The End of Neo-Liberalism? