WTO and Neoliberalism

Dear friends and colleagues, the TIME magazine in its August 11 edition wrote that after the latest breakdown of WTO global trade talks, most observers found it hard to escape the conclusion that, this time Doha really was dead. The breakdown may lead into something decisive for the future of resistance against neoliberalism.
Tuesday, August 19, 2008

The World Trade Organization, (WTO), is one of the built-in mechanism for promoting and enforcing global free trade. It helps to draw the rules of international trade. However, it has been mired in controversy and seen to be hijacked by rich country interests, thus worsening the lot of the poor, and accordingly inviting protest and intense criticism.

The following is a posting from Global Issues: http://www.globalissues.org/print/article/42

WTO principles

Founded in 1995 after the 8-year “Uruguay Round” of talks, it succeeded the General Agreement on Tarrifs and Trade (GATT), which was created in 1948 to lower trade barriers. The scope of the WTO is greater, however, including services, agriculture, and intellectual property, not just trade in goods.

The main principles of the WTO boil down to the following:

· Non discrimination

National treatment implies both foreign and national companies are treated the same, and it is unfair to favor domestic companies over foreign ones. Some countries have a most favored nation treatment, but under WTO the policy is that all nations should be treated equally in terms of trade. Any trade concessions etc offered to a nation must be offered to others.

· Reciprocity

Nations try to provide similar concessions for each other.

· Transparency

Negotiations and process must be fair and open with rules equal for all.

· Special and differential treatment

A recognition that developing countries may require “positive discrimination” because of historic unequal trade.

Reality different from the principles

However, in reality, power politics has meant that the WTO has received criticized by various groups and third world countries for numerous things, including

• Being very opaque and not allowing enough public participation, while being very welcoming to large corporations¹. (That doesn’t help the claims of free, open and democratic!)



• That while importing nations cannot distinguish how something is made when trading, though it sounds good at first along the lines of equality and non-discrimination, the reality is that some national laws and decisions for safety and protection of people’s health, environment and national economies have been deemed as barriers to free trade. Take the following as a very small set of examples:

• Countries cannot say no² to genetically engineered food or milk that contains genetically engineered growth hormones known to cause health problem or trees that have been felled from pristine forests and so on.

• Guatemala took efforts to help reduce infant mortality, in accordance with the World Health Organization’s guidelines, and to counter aggressive marketing by baby food companies aimed at convincing mothers their products are superior to the more nutritious and disease-protecting breast milk for their babies. The result? The affected corporations managed to take this to GATT (the predecessor to the WTO) and get a reversal of the law amidst the threat of sanctions³. Profits prevailed.

• Canada complained to the WTO about France’s ban on asbestos⁴. (The previous link also makes the point of how the victim’s views are not heard in WTO proceedings, nor ar they part of the debate, even though there may be thousands of them.)


• The United States’ attempt to ban shrimp caught using apparatus that were harmful to endangered sea turtles has been ruled as WTO-illegal, forcing the US to reverse its decision.


• That instead of respecting the reasons why there has been special and differential treatment for developing countries, rich countries instead want to push poor countries to reciprocate equally, in what would therefore actually be an unequal result (as it would maintain the unequal terms of trade.)

A number of countries have also spoken out⁸ against the WTO saying that there needs to be more co-operation between the North and South (a general term to refer to the Rich and Developing countries, respectively) with regards to international trade.

• During the week of May 20, 1998, celebrations marked 50 years of multilateral trade. However, as the following link mentions, the African nations did not feel that there was much to rejoice at and said that it was a party where only the rich nations has something to celebrate⁹.


• Most people in the world have not benefited from the current form of “multilateral” trading systems.


• At a Mercosur¹⁰ (South America’s Southern Common Market) summit, then South African President, Nelson Mandela, had spoken of the need to ensure that there is more fairness¹¹ in the globalization process. Mercosur is the world’s fourth largest economic power, after the United States, European Union and Japan.


• There have been so many examples, it is impossible to list here. For more, see other parts of this site’s section on Trade, Economy, & Related Issues¹².

Neoliberalism and Corruption

Friends and colleagues, from their origins in the 1940s, the IMF and World Bank have functioned as built-in systemic mechanism of neoliberalism; both are -- in the words of Woods, 1989 -- opposing not only socialism but national capitalism as well, in favor of the progressive extension of international market forces. Both institutions play significant roles in the social construction of global market economies. However, in doing so, they produce policies that encourage corruption in various economies. Well, nonetheless World Bank battles corruption -- but only in some countries. The following are articles that highlighted the issue .

