UK Vol.55 (The death of neoliberalism and the crisis in western politics)

Here is an article, The death of neoliberalism and the crisis in western politics: In the early 1980s the author was one of the first to herald the emerging dominance of neoliberalism in the west. Here he argues that this doctrine is now faltering. But what happens next? (21 August 2016) | @martjacques. Excerpts are on our own.

The western financial crisis of 2007-8 was the worst since 1931, yet its immediate repercussions were surprisingly modest. The crisis challenged the foundation stones of the long-dominant neoliberal ideology but it seemed to emerge largely unscathed. … Subsequent economic policy, especially in the Anglo-Saxon world, has relied overwhelmingly on monetary policy, especially quantitative easing. It has failed. …
… Although it failed the test of the real world, bequeathing the worst economic disaster for seven decades, politically and intellectually it remained the only show in town. Parties of the right, centre and left had all bought into its philosophy, New Labour a classic in point. They knew no other way of thinking or doing: it had become the common sense. It was, as Antonio Gramsci put it, hegemonic. But that hegemony cannot and will not survive the test of the real world.
… The effect of the financial crisis was to undermine faith and trust in the competence of the governing elites. It marked the beginnings of a wider political crisis.

… They go to the heart of the neoliberal project that dates from the late 70s and the political rise of Reagan and Thatcher, and embraced at its core the idea of a global free market in goods, services and capital. The depression-era system of bank regulation was dismantled, in the US in the 1990s and in Britain in 1986, thereby creating the conditions for the 2008 crisis. …
It should be noted that, by historical standards, the neoliberal era has not had a particularly good track record. The most dynamic period of postwar western growth was that between the end of the war and the early 70s, the era of welfare capitalism and Keynesianism, when the growth rate was double that of the neoliberal period from 1980 to the present.
… And the problem has grown more serious since the financial crisis. On average, between 65-70% of households in 25 high-income economies experienced stagnant or falling real incomes between 2005 and 2014.
The reasons are not difficult to explain. The hyper-globalisation era has been systematically stacked in favour of capital against labour: international trading agreements, drawn up in great secrecy, with business on the inside and the unions and citizens excluded…
As Thomas Piketty has shown, in the absence of countervailing pressures, capitalism naturally gravitates towards increasing inequality. In the period between 1945 and the late 70s, Cold War competition was arguably the biggest such constraint. …

… This popular revolt is often described, in a somewhat denigratory and dismissive fashion, as populism. Or, as Francis Fukuyama writes in a recent excellentessay in Foreign Affairs: “‘Populism’ is the label that political elites attach to policies supported by ordinary citizens that they don’t like.” …
…a cri de coeur from those who feel they have lost out and been left behind, whose living standards have stagnated or worse since the 1980s, who feel dislocated by large-scale immigration over which they have no control and who face an increasingly insecure and casualised labour market. …
… For many decades, the idea of the “working class” was marginal to American political discourse. Most Americans described themselves as middle class, a reflection of the aspirational pulse at the heart of American society. According to a Gallup poll, in 2000 only 33% of Americans called themselves working class; by 2015 the figure was 48%, almost half the population. …
The re-emergence of class should not be confused with the labour movement. …

The neoliberal era is being undermined from two directions. First, if its record of economic growth has never been particularly strong, it is now dismal. … Economists such as Larry Summers believe that the prospect for the future is most likely one of secular stagnation.
…the recovery has been so weak and fragile… the neoliberal era has delivered the west back into the kind of crisis-ridden world that we last experienced in the 1930s. … Second, those who have lost out in the neoliberal era are no longer prepared to acquiesce in their fate – they are increasingly in open revolt. We are witnessing the end of the neoliberal era. It is not dead, but it is in its early death throes, just as the social-democratic era was during the 1970s.
… From the mid-70s through the 80s, the economic debate was increasingly dominated by monetarists and free marketeers. But since the western financial crisis, the centre of gravity of the intellectual debate has shifted profoundly. This is most obvious in the United States, with economists such as Joseph Stiglitz, Paul Krugman, Dani Rodrik and Jeffrey Sachs becoming increasingly influential. … Thomas Piketty … Tony Atkinson and Angus Deaton … Ha-Joon Chang …

… But the zeitgeist had changed. The membership, especially the young who had joined the party on an unprecedented scale, wanted a complete break with New Labour. One of the reasons why the left has failed to emerge as the leader of the new mood of working-class disillusionment is that most social democratic parties became, in varying degrees, disciples of neoliberalism and uber-globalisation. …
But as David Marquand observed in a review for the New Statesman, what is the point of a social democratic party if it doesn’t represent the less fortunate, the underprivileged and the losers? New Labour deserted those who needed them, who historically they were supposed to represent. …
… Labour, like everyone else, is obliged to think anew. The membership in their antipathy to New Labour turned to someone who had never accepted the latter, who was the polar opposite in almost every respect of Blair, and embodying an authenticity and decency which Blair patently did not. …
Corbyn is not a product of the new times, he is a throwback to the late 70s and early 80s. That is both his strength and also his weakness. He is uncontaminated by the New Labour legacy because he has never accepted it. But nor, it would seem, does he understand the nature of the new era. …

… the condition of the Conservatives is not a great deal better. … It has no idea in which direction to move after Brexit. …
… Meanwhile, the Conservatives seem to have little understanding that the neoliberal era is in its death throes.

… Donald Trump … His message was straightforwardly anti-globalisation. He believes that the interests of the working class have been sacrificed in favour of the big corporations that have been encouraged to invest around the world and thereby deprive American workers of their jobs.
He proposes that US corporations should be required to invest their cash reserves in the US. …
… Given that their wages have been falling for most of the last 40 years, it is extraordinary how their interests have been neglected by the political class. Increasingly, they have voted Republican, but the Republicans have long been captured by the super-rich and Wall Street, whose interests, as hyper-globalisers, have run directly counter to those of the white working class. …
… As in the case of the Republicans, the Democrats have long supported a neoliberal, pro-globalisation strategy, notwithstanding the concerns of its trade union base. Both the Republicans and the Democrats now find themselves deeply polarised between the pro- and anti-globalisers, an entirely new development not witnessed since the shift towards neoliberalism under Reagan almost 40 years ago.
… He points to Japan and South Korea, and Nato’s European members as prime examples. …
…Trump’s position represents a major critique of America as the world’s hegemon. His arguments mark a radical break with the neoliberal, hyper-globalisation ideology that has reigned since the early 1980s and with the foreign policy orthodoxy of most of the postwar period. These arguments must be taken seriously. They should not be lightly dismissed just because of their authorship. But Trump is no man of the left. He is a populist of the right. …
Trump may well… But this does not mean that the forces opposed to hyper-globalisation… will have lost the argument and are set to decline. In little more than 12 months, Trump and Sanders have transformed the nature and terms of the argument. Far from being on the wane, the arguments of the critics of hyper-globalisation are steadily gaining ground. … And, above all else, what will continue to drive opposition to the hyper-globalisers is inequality.