Sound the alarms! Could the International Monetary Fund be reconsidering neoliberalism? Sadly, no, once we actually read the short document “Neoliberalism: Oversold?”
The title certainly does grab our attention, and on the very first page, there is this highlighted passage: “Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.”
Ah, but disappointment quickly sets in while reading the first paragraph, which purports to hold up Pinochet-era Chile as model “widely emulated across the globe,” including a mention of Chicago School godfather Milton Friedman proclaiming Chile an “economic miracle” in 1982. The actual record is not mentioned, nor is the little matter of military dictator Augusto Pinochet’s wave of terror that killed, imprisoned, tortured and imprisoned tens of thousands mentioned. Details in the eyes of the IMF, we presume.
In reality, Chile’s poverty rate skyrocketed to 40 percent under Pinochet, while real wages had declined by a third and one-third of Chileans were unemployed during the last years of the dictatorship. Unemployment figures do not include the many urban Chileans who worked as “car minders” earning small tips from waving orange rags at motorists pulling into parking spaces and taking the motorists’ coins to insert into parking meters, which Pinochet’s planning minister, a Friedman disciple, declared to be “a good living.” Lavish subsidies were given to large corporations, public spending was slashed and the social security system was privatized. The privatized social security system was so bad for Chilean working people that someone retiring in 2005 received less than half of what he or she would have received had they been in the old government system.
Let us not forget the humanity of those whose lives were crushed by Pinochet and Friedman.
Back to the IMF paper, which defines neoliberalism blandly as “deregulation” and “a smaller role for the state.” A far better definition of neoliberalism is provided by Henry Giroux:
“As an ideology, it construes profit-making as the essence of democracy, consuming as the only operable form of citizenship, and an irrational belief in the market to solve all problems and serve as a model for structuring all social relations.”
The authors of the IMF paper gingerly work themselves up to some mild critiques, lamenting that “The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries” and that “The costs in terms of increased inequality are prominent.” Furthermore, the odds of an economic crash are raised, among other problems:
“Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment. … [I]n practice, episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1 percent of [gross domestic product] increases the long-term unemployment rate by 0.6 percentage point and raises by 1.5 percent within five years the Gini measure of income inequality.”
Decades of stagnant wages, hollowing out of manufacturing bases and steadily increasing inequality, augmented by unsustainable stock-market bubbles and capped by eight years and counting of economic downturn and stagnation, and that is the best the IMF can do? The paper concludes with this passage: “Policymakers, and institutions like the IMF that advise them, must be guided not by faith, but by evidence of what has worked.”
The belief in neoliberalism and austerity, or supply-side economics, or Reaganism, or Thatcherism (whatever we want to call it) has always been based on faith, at least on the part of some of those who promote it. For many other financiers and industrialists, it surely is the case is they knew just what was going to happen and cheered it all the way because they were going to benefit handsomely. Economics may be the dismal science, but dismal though classical economics is, it is far more art than science, as in the art of fleecing.