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The “Neoliberal Agenda” Problem: Sustainability lost in Growth
By admin June 1, 2016

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A recent essay titled “Neoliberalism: Oversold?” published by the International Monetary Fund (IMF) has caused some controversy and stirred reactions across the board. The piece aims to give more nuances to what is famously labeled the “neoliberal agenda”. Neoliberal agenda, a term that is usually used by its critics, points to a set of economic principles which aim at opening-up and deregulating financial markets as a way to boost economic growth. Aditya Chakrabortty, in a celebratory essay in The Guardian, has called this article “the death of neoliberalism from within”. The author explicitly states that “neoliberalism hasn’t delivered economic growth –it only made a few people a lot better off”. Other journalists from news and analysis websites such as Salon, The Independent and Slate among others have also called the piece as the IMF’s confession that neoliberalism has “failed”.

 

The essay ends with the following words: “policymakers, and institutions like IMF that advise them, must be guided not by faith, but by evidence of what has worked”. The same applies to the conclusions of the essay itself: if the essay’s conclusion is used as another weapon in  the far Right’s and far Left’s stockpiles for their ideological war, then policymakers will fall in the same trap as faithful neoliberals fell. However, if it is looked upon as lessons-learned in the labs of development and economic growth models around the world in the last three-decades – we might finally be arriving at a healthy synthesis between two (or more) economic worldviews.

 

So, what is the essay about? The piece, written by Ostry, Loungani, and Furceri, specifically analyzes the neoliberal assumptions about ‘capital account liberalization’ (i.e. removing restrictions on the movement of capital across borders) and fiscal consolidation (i.e. “austerity”). The essay calls for a more nuanced understanding of financial openness. In this view, openness can mean the expansion of global trade, increase in foreign direct investments and the transfer of technology and know-how around the global markets. In this sense, neoliberal agenda has increased opportunities, lifted millions of people out of abject poverty and has boosted technology transfer to many developing countries. What the essay finds problematic is the short-term capital flow (speculative, or hot debt inflows). The essay also mentions a gradual shift of opinions among top-ranking IMF officials about short-term capital inflows. In this view, if an economy is left exposed to global markets and inundated by speculative financial debt inflows, then both the level of inequality and the number of financial crises will increase. Secondly, Governments which show robust economic activity (such as the US or Western European countries) are not necessarily better off by reducing the debt. As long as the debt can be addressed in medium- to long-term organically by economic growth and further development, these governments are not urged to introduce austerity plans.

 

The article does not claim that neoliberalism has crumbled or failed. On the other hand, the main assumptions of neoliberalism are viewed positively: global free trade produces more opportunities and wealth compared to other global economic systems. However two lessons are drawn: first, economic policies should be based on evidence-based case-by-case realities of each country’s socioeconomic realities. Secondly, although growth is good news for any economy, if it is not sustainable growth, then it will leave societies in repeated crises. In other words, the main challenge of neoliberalism, as a set of principles which are faithfully followed globally, is inequality and sustainability of development and economic growth. Instead of celebrating the supposed defeat of IMF, thinkers, scholars and economists should develop a better understanding of long-term economic development and sustainable growth.

 

 

For more information:

Neoliberalism: Oversold?

You’re witnessing the death of neoliberalism – from within

Wrong all along: Neoliberal IMF admits neoliberalism fuels inequality and hurts growth

The IMF Has Not Rejected Neoliberalism Nor Austerity: Rather, They’ve Examined Them

 

 


Thanks for sharing !


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