony capitalism. In the neoliberal view, the government isn’t supposed to favor one economic actor over another. It’s supposed to act as an honest broker between rival parties.
No, communism was just as much an abomination in theory as in practice. If something seems great in theory but bad in practice, it just means it’s not so great a theory after all.
While I have been of the opinion that entire IMF leadership from the last 25 years merit an appointment with a firing squad for their slavish adherence to policies which have caused misery, recession and suffering in the Far East in 1997, the Med in the last decade and Russia in the 1990’s. the article is far from a mea culpa.
No it isn’t. What the article says is that currency controls might be a good idea in some instances because they prevent alot of speculative borrowing on the part of poor countries which occasionally lead to currency crises. The idea that currency crises are bad is not a novel insight. The traditional argument against currency controls is that they don’t work and make things worse. If there are situations where they do work it is possible that they might not be a bad idea. That is not revolutionary even if true.
The second idea of the article is that government debt might not be a bad idea in some circumstances. If a government can get people to lend it money it is better to cut the debt over time by having the rate of economic growth be greater than the rate of debt rather than sudden cuts to government spending. This assumes that people want to lend the government money and the government can reduce the rate of spending growth. The article mentions that credible medium term plans are better than sudden changes. The problem with this very few governments that need the IMF have any credibility, medium term or otherwise, so the only way to get people to lend them money is to do actions immediately.
Neither of these ideas is threatening at all to the neo-liberal consensus. However, this is just three economists who work for the IMF, they are not an oracle. It is unlikely that what they find is actually true. It is just one research paper. Neo-liberalism has an unrivaled track record of success everywhere it has been tried and one paper with a couple of quibbles is not going to threaten that at all.
Yes, it seems like Salon’s article is jumping to conclusions by saying “Wrong all along”
After all, the linked article from IMF’s economists (here), says this:
One of the conclusions is that foreign investment in stocks doesn’t necessarily boost the local economy. (Even though other types of foreign investment do benefit).
They also argue that there’s no point for a country like the US to prioritize debt reduction but “It is surely the case that many countries (such as those in southern Europe) have little choice but to engage in fiscal consolidation” so you can’t conclude that these economists disagree with austerity measures in Greece, just that austerity measures in the US aren’t necessary.
This is not a recommendation to throw out neoliberalism, just a recommendation to re-examine a few specific implementations of it.