Saturday, March 04, 2017

Neo-Liberalism Revisited

A contentious debate has erupted amongst Democrats regarding the term neo-liberal.

Leftists (such as myself) use the term derisively to indicate that the Democratic party has become Republican-lite.  The Dems, according to this view, compromised too much since the time of the Reagan Revolution. Bill Clinton ended welfare as we know it and declared the era of big government over.  The power base of the Dems shifted from unions to Wall Street, Silicon Valley, and Hollywood.

Centrists argue that there is still significant space between the Democrats and Republicans.  Democrats still believe in Keynesian economics, and the role of government to regulate the economy, and stimulate the economy in times of recession.

In discussing these views, I was recently informed of an essay by Charles Pierce from 1982, entitled A Neo-Liberal's Manifesto.  I think it captures the essence of neo-liberalism, as neither a totally positive nor totally negative phenomenon.  It was well-intentioned, but not successful as the Republicans got what they wanted in terms of more unbridled capitalism, but surrendered nothing with regard to the economy.

In reviewing Pierce's analysis, the one thing that stands out to me (naturally, given my economic world view) is his "seriousness" regarding government finances:
Another way in which the practical and the idealistic merge in neo-liberal thinking is in our attitude toward income maintenance programs like Social Security, welfare, veterans' pensions, and unemployment compensation. We want to eliminate duplication and apply a means test to these programs. They would all become one insurance program against need.
As a practical matter, the country can't afford to spend money on people who don't need it... as liberal idealists, we don't think the well-off should be getting money from these programs anyway -- every cent we can afford should go to helping those in real need... We are, after all, determined to be practical, not to be the kind of liberal who spends without regard to income.
Politically, this turned out to be a disastrous approach.
  1. The Republicans gave only lip service to the deficit, while Dems were more fiscally responsible.  The effect was that Dems provided less stimulus than the Republicans with their multiple tax cuts.
  2. By means testing government programs, the Dems lost much of the middle class.  "Every cent we can afford should go to helping those in real need" may have been a noble idea, but practically it was not necessary, raised legitimate questions regarding incentives, and led to unnecessarily complex programs such as "ObamaCare".
I still like the Pierce's idea of neo-liberalism for the most part, but the emphasis on fiscal prudence at the expense of broad government programs (helping the middle class as well as the poor) should be changed.

A few additonal of Pierce's neo-liberal thoughts that have not fared well based upon the test of time:
Our hero is the risk-taking entrepreneur who creates new jobs and better products. "Americans," says Bradley, "have to begin to treat risk more as an opportunity and not as a threat."
My observation:  Entrepreneurial "heroes" have too often poisoned our society, whether it be the literal poisons of the fossil fuel folks (e.g. Koch brothers) or the financial poison that has come to dominate our economy.

Note also how poorly many of the cited 1982 neo-liberals have fared.  The Democratic politicians uniformly fared poorly and had little impact on the political landscape (Hart, Babbit, Tsongas, Bradley), while several of the journalists seem to have lost their way  (Kaus, Kinsley).  Charley Pierce himself seemed to devolve into something of a ranting crank.  Of all those mentioned, only James Fallows has my admiration.


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