IMF and World Bank Policies that Encourage Corruption
by Anup Shah
http://www.globalissues.org/article/590/corruption#IMFandWorldBankPoliciesthatEncourageCorruption
23 September 2007
. . . At a deeper level are the policies that form the backbone to globalization. These policies are often prescribed by international institutions such as the World Bank and IMF. For years, they have received sharp criticism for exacerbating poverty through policies such as Structural Adjustment, rapid deregulation and opening barriers to trade before poorer countries are economic ready to do so. This has also created situations ripe for corruption to flourish:
As Western governments and the World Bank and IMF shout ever more loudly about corruption, their own policies are making it worse in both North and South. Particularly at fault are deregulation, privatization, and structural adjustment policies requiring civil service reform and economic liberalization. In 1997, the World Bank asserted that: any reform that increases the competitiveness of the economy will reduce incentives for corrupt behavior. Thus policies that lower controls on foreign trade, remove entry barriers to private industry, and privatize state firms in a way that ensure competition will all support the fight.
The Bank has so far shown no signs of taking back this view. It continues to claim that corruption can be battled through deregulation of the economy; public sector reform in areas such as customs, tax administration and civil service; strengthening of anti-corruption and audit bodies; and decentralization.
Yet the empirical evidence, much of it from the World Bank itself, suggests that, far from reducing corruption, such policies, and the manner in which they have been implemented, have in some circumstances increased it. — Dr Susan Hawley, Exporting Corruption; Privatization, Multinationals and Bribery, The Corner House, June 2000 Jubilee Research (formerly the prominent Jubilee 2000 debt relief campaign organization) has similar criticisms, and is also worth quoting at length:
Rich country politicians and bank officials argue that because dictators like Marcos, Suharto, and Mobutu were kept in power with western arms and were given loans to squander on ill-judged and repressive schemes, that the people of those countries—who often fought valiantly against those dictators—cannot be trusted not to waste the money released by debt cancellation. This may seem confusing to people not familiar with the logic of the IMF and World Bank.
In summary:
Creditors colluded with, and gave loans to dictators they knew were corrupt and who would squander the money.
Creditors gave military and political aid to those dictators—knowing arms might be used to suppress popular opposition
Therefore, successor democratic governments and their supporters, who may have been victims of corruption and oppression, cannot be trusted.
To many people in the South, this seems irrational and illogical—the logic of blaming the victim. It is the logic of power rather than of integrity, and is used to benefit the rich rather than the poor in developing countries.
A similar logic argues that if the World Bank and government export credit agencies promoted inappropriate and unprofitable projects, then southern governments proved their inability to control money because they accepted the ill-advised projects in the first place. Thus, if money is released by debt cancellation, it must be controlled by agencies which promoted those failed projects.
This is the logic that says if people were stupid enough to believe cigarette advertising, then they are too stupid to take care of themselves and the “reformed” cigarette companies should be put in charge of their health care.
The same institutions who made the corrupt loans to Zaire and lent for projects in Africa that failed repeatedly are still in charge, but their role has been enhanced because of their success in pushing loans. Can we trust these institutions to suddenly only lend wisely; to not give loans when the money might be wasted?
Preventing new wasted loans and new debt crises, and ensuring that there is not another debt crisis, means that the people who pushed the loans and caused this crisis cannot be left in charge.
The creditors or loan pushers cannot be left in charge, no matter how heartfelt their protestations that they have changed. Pushers and addicts need to work together, to bring to an end the entire reckless and corrupt lending and borrowing habit. — Joseph Hanlon and Ann Pettifor, Kicking the Habit; Finding a lasting solution to addictive lending and borrowing—and its corrupting side-effects, Jubilee Research, March 2000
And in terms of how lack of transparency by the international institutions contributes to so much corruption structured into the system, Hanlon and Pettifor continue in the same report as cited above:
Structural adjustment programs cover most of a country’s economic governance.
… The most striking aspect of IMF/World Bank conditionality [for aid, debt relief, etc] is that the civil servants of these institutions, the staff members, have virtual dictatorial powers to impose their whims on recipient countries. This comes about because poor countries must have IMF and World Bank programs, but staff can decline to submit programs to the boards of those institutions until the poor country accepts conditions demanded by IMF civil servants.
There is much talk of transparency and participation, but the crunch comes in final negotiations between ministers and World Bank and IMF civil servants The country manager can say to the Prime Minister, “unless you accept condition X, I will not submit this program to the board”. No agreed program means a sudden halt to essential aid and no debt relief, so few ministers are prepared to hold out. Instead Prime Ministers and presidents bow to the diktat of foreign civil servants. Joseph Stiglitz also notes that “reforms often bring advantages to some groups while disadvantaging others,” and one of the problems with policies agreed in secret is that a governing elite may accept an imposed policy which does not harm the elite but harms others. An example is the elimination of food subsidies. — Joseph Hanlon and Ann Pettifor, Kicking the Habit; Finding a lasting solution to addictive lending and borrowing—and its corrupting side-effects, Jubilee Research, March 2000
As further detailed by Hanlon and Pettifor, Christian Aid partners (a coalition of development organizations), argued that top-down “conditionality has undermined democracy by making elected governments accountable to Washington-based institutions instead of to their own people.” The potential for unaccountability and corruption therefore increases as well. http://www.thestreetspirit.org/June2006/bank.htm

World Bank battles corruption -- but only in some countries.

Observing the struggles of its sister organization (the IMF), the World Bank has taken a proactive approach to its own crisis of legitimacy by considering extending invitations to Mexico, Turkey, South Korea and China to become full voting members. The World Bank is also investing $30 million in a public relations campaign in an effort to position itself as the premiere lending institution for global efforts to end poverty, protect the environment and address the global AIDS pandemic, as well as to reiterate that it is the world's largest "development" research organization. At the heart of this new media campaign is World Bank President Paul Wolfowitz's new anti-corruption campaign. Given Wolfowitz's recent history as the architect of the Iraq war and occupation -- an undertaking literally drowning under allegations of mismanagement and nepotism -- many see this anti-corruption campaign as grossly hypocritical. Many African leaders have long said that they need Western institutions to aid them in rooting out corruption and ensure transparent governance, since international institutions based in the Global North are complicit in corruption. Recently, European countries have pressured Wolfowitz to put greater emphasis on building institutions to fight corruption in the developing world, rather than simply suspending loans where corruption is suspected. As a result, he began working with shareholders to develop a framework to fight and monitor corruption. The framework will be considered at the next IMF/WB meetings in the Fall of 2006 in Singapore. While welcoming this needed reform, many argue that the World Bank is not applying the same scrutiny to Iraq and Indonesia (where Wolfowitz worked prior to his work in the Bush administration) that is being applied to Chad and the Democratic Republic of Congo. In January, the World Bank cut off $124 million in loans after Chad changed its laws to siphon oil pipeline revenues away from anti-poverty programs; and in March, the Bank imposed rigid conditions on Congo's oil-exporting capacity. The World Bank maintains that Chad, Congo and Sudan may all be eligible for debt relief in the coming months, provided they show proof of economic stability and government reform. Civil society reactions Addressing corruption and the need for basic standards applied to loans and disbursements has been one of the main campaign points of civil society in the Global South for the last 30 years. Campaigners are pleased to see the financial institutions that are the source of so much corruption taking this life-threatening issue seriously. However, ensuring that debt-servicing funds are properly reallocated to address human needs (education, health, etc.) is a process that must involve partnerships between civil society and governments in indebted countries. This process cannot be achieved solely vis-a-vis international institutions. At present, there are seven international bodies that address accountability and transparency in international fund management. If the World Bank wants to add itself to this list, there must first be a proper analysis of why these existing institutions and bodies have not been wholly effective.

The Capital City of Neoliberalism

Friends and colleagues, the following is a brief essay witnessing the fall of a capital city against the invasion of market fundamentalism (or, if you wish, you may read it as a case study about the rise of a Big Village into the capital city of neoliberalism, following fullblown neoliberalism prescriptions in its master plan for urban development).

"It seems that Jakarta has no city planners, only private developers that have no respect for the majority of its inhabitants who are poor (the great majority, no matter what the understated and manipulated government statistics say). The city abandoned itself to the private sector, which now controls almost everything, from residential housing to what were once public areas."

Jakarta: Neoliberal Capital City (or the Capital City of Neoliberalism)

Neoliberal Capital City
The Capital City of Neoliberalism
(Original Title: "Jakarta: In Dire Need of Improvements ". Andre Vitchek Worldpress.org contributing editor July 26, 2007

Today, high-rises dot the skyline, hundreds of thousands of vehicles belch fumes on congested traffic arteries and super-malls have become the cultural centers of gravity in Jakarta , the fourth largest city in the world. In between towering super-structures, humble kampongs house the majority of the city dwellers, who often have no access to basic sanitation, running water or waste management.

While almost all major capitals in the Southeast Asian region are investing heavily in public transportation, parks, playgrounds, sidewalks and cultural institutions like museums, concert halls and convention centers, Jakarta remains brutally and determinately 'pro-market' profit-driven and openly indifferent to the plight of a majority of its citizens who are poor.

Most Jakartans have never left Indonesia , so they cannot compare their capital with Kuala Lumpur or Singapore ; with Hanoi or Bangkok . Comparative statistics and reports hardly make it into the local media. Despite the fact that the Indonesian capital is for many foreign visitors a 'hell on earth,' the local media describes Jakarta as "modern," "cosmopolitan, " and "a sprawling metropolis."
Newcomers are often puzzled by Jakarta 's lack of public amenities. Bangkok , not exactly known as a user-friendly city, still has several beautiful parks. Even cash-strapped Port Moresby , capital of Papua New Guinea , boasts wide promenades, playgrounds, long stretches of beach and sea walks. Singapore and Kuala Lumpur compete with each other in building wide sidewalks, green areas as well as cultural establishments. Manila , another city without a glowing reputation for its public amenities, has succeeded in constructing an impressive sea promenade dotted with countless cafes and entertainment venues while preserving its World Heritage Site at In tramuros. Hanoi repaved its wide sidewalks and turned a park around Huan-Kiem Lake into an open-air sculpture museum.

But in Jakarta , there is a fee for everything. Many green spaces have been converted to golf courses for the exclusive use of the rich. The approximately one square kilometer of Monas seems to be the only real public area in a city of more than 10 million. Despite being a maritime city, Jakarta has been separated from the sea, with the only focal point being Ancol, with a tiny, mostly decrepit walkway along the dirty beach dotted with private businesses. Even to take a walk in Ancol, a family of four has to spend approximately $4.50 (40,000 Indonesian Rupiahs) in entrance fees, something unthinkable anywhere else in the world.

The few tiny public parks which survived privatization are in desperate condition and mostly unsafe to use. There are no sidewalks in the entire city, if one applies international standards to the word "sidewalk." Almost anywhere in the world (with the striking exception of some cities in the United State , like Houston and Los Angeles ) the cities themselves belong to pedestrians. Cars are increasingly discouraged from travelling in the city centres. Wide sidewalks are understood to be the most ecological, healthy and efficient forms of short-distance public transportation in areas with high concentrations of people. In Jakarta , there are hardly any benches for people to sit and relax, and no free drinking water fountains or public toilets. It is these small, but important, 'details' that are symbols of urban life anywhere else in the world. Most world cities, including those in the region, want to be visited and remembered for their culture. Singapore is managing to change its 'shop-till-you- drop' image to that of the centre of Southeast Asian arts. The monumental Esplanade Theatre has reshaped the skyline, offering first-rate international concerts in classical music, opera, ballet, and also featuring performances from some of the leading contemporary artists from the region. Many performances are subsidized and are either free or cheap, relative to the high incomes in the city-state. Kuala Lumpurspent $100 million on its philharmonic concert hall, which is located right under the Petronas Towers , among the tallest buildings in the world. This impressive and prestigious concert hall hosts local orchestra companies as well top international perfor mers. The city is currently spending further millions to refurbish its museums and galleries, from the National Museum to the National Art Gallery . Hanoiis proud of its culture and arts, which are promoted as its major attraction millions of visitors flock into the city to visit countless galleries stocked with canvases, which can be easily described as some of the best in Southeast Asia . Its beautifully restored Opera House regularly offers Western and Asian music treats. Bangkok 's colossal temples and palaces coexist with extremely cosmopolitan fare international theater and film festivals, countless performances, jazz clubs with local and foreign artists on the bill, as well as authentic culinary delights from all corners of the world. When it comes to music, live performances and nightlife, there is no city in Southeast Asia as vibrant as Manila .

Now back to Jakarta . Those who have ever visited the city's 'public libraries' or National Archives building will know the difference. No wonder; in Indonesia education, culture and arts are not considered to be 'profitable' (with the exception of pop music), and are therefore made absolutely irrelevant. The country spends the third lowest amount in the world on education (according to The Economist, only1.2 percent of its GDP) after Equatorial Guinea and Ecuador (there the situation is now rapidly improving with the new progressive government). Museums in Jakarta are in appalling condition, offering absolutely no important international exhibitions. They look like they fell on the city from a different era and no wonder the Dutch built almost all of them. Not only are their collections poorly kept, but they lack elements of modernity there are no elegant cafes, museum shops, bookstores or even public archives. It appears that the individuals running them are without vision and creativity. However, even if they did have inspired ideas, there would be no funding to carry them out.

It seems that Jakarta has no city planners, only private developers that have no respect for the majority of its inhabitants who are poor (the great majority, no matter what the understated and manipulated government statistics say). The city abandoned itself to the private sector, which now controls almost everything, from residential housing to what were once public areas. While Singapore decades ago, and Kuala Lumpur recently, managed to fully eradicate poor, unsanitary and depressing kampongs from their urban areas, Jakarta is unable or unwilling to offer its citizens subsidized, affordable housing equipped with running water, electricity, a sewage system, wastewater tr eatment facilities, playgrounds, parks, sidewalks and a mass public transportation system. Rich Singapore aside, Kuala Lumpur with only 2 million inhabitants boasts one metroline (Putra Line), one monorail, several efficient Star LRT lines, suburban tr ain links and high-speed rail system connecting the city with its new capital Putrajaya. The "Rapid" system counts on hundreds of modern, clean and air-conditioned buses. Transit is subsidized; a bus ticket on "Rapid" costs only $.60 (2 Malaysian Ringgits) for unlimited day use on the same line. Heavily discounted daily and monthly passes are also available.

Bangkok contracted German firm Siemens to build two long "Sky Train" lines and one me tr o line. It is also utilizing its river and channels as both public transportation and as a tourist attraction. Despite this enormous progress, the Bangkok city administration claims that it is building an additional 50 miles (80 kilometers) of tracks for these systems in order to convince citizens to leave their cars at home and use public transportation. Polluting pre-historic buses are being banned from Hanoi , Singapore , Kuala Lumpur and gradually from Bangkok . Jakarta , thanks to corruption and phlegmatic officials, is in its own league even in this field.

Mercer Human Resource Consulting, in its reports covering quality of life, places Jakarta repeatedly on the level of poor African and South Asian cities, below metropolises like Nairobi and Medellin . Mercer Human Resource Consulting.

Considering that it is in the league with some of the poorest capitals of the world, Jakarta is not cheap. According to the Mercer Human Resource Consulting 2006 Survey, Jakarta ranked as the 48th most expensive city in the world for expatriate employees, well above Berlin (72nd), Melbourne (74th) and Washington D.C. (83rd). And if it is expensive for expa tr iates, how is it for local people with a GDP per capita below $1,000?

Curiously, Jakartans are silent. They have become inured to appalling air quality just as they have gotten used to the sight of children begging, even selling themselves at the major intersections; to entire communities living under elevated highways and in slums on the shores of canals turned into toxic waste dumps; to the hours-long commutes; to floods and rats. . But if there is to be any hope, the truth has to eventually be told, and the sooner the better. Only a realistic and brutal diagnosis can lead to treatment and a cure. As painful as the truth can be, it is always better than self-deceptions and lies. Jakarta has fallen decades behind capitals in the neighbouring countries in aesthetics, housing, urban planning, standard of living, quality of life, health, education, culture, transportation, food quality and hygiene. It has to swallow its pride and learn from Kuala Lumpur , Singapore , Brisbane and even in some instances from its poorer neighbours like Port Moresby , Manila and Hanoi .

Comparative statistics have to be transparent and widely available. Citizens have to learn how to ask questions again, and how to demand answers and accountability. Only if they understand to what depths their city has sunk can there be any hope of change. "We have to watch out," said a concerned Malaysian filmmaker during New Year's Eve celebrations in Kuala Lumpur . " Malaysia suddenly has too many problems. If we are not careful, Kuala Lumpur could end up in 20 or 30 years like Jakarta !"

Could this statement be reversed? Can Jakarta find the strength and solidarity to mobilize in time catch up with Kuala Lumpur ? Can decency overcome greed? Can corruption be eradicated and replaced by creativity? Can private villas shrink in size and green spaces, public housing, playgrounds, libraries, schools and hospitals expand?

Who are we?

Man is no more free than a slave crawling east on the deck of a ship heading west (Sartre)
For that very reason, do whatever you think and feel is best . . . and let our greater soul do the rest.

Harvard Disorientation Guide to Neoliberalism

Neoliberalism 101

By Ted Lechterman
http://harvarddisguide.blogspot.com/2007/10/neoliberalism-101-by-ted-lechterman.html

Introduction
It’s not your grandmother’s liberalism, that’s for sure. There are, in fact, two brands of neoliberalism. When contrasted against neorealism, neoliberalism can mean the approach to international relations that stresses collective security through interdependence, supranational institutions, and soft power. In the economic realm, however, neoliberalism forms the backbone of the right-wing intellectual movement. Today, neoliberalism—sometimes referred to as free-market capitalism or market fundamentalism—has ascended to the point where it has co-opted the title of “mainstream” economics. While neoliberalism presents a legitimate approach to economics, its hegemony obscures equally legitimate approaches from the fields of study, debate, and policy. The following presents a brief introduction and a critical analysis of certain aspects of neoliberalism, which I will use as a shorthand for the convergence of similar streams of mainstream economic thought. I first examine the reach of neoliberalism’s influence; next I draw out some of its guiding principles before discussing its policy prescriptions and evaluating their impact.

Neoliberalism at Harvard and Beyond
Neoliberalism is the lingua franca of Harvard’s economics department and the only school of thought to which a credulous student of economics will be exposed. [1] Neoliberalism is the guiding philosophy behind the Harvard Corporation, which helps to explain why movements toward socially responsible investing and employment policies encounter bitter resistance. A frequent critic of student labor activism is N. Gregory Mankiw, professor of the giant introductory economics class Social Analysis 10: Principles of Economics (“Ec 10”). Mankiw has worked as chairman of President Bush’s Council of Economic Advisors. Mankiw was preceded by Martin Feldstein, who taught Ec 10 for 20 years and was chairman himself under President Reagan. Feldstein mentored none other than Lawrence H. Summers, former Harvard president, Secretary of the Treasury, and chief economist at the World Bank. Summers, whose economic policies, like those of his colleagues, leaned heavily to the right, in turn mentored the infamous Andrei Shleifer. With the help of Summers, Shleifer later settled a lawsuit with the Justice Department that charged him with defrauding the U.S. Government for corrupt dealings while advising Russian industrial privatisation. While I do not mean to imply a link between neoliberalism and corruption, I do want to emphasize that the political positions and controversies that have become associated with these Harvard economists are not mere coincidences, but rather predictable consequences of neoliberal economic philosophy. Many of President Summers’ polarizing statements, for example, came out of the context of neoliberal policy positions, and, to an extent, Shleifer’s missteps in Russia resulted from the policies he was implementing. These conspicuous characters and events, however, overshadow the day to day influence of neoliberalism at Harvard, where economics is the largest undergraduate concentration and the financial industry draws in the highest percentage of students after graduation.

Economic liberalism has governed several periods of American history, including the period leading up to the Great Depression. The Keynesian welfare state emerged from the Depression and World War II as a model compromise between a growing market economy and an inclusive distribution of wealth. This model lacked the dynamism that many economists believe to be central to economic health. What began as a critique of the largess of the welfare state, however, resulted in a concerted effort to unbridle the forces of capitalism. The progenitors of neoliberalism, such as Friedrich Hayek, Milton Friedman, and Ayn Rand, reacted to the egalitarian ethos of the welfare state with a call to restore the spirit of rational egoism, advocating for a society in which each individual pursues her self-interest. Neoliberalism took center stage during the Reagan Administration, and has been the guiding force behind U.S. economic policy ever since. The so-called Washington Consensus, the term for the neoliberal package of policy prescriptions that the U.S. has exported internationally, now governs the policies of many U.S. allies, recipients of U.S. aid, the Bretton Woods institutions, and the World Trade Organization (WTO). Recently, neoliberalism has been encroaching on the European Union, one of the few remaining bastions for social democracy, such as with the election of Nicolas Sarkozy in France.

What’s Wrong with Self-Interest?

Neoliberalism is the lingua franca of Harvard’s economics department and the only school of thought to which a credulous student of economics will be exposed. [1] Neoliberalism is the guiding philosophy behind the Harvard Corporation, which helps to explain why movements toward socially responsible investing and employment policies encounter bitter resistance. A frequent critic of student labor activism is N. Gregory Mankiw, professor of the giant introductory economics class Social Analysis 10: Principles of Economics (“Ec 10”). Mankiw has worked as chairman of President Bush’s Council of Economic Advisors. Mankiw was preceded by Martin Feldstein, who taught Ec 10 for 20 years and was chairman himself under President Reagan. Feldstein mentored none other than Lawrence H. Summers, former Harvard president, Secretary of the Treasury, and chief economist at the World Bank. Summers, whose economic policies, like those of his colleagues, leaned heavily to the right, in turn mentored the infamous Andrei Shleifer. With the help of Summers, Shleifer later settled a lawsuit with the Justice Department that charged him with defrauding the U.S. Government for corrupt dealings while advising Russian industrial privatisation. While I do not mean to imply a link between neoliberalism and corruption, I do want to emphasize that the political positions and controversies that have become associated with these Harvard economists are not mere coincidences, but rather predictable consequences of neoliberal economic philosophy. Many of President Summers’ polarizing statements, for example, came out of the context of neoliberal policy positions, and, to an extent, Shleifer’s missteps in Russia resulted from the policies he was implementing. These conspicuous characters and events, however, overshadow the day to day influence of neoliberalism at Harvard, where economics is the largest undergraduate concentration and the financial industry draws in the highest percentage of students after graduation.

Economic liberalism has governed several periods of American history, including the period leading up to the Great Depression. The Keynesian welfare state emerged from the Depression and World War II as a model compromise between a growing market economy and an inclusive distribution of wealth. This model lacked the dynamism that many economists believe to be central to economic health. What began as a critique of the largess of the welfare state, however, resulted in a concerted effort to unbridle the forces of capitalism. The progenitors of neoliberalism, such as Friedrich Hayek, Milton Friedman, and Ayn Rand, reacted to the egalitarian ethos of the welfare state with a call to restore the spirit of rational egoism, advocating for a society in which each individual pursues her self-interest. Neoliberalism took center stage during the Reagan Administration, and has been the guiding force behind U.S. economic policy ever since. The so-called Washington Consensus, the term for the neoliberal package of policy prescriptions that the U.S. has exported internationally, now governs the policies of many U.S. allies, recipients of U.S. aid, the Bretton Woods institutions, and the World Trade Organization (WTO). Recently, neoliberalism has been encroaching on the European Union, one of the few remaining bastions for social democracy, such as with the election of Nicolas Sarkozy in France.

Neoliberalism begins from a particular view of human nature: homo economicus. The “economic man” is one who acts rationally, by maximizing his self-interest. Self-interest, in this context, traditionally means material resources, though revisionists have pointed out that the maximizandum (i.e., that which we are to maximize) could be any resource, from something as mundane as physical sustenance, to something instrumental like money or power, to something as abstract as happiness. Economic man, and neoliberal thought more generally, engages in instrumental reason, the process of determining the best means to a given end. According to neoliberal psychology, human beings have limited, if any, authentic concern for each other, or for higher principles such as community, religion, justice, or the good life. The economic man, therefore, is invariably selfish, distrustful of cooperative ventures, and pessimistic about human capabilities. He is reminiscent of a being in Hobbes’ state of nature, where a constant war of all against all proscribes social behavior.

We must ask ourselves whether (1) the concept of homo economicus presents an accurate description of human behavior, and (2) whether it presents a desirable or legitimate form of such behavior. I believe it does neither of these. In fact, homo economicus has undergone significant criticism for its atomistic assumptions (cf. methodological individualism) about human sociality; it is continually facing challenges from the natural sciences for its descriptive fallacies, and from normative fields, such as theology and moral philosophy, for the implications of its amoralism.

Despite its dubious claims to truth, just as subatomic particles ground the natural sciences, homo economicus is the fundamental principle of mainstream economic analysis. Even more surprising, given its limited generalizability even at the individual level, homo economicus is extended to analogize aggregate social units, such as the firm and the state. For the firm it has the effect of justifying its raison d’être of maximizing profits for its shareholders and minimizing costs. Likewise it justifies the nation-state as a unitary rational actor attempting to maximize power of one kind or another. Homo economicus thus sustains the corporate ethic that governs the economy and increasingly invades other domains of social life, economizing our relationships with one another. What begins as a claim to scientific impartiality becomes a normative ethic unto itself. Yet neoliberalism often cloaks itself in scientific rhetoric, and its normative underpinnings, which at the very least merit debate, elude the public conscience.

Privatization and “Free” Markets
When neoliberals argue for privatization of government services, they are claiming that private industry, through the profit motive, can run services better or more efficiently than government agencies. Value claims like “better” and “most efficient,” however, beg the question as to what might constitute goodness or efficiency. As I explained earlier, instrumental reason, the process by which one determines the best means to a given end, is the sine qua non of neoliberal thought. Concerns for efficiency and maximization, therefore, always rule out over alternatives. The fact that the profit motive might not be appropriate in many government activities—e.g., health care, defense, education—cannot enter into neoliberal reasoning, and thus often escapes public discussion.

The buzzword “choice” also comes up a lot in the context of privatization. By turning public goods over to individual stewardship, neoliberalism argues that through the ensuing competition of the market individuals can gain more options at various prices. While this may be true, it is rarely desirable. One function of government is to solve collection action problems by holding public goods in common and providing services to which each citizen has an equal claim. Privitization, on the other hand, tends to exacerbate inequalities. For example, those who are already wealthy and financially astute have the most to gain from the privatization of Social Security. Those who have less money often have less time and financial experience to administrate their own retirement funds effectively. Rhetorically, choice benefits everyone. Practically this is rarely the case.

Privitization is one element of the argument for free markets, the idea that governments are maladroit at economic management, and that regulations and taxes infringe on innovation and production. Rather, neoliberals insist, the “invisible hand” of the market will regulate the natural give-and-take of supply and demand. An unregulated market can produce more, they argue, and an ever-enlarging economic pie is best because it provides more “choice,” which benefits everyone. Neoliberals advocate against labor unions and minimum wages, which they regard as artificial barriers to efficiency.

“Free” Trade

According to the theory of comparative advantage, when nations specialize in industries in which they are most adept and trade their excess production, more goods enter into the economy with the potential to benefit all of the trading partners.

In reality, specializing in the production of certain goods takes away a country’s self-sufficiency and leaves it vulnerable to fluctuations in the global economy. Furthermore, the rallying cry of free trade finds conspicuous sympathy from multinational corporations, who are more than happy to exploit untapped markets for labor and consumption in hitherto recalcitrant regions. Free trade contributes to the rise in inequality among nations and the uneven distribution of the benefits and losses from globalization. Neoliberals argue that global poverty is the result of local policies, rather than globalization itself. However, when a developing country, recovering from the yoke of colonialism, finds its options closed off by aggressive foreign investment and dogmatic trading regimes, it is hard to argue that local policies are the result of autonomous choice.

Three Critiques of Market Fundamentalism

1. Inequality and Distributive Justice: It should be no surprise that we enter the world endowed with a set of resources entirely contingent on the family, country, and circumstances into which we are born. Without modest regulation, such as collective bargaining or minimum wages, those of us who must sell our labor fall at the mercy of those born with a better hand of cards. The logic of profit maximization, meanwhile, leads firms to compensate labor at the bare minimum. An unregulated market confers disproportionate benefits to the most well-off while exploiting the labor of the least well-off. These trends tend to be self-reinforcing: increasing concentration of wealth corresponds to an increasing concentration of power in monied interests. Poverty—the inability to provide for one’s basic needs—is but one endemic consequence of inequality.

Neoliberals are generally deaf to concerns about inequality because of their obsession with Pareto optimality. Pareto optimality holds that if someone can be made better off without making anyone else worse off, one can, and one should, make a “Pareto improvement” by accepting the exchange. Economic growth, therefore, takes precedence over economic justice. From this logic, if the rich get richer and the poor stay poor, society experiences a net gain. The logic of Pareto tends to form the horizon of neoliberal responses to distributive justice

2. Public Safety and Environmental Degradation: Without any counterbalance, the lack of regulation under a free market paradigm threatens public health and depletes the environment. Marketing dangerous products and polluting the environment are tremendously efficient practices in the short-run, as firms can write off the costs of safety mechanisms and environmental sustainability. Conservation and wellness only enter into the neoliberal calculus when they can be seen as profitable for one reason or another. Currently, what seems to be most profitable (or least costly) is to use public relations techniques to convince consumers that a particular company or product is “green,” regardless of its true environmental impact. Examine the current ad campaigns of the energy industry for a case in point.

3. Consumer Culture and Escapism: The hegemony of the reigning economic order conspires to convince the losing parties of the inevitability of their plight. The escapism of consumerism and mass-produced popular culture distracts the least well-off from their declining standard of living and erodes civil society. We tend to be much more interested in Paris or Britney’s latest exploits than the fact that 30,000 children under the age of 5 die each day from preventable diseases, or that many of us lack health insurance. Particularly under the gloss of neoliberalism’s scientific rhetoric, the economy as we know it seems monolithic and immutable, so much so that we feel like no amount of our own effort could have an impact. Neoliberalism bears particular blame for this state of affairs because it promotes the skewed distributional patterns that lead to despair and despondency. It encourages the escapist enterprises that prey upon our vulnerabilities and prolong our struggle.

Alternative Schools of Thought

The overriding theme of this piece has been that markets, while appropriate in certain circumstances, can be dangerous in others. Market values need to be weighed against other values, and this is something neoliberalism, the dominant economic ideology of our time, fails to do. How can we promote a dynamic vision of the economy without sacrificing our beliefs about the right and the good? Not all heterodox theories are equally advanced or consistent in their tenets, but an inquisitive student owes it to herself to apprise herself of all the options. A common misconception—one which neoliberal demagogues have relished in perpetuating—is that the only alternative to neoliberalism is some form of socialist command economy. This could not be further from the truth. Countless schools of economic thought are advancing critiques of the reigning dogma as well as alternative ways to organize the production and distribution of resources, particularly with an eye toward social and environmental justice. The onus, however, is on the student to discover these alternatives. Chances are, you won’t find them at Harvard.

Endnotes

[1]: A critic might contend that the Economics Department subscribes, rather, to neoclassical foundations, which might serve as a jumping off point for neoliberal ideology. I argue, however, that neoclassical foundations lend themselves too easily to neoliberal ideology, to the point where distinguishing between the two is not instructive. Whether or not this has always been the case is debatable. Today, though, we see a convergence of neoclassical and neoliberal thought, so much so that to call oneself a neoclassicist but not a neoliberal has become self-contradictory.

Posted by adaner at 10:50 AM

Education in Neoliberalism

Harvard MBAs - Naked Capitalism
April 4th, 2008 by jgoldstein · 1 Comment

This is from a blog called “naked capitalism” - my friend sent me this link because I always make fun of her for wanting to be an economist… pretty much for the sorts of reasons that this study shows…. It couldn’t be a more perfect example of the ‘professionalism’ we read about in class. Can’t decide if its hilarious or depressing.

The Ethics of Harvard MBAs via naked capitalism by Yves Smith on 4/3/08

Bloomberg had a odd article on the varying fortunes of Harvard MBAs (and some alumni of other Harvard graduate programs). It duly notes that they range from unquestioned successes like Lou Gerstner to more controversial figures, such as Jeff Skilling, Paul Bilzerian, Henry Paulson,, Stan O’Neal, and of course, George W. Bush

Generalizing about HBS graduates is tricky. It is the largest graduate school program in the world, turning out roughly 900 MBAs a year, which almost guarantees some heterogeneity in the population, Thus it might be more useful as an indicator of business behavior generally, in part because force of numbers gives Harvard MBAs some sway, in part because the program more so than others sets out to create CEOs, and finally because only a few MBA programs, such as Yale School of Management’s, are highly distinctive (Yale has a strong emphasis on not-for-profit management.

After the accounting scandals of 2002, where Skilling and other Harvard MBAs played high-profile roles, the school studied what it could do to improve the conduct of its graduates. It concluded that students’ ethical compasses were set before they got there, which one could view either as accurate or a way of punting. Thus, the school gave some motherhood statements about changing its admissions policies.

So what has happened? Consider this section of the Bloomberg article:
Harvard Business School’s two-year program instills confidence “to go out and aim high and to think you can work on the world’s stage,” said Scott Snook, an associate professor at the school. Yet, not all students mature psychologically while at Harvard, he said.

Snook studied 50 students from before they enrolled until they graduated in 2006. Using psychological tests and interviews, he found that one-third were still, in respects, stuck in adolescence, and had trouble empathizing.

Snook found another third inclined to define right or wrong in terms of what everybody else is doing. That might explain why even well-educated executives have fallen prey to the subprime- mortgage debacle, he said. Snook said the study will be published this year.

“They can’t really step back and take a critical view,” he said. “They’re totally defined by others and by the outcomes of what they’re doing.”

The subprime-lending spree shows that Harvard and other elite schools fail to mold managers who look beyond self- interest, said Rakesh Khurana, an associate professor at Harvard Business School.

