The Economic Failures of Neoliberalism

The Economic Failures of Left Neoliberalism

Let’s get into some research. The first tradeoff is that the economy would become more unequal under neoliberal policy, but that neoliberal policies would also lead to rising GDP growth. This, in turn, would also lead to stronger wage growth, increased mobility, and increased economic dynamism. So went the theory. Inequality did grow across this time period, first on the labor market income side then later on capital income.

The positive effects of more inequality never happened. Starting in 1980, the growth rate of the economy slowed. While the economy grew at 3.9 percent a year from 1950 to 1980, since 1980 it has only grown at a rate of 2.6 percent. Wage growth also slowed, diverging from overall economic growth and productivity growth.

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Where This Leaves Us

These background assumptions have been losing their power since around the middle of the Obama administration. Whether it was ever reasonable to believe them is a good question but besides the point, as these ideas are no longer able to convince liberals to the point that they shut down alternative ideas. Why always presume business and markets are the leaders in innovation and dynamism if the corporate sector looks like an increasingly bloated, shareholder-dominated rent machine? Why assume billionaires are a boom to our society if a majority of people won’t be better off than their parents? Why bother supporting this economic regime if you can’t point to these tradeoffs as having been worthwhile?

There aren’t a lot of convincing responses on the Right either. One reaction is to say nothing has changed, or that the last 40 years since Reagan have been even more about government and socialism rather than a turn to neoliberalism. I don’t think people find that convincing. Another is to try and locate the dysfunction in affirmative government policy, and if we only get government even more out of the way then we’ll make progress. These arguments are not very convincing and certainly not up to the challenge of describing or mitigating against what has happened. United conservative governance failed to do anything meaningful to correct for failed ideas. The current shift Left would have happened even without Trump—though he does accelerate the need for a new set of ideas, because it is ideas about a whole economic regime that are what we need now.

http://rooseveltinstitute.org/the-failures-of-neoliberalism-are-bigger-than-politics/