Neoliberalism is a global story that has dictated our destiny

In the early ’90s, when I was in my last year of business school in Tunisia, our finance professor, freshly graduated from Paris-Dauphine, one of the most prestigious business schools in France, urged us to get into “financial culture” by reading the Financial Times, as a way of immersing ourselves in capitalism or rather, neoliberalism (he didn’t use any of these words, though). He was very pragmatic but only half right. Most of us were a bunch of “ignorant” kids working hard to obtain a university degree with only the hope to eventually land in a safe job like bank manager or government clerk. Very few of us heard about the “stock exchange,” “derivative products” or even “financial markets” — and even if we did, these concepts were black holes with no clear grasp or discernment. In those times, finance was still synonymous with safe words like “budget,” “investment rate” and “profit ratios.”

Little did we know that in the coming years, the world would start harvesting the fruits of neoliberalist policies implemented respectively in the U.S. and the U.K. by Ronald Reagan and Margaret Thatcher in the ’80s.

Tunisia, a small country in North Africa, wouldn’t be immune to that global overhaul. Indeed, the country experimented with one of the harshest austerity policies dictated by the International Monetary Fund and the World Bank throughStructural Adjustment Programs.

On the surface, this program had a poverty reduction objective — and many infrastructure projects were built, like highways, roads and bridges. Tunisians had access to home ownership programs through easy loans and the most popular initiative was the importation and selling of small Europeans cars at relatively affordable prices. Those cars would soon fill the dense urban space, polluting the landscape and contributing to poor air quality.

These economic policies were accepted with open arms by the business class of the country, which often collides with the political class. Many state-owned companies, like la Société de l’Industrie Laitière (STIL), were sold to private interests at derisory prices with little economic transparency and no political accountability whatsoever. The public wasn’t particularly financially literate and even if they were, political oppression didn’t leave any space for civil scrutiny or criticism.

Missing parts of the story

As a studious pupil, I followed my professor’s advice and started reading the Financial Times, understanding only one per cent of the articles and their accompanying jargon. Gradually, I got familiar with rating agencies like Standard & Poor’s, investment banks like Merrill Lynch, and derivatives products like futures and swaps. Later on, this peek into an unknown world helped me understand basic concepts and paved the road to my future academic endeavours in Montreal at McGill University’s Faculty of Management. But my Tunisian professor told us only half of the story. He didn’t warn us about the social consequences of the neoliberal theories defended by Milton Friedman from the Chicago school or his founding father, Friedrich Hayek.

Once in Canada, I came to better understand capitalist theories started by Adam Smith and his famous “invisible hand.” I also discovered that those experiments didn’t just affect poor countries like Tunisia but also rich countries like Canada. Between 1992 and 1994, Standard & Poor’s downgraded Canada’s credit rating due to its foreign-denominated debt. Former finance minister Paul Martin slashed Canadian spending in an attempt to eliminate the growing deficit and balance the federal budget. Those cuts, praised by the IMF and World Bank, translated into social programs being erased, health and education programs decimated and public infrastructure put on hold. The economy started a new era: the privatization and financialization of sectors like energy, university education, and even prisons.

South of the border, these changes were even more aggressively implemented, with direct consequences.

The 2007-2008 financial crisis brought to the surface the obscure financial tactics used for years with total impunity by the “golden boys,” the smart financial traders that my Tunisian professor admired so much and in whose footsteps he wanted us to follow.

The creation of high-risk securities by repackaging risky mortgages and reselling them to other investment companies with the promise of more profits was behind the sub-prime mortgage crisis that affected many middle-class American families and made them instantaneously homeless and bankrupt. The collateralized debt obligations (CDO), as they were named, were not real financial products; they were “synthetically” constructed by hedge funds and other investment companies through mathematical models and they “derived” their value through other assets which turned out to be extremely risky and led to the fall of the fixed-income market.

U.S. president Obama followed the advice of Wall Street experts and instead of penalizing the real culprits — greedy financial institutions and their CEOs and traders — he “saved” them. He hid behind empty old slogans like “too big to fail,” perpetuated by the tenors of neoliberalism who in other circumstances would never have accepted any intervention from the state into the sacrosanct arena of the economy. But, when financial institutions were on the verge of collapsing, the “invisible hand” became “visible” and cashed billions of dollars of bailout money. The same story could be told about Milton Friedman’s famous line, “there is no such a thing as a free lunch” — Friedman would use this “principle” to explain everything from financial arbitrage to fair market prices and efficient financial markets, but would be unable to rationally explain the “free lunches” distributed to banks and financials institutions after the crisis.

Root causes ignored

In the last U.S. election campaign that led to Donald Trump’s election, little was said about the real causes of the pauperization of the American middle class — as if it was assumed that the economic crisis of 2008 was created by previous U.S. president Obama. Few links were made with the policies initiated by Ronald Reagan and later implemented by Bush the elder, Bill Clinton and George W. Bush. These successive economic policies were the seeds of today’s political polarization and economic crisis. Instead, today’s problems are attributed to simplistic rhetoric of “us” versus “them” — where “us” came to represent “white” disadvantaged middle-class families hit by these policies and “them” a sort of a “potpourri” made up of illegal immigrants, Hispanics, refugees, Muslims, Blacks, and everyone else who didn’t look or think like “us,” and most of the time accused of “stealing jobs” and increasing crime rates and violence. This dangerous oversimplification falsely assumes that these formerly praised policies affected only the white middle class, whereas in reality neoliberal policies affected an entire class of workers. The difference is that the impact is felt today by many, including those who used to be relatively well off in past decades.

In the U.S., it is not a secret that the policies of globalization and global trade were pushed by both Democrat and Republican governments, not only nationally but also internationally. In each election or new rounds of trade agreement negotiations, the simple explanation thrown out by politicians to voters was that having our products built in countries like China or India or Mexico would allow “us” to buy cheaper goods, thus making “us” richer. This was relatively accepted until the majority of American jobs were transferred to those countries and most of the profits made by multinational companies evaded the fiscal system and channelled profits and dividends to CEOs through astronomical compensations and extravagant bonuses, keeping U.S. minimum wages always at the bottom.

Neoliberalist policies not only divided the world into “rich” and “poor” countries but went on to exacerbate the wealth gap in each country. In the aftermath of the 2008 financial crisis, the Occupy Wall Street movement was born and the “the 99%” helped bring the inequality debate into the mainstream. This was to no avail as politicians seem to have shifted the debate about economic inequalities to identity politics, as seen in the travel ban in the U.S. and the Brexit vote in the U.K.

Today anti-racist groups, human rights groups, social movements and environmental groups tend to work in silos, each one thinking that they are conducting the mother of all battles. These fights are all crucial but they will never be totally won if neoliberalist policies continue to determine all aspects of our lives and traditional economic growth models are always in charge of our destiny.

This article was published on rabble.ca 

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One thought on “Neoliberalism is a global story that has dictated our destiny

  1. Hi Monia — nice article. I’ve been hammering away about neo-liberalism for a long time. It’s upsetting that not even the NDP will use the word — except probably for Niki Ashton. I joined the party again, just to vote for her. About three years ago, I ran a little contest on my blog. I said that if anyone could spot the word neo-liberalism in a major Canadian newspaper, I’d treat them to a meal for two. Perhaps four months later a friend of mine spotted the word in a guest opinion piece in the Halifax paper. Of course it was written by a progressive woman who I happened to know. I’ve been doing as lot of work lately about the disastrous programming on CBC Radio. You might like my blog: nickfillmore.blogspot.com Please scroll through a few of my past posts. Kind regards, Nick Fillmore

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