“Business schools as an institution have not effectively addressed this issue of creating a profession that has the capacity for self-regulation,” said Khurana, author of “From Higher Aims to Hired Hands” (Princeton University Press, 2007).

Hhm. It looks that post 2002 study was wrong, or that Harvard did a lousy job of changing its admissions policies.

A final tidbit:
Bush, the first U.S. president with an MBA, has written that Harvard gave him “the tools and the vocabulary” of the business world. Now, in his final year in office, Bush faces a slumping economy and an unpopular war. His approval rating is 32 percent, according to USA Today/Gallup Poll research in March.

Neoliberalism in Education

Neoliberalism is a Contagious Disease

What country do you think the following excerpt from Giroux's chapter (2008) purports to describe?

(a) Indonesia

(b) USA

(c) Indonesia and the USA

(d) none of them

In keeping with the progressive impoverishment of politics and public life over the past two decades, the university is increasingly transformed into a training ground for corporate interests and, hence, receding from its role as a public sphere in which youth can become the critical citizens and democratic agents necessary to nourish a socially responsible future. Strapped for money and increasinghly defined in the language of corporate culture, many universities are now modeled after the wisdom of the business world and seems less interested in higher learning than in becoming licensed storefronts for brand-name corporations -- selling of space buildings, and research programs to rich corporate donors. As higher education is corporatized, young people find themselves on campuses that look like malls . . .. . . . As higher education increasingly becomes a privilege rather than a right, many working-class youth either find it financially impossible to enter college or, because of increased cost, have drop out.
Not surprisingly, students are now referred to as "customers," while some university presidents even argue that professors should be labeled "academic entrepreneours". College presidents are now often called CEOs and have come to be known less for their intellectual leadership than for their role as fund-raisers and their ability to bridge the worlds of academe and business. What was once the hidden curriculum of many universities -- the subordination of higher education to capital -- has now become an open and much-celebrated policy of both public and private higher education. (Giroux, Henry A, Against the Terror of Neoliberalism: Politics Beyond the Age of Greed. London, Boulder: Paradigm Publishers. 2008, pp.102-103).

Even though Giroux refer his description to the US condition, but it applies to other countries as well, perhaps it may also apply to our country. This shows that neoliberalism is indeed a global contagious disease.

Your Govt is infected by neoliberalism disease!

How do you know if your Government is infected by neo-liberalism disease?

You will immediately know it by understanding the main points of neo-liberalism

The main points of neo-liberalism Martinez, (2000).

The rule of the market.
Liberating “free” enterprise or private enterprise from any bond imposed by the government (the state) . . . Calls for total freedom of movement for capital, goods and services . . . unregulated markets is the best way to increase economic growth, which will ultimately benefit everyone.
Deregulation:
Reduce government regulation of everything that could diminish profits . . . including protecting the environment and safety of the job.
Privatization.
Sell state-owned enterprises, goods and services to private investors . . . in the name of greater efficiency.
Cutting public expenditures for social services
Pressuring the poorest people in a society to find solutions to their lack of health care, education and social security all by themselves – then blaming them, if they fail, as “lazy” ("fatalistic", "lack of need for achievement or McCleland's nAch -- added by me), etcetera.

Neoliberalism Kills

NEOLIBERALISM KILLS !!!

The domination of neoliberalism is a victory of ideas, or precisely: a set of myths. Accordingly, to be succesful in overturning the myth we must redouble our efforts to win "the battle of ideas". Winning this battle requires conserted efforts to reveal that neoliberalism functions as "an ideological cover for the promotion of capitalist interests, not as a scientific framework for iluminating the economic and social consequences of capitalist dynamics" (Hart-Landsberg, 2006).

As a set of myths, neoliberalism consists of, among other things, the myth of the superiority of "free trade"; the myth that unregulated free market is essential precondition for the fair distribution of wealth and for political democracy; the myth that economic growth will reach its maximum speed when the movement of goods, services, and capital is unimpeded by government regulation or any "un-natural barriers".

Well yes, the human race on planet Earth, taken as an aggregate mass abstraction, may be getting richer. But there is another side of reality: a new report from the World Institute for Development Economic Research of the United Nation University (as quoted in Hirschhorn, 2006) shows that wealth creation is "criminally" unequal: the richest 1 percent of adults alone owned 40 percent of global assets in the year 2000; the richest 2 percent owned more than half of household wealtyh; and the richest 10 percent accounted for 85 percent of the worl total. The trend shows that the unequal distibution of wealth may get worse; the riche are still getting richer, more millionaires are becoming billionaires.

That leaves very little for the remaining 90 percent of the global population. As for them, the bottom half of the world owned barely 1 percent of global wealth; over 1 billion poor people subsist on less one dollar a day. Even worse, according to Unicef, 30.000 children die due to poverty -- that's over 10 million children killed by neoliberals every year. The poor will not survive neoliberalism!!!

The proposition that unregulated free-market is essential precondition for political democracy, or that economic liberalization is a necessary precondition for political liberalization, is another myth. The reality shows that neoliberals' free market is slowly killing political democrarcy in various part of the world as politics become more and more commodified, as state now makes stronger and stronger alignment with corporate capital, and as the state emphasize more on its policing functions, with a stronger political willingness to punish rather that serve the poor (which are most visible in the increasing use of the coercive state appartuses to arrests homeless, to enforce anti-begging laws, to eliminated side streets vendors, to guard environmentally harmful urban projects, to take a stance on the capitalists side in industrial relations disputes, etc.). Democracy will not survive neoliberal free market!!!.

Neoliberalism kills children, and democracy !!!

Snapshots of Neoliberalism

Faces of Poverty in the Land of Plenty