Fisking George Monbiot

It's difficult to be wrong on practically everything in a single article, but George Monbiot manages it in this train wreck on who caused the economic crisis

by Yorker on 15 January 2013 07:15

This fisking relates to a piece by George Monbiot in today's Guardian. Monbiot in italics; me in bold:

How they must bleed for us. In 2012, the world's 100 richest people became $241 billion richer. They are now worth $1.9 trillion: just a little less than the entire output of the United Kingdom.

So what? This is pure class warfare designed to raise the emotional stakes so readers will be less prepared to deal with the anti-intellectual tirade that follows.

This is not the result of chance. The rise in the fortunes of the super-rich is the direct result of policies. Here are a few: the reduction of tax rates and tax enforcement; governments' refusal to recoup a decent share of revenues from minerals and land; the privatisation of public assets and the creation of a toll-booth economy; wage liberalisation and the destruction of collective bargaining.

These issues have, largely, nothing to do with it. Wealthy people are getting wealthier because they are investing in the newly liberalising, and therefore growing, economies of Asia. China is still growing robustly and offers far better returns than in the sclerotic, social democratic economies of Europe.

The policies that made the global monarchs so rich are the policies squeezing everyone else. This is not what the theory predicted. Friedrich Hayek, Milton Friedman and their disciples – in a thousand business schools, the IMF, the World Bank, the OECD and just about every modern government – have argued that the less governments tax the rich, defend workers and redistribute wealth, the more prosperous everyone will be. Any attempt to reduce inequality would damage the efficiency of the market, impeding the rising tide that lifts all boats. The apostles have conducted a 30-year global experiment, and the results are now in. Total failure.

Utter garbage. Western economies have never been so burdened by the state. The share of public spending as a percentage of GDP in OECD countries averages at around 46 percent. In several it is over 50 percent. Taxation and state borrowing have crowded the free market economy out of existence. There are markets, yes, but they're not free. Anyone who owns a small business knows that regulation has never been more intense, or more stifling. The Western economy could only be further away from what Hayek and Friedman would have wanted if they actually became communist states. Free market capitalism this is not.

Before I go on, I should point out that I don't believe perpetual economic growth is either sustainable or desirable. But if growth is your aim – an aim to which every government claims to subscribe – you couldn't make a bigger mess of it than by releasing the super-rich from the constraints of democracy.

Eh? In what way are they released from the constraints of democracy? He's on his class war bandwagon again...

Last year's annual report by the UN Conference on Trade and Development should have been an obituary for the neoliberal model developed by Hayek and Friedman and their disciples. It shows unequivocally that their policies have created the opposite outcomes to those they predicted. As neoliberal policies (cutting taxes for the rich, privatising state assets, deregulating labour, reducing social security) began to bite from the 1980s onwards, growth rates started to fall and unemployment to rise.

See above pointing out that these are not free market economies. Also note that unemployment has been a much bigger problem in countries with rigidly regulated labour markets such as Spain.

The remarkable growth in the rich nations during the 50s, 60s and 70s was made possible by the destruction of the wealth and power of the elite, as a result of the 1930s depression and the second world war. Their embarrassment gave the other 99% an unprecedented chance to demand redistribution, state spending and social security, all of which stimulated demand.

No. The remarkable growth in rich nations was due to reconstruction following the devastation of the Second World War. Thereafter, relatively free economies grew quickly. It was only when the state started to grow in size and to heavily regulate that growth started to slow and unemployment picked up.

Neoliberalism was an attempt to turn back these reforms. Lavishly funded by millionaires, its advocates were amazingly successful – politically. Economically they flopped.

Except in isolated instances in certain sectors of the economy, neo-liberalism never got a look in, despite the bluster from some of its advocates.

Throughout the OECD countries taxation has become more regressive: the rich pay less, the poor pay more. The result, the neoliberals claimed, would be that economic efficiency and investment would rise, enriching everyone. The opposite occurred. As taxes on the rich and on business diminished, the spending power of both the state and poorer people fell, and demand contracted. The result was that investment rates declined, in step with companies' expectations of growth.

The neoliberals also insisted that unrestrained inequality in incomes and flexible wages would reduce unemployment. But throughout the rich world both inequality and unemployment have soared. The recent jump in unemployment in most developed countries – worse than in any previous recession of the past three decades – was preceded by the lowest level of wages as a share of GDP since the second world war. Bang goes the theory. It failed for the same obvious reason: low wages suppress demand, which suppresses employment.

To repeat, countries with less regulated labour markets have had better records on unemployment. This is one reason why despite the recession, UK unemployment has remained relatively low -- significantly below the average in the EU where most countries have more rigid employment laws.

As wages stagnated, people supplemented their income with debt. Rising debt fed the deregulated banks, with consequences of which we are all aware. The greater inequality becomes, the UN report finds, the less stable the economy and the lower its rates of growth. The policies with which neoliberal governments seek to reduce their deficits and stimulate their economies are counter-productive.

The impending reduction of the UK's top rate of income tax (from 50% to 45%) will not boost government revenue or private enterprise, but it will enrich the speculators who tanked the economy. Goldman Sachs and other banks are now thinking of delaying their bonus payments to take advantage of it. The welfare bill approved by parliament last week will not help to clear the deficit or stimulate employment: it will reduce demand, suppressing economic recovery. The same goes for the capping of public sector pay. "Relearning some old lessons about fairness and participation," the UN says, "is the only way to eventually overcome the crisis and pursue a path of sustainable economic development."

Why do you keep referring to the UN, as if any intelligent person even takes them seriously? But finally a point to, sort of, agree on: the bonus thing is a scandal. It's not a scandal that they're trying to delay payments so as to minimise taxes. That's just sensible. But it is a scandal that people who made such a mess of things -- governments bear a greater share of responsibility for the crisis, but the bankers must accept their share too -- are now awarding themselves huge bonuses again, usually having been bailed out by the taxpayer. But that's the social-democratic, corporatist banking sector for you George. It has very little to do with free market theory or practice.

As I say, I have no dog in this race, except a belief that no one, in this sea of riches, should have to be poor. But staring dumbfounded at the lessons unlearned in Britain, Europe and the US, it strikes me that the entire structure of neoliberal thought is a fraud. The demands of the ultra-rich have been dressed up as sophisticated economic theory and applied regardless of the outcome. The complete failure of this world-scale experiment is no impediment to its repetition. This has nothing to do with economics. It has everything to do with power.

You are totally misguided and need to go back to square one with all your thinking.

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