Neoliberals - (18.05.03)

Moving on from the unproductive UK economy, in the US the neoliberals have been celebrating 20 years of restructuring the US economy. For those fresh to this term it's pretty much Thatcherism without the focus on privatisation (although the effect on share ownership in the states is much wider, but that's a debate for a different article). Neoliberalism comes down to avoiding government expenditure, deregulation and a social focus on personal responsibility (i.e. low tax no welfare).

For the US in particular, these policies were viewed before implementation under Reganomics as dangerously similar to those that caused the Great Depression in the 1930's. It was the emphasis on middle class tax cuts that sold it to a new generation, a generation with a young and greatly expanded middle class.

So here's the interesting point. In the presence of a stock crash, then why in the US is there not a major call to reject neoliberalism once more. You would expect that the pump priming of George Bush would have been rejected either way, but it is seen as a reasonable short term cash injection rather than rejecting the orthodoxy of a low tax deregulated economy. The answer must be driven by the impact of property and the larger middle class. Unlike the 1930's there is an alternative source of investment to most people separate from the stock exchange, the housing market. As long as their is this alternative source to follow the self-sufficiency dream through unearned income then other economic factors can be ignored.

This becomes almost a Marxist rather than neoliberal perspective. Marxists would argue that the accumulation of capital is consistent with increased corporate profits through driving wages down. This is not to say that corporate profits are increasing, only that they are being maintained through efficiency cost cutting rather than innovation and economy growth (not that a Marxist would argue in favour of those things).

So the chances are that neoliberalism will remain an unchallenged orthodoxy in the US (whatever happens in the rest of the world). Unless rapid inflation becomes more of a concern that accumulation of unearned wealth then the middle classes will remain content. President Bush will continue to win that debate over any counter view of what the US economy needs in the long run. Some could argue that economic policy has been ostrich like on defecits for the past 20 years and that crash will come. There do not seem to be any signs of that happening at the moment though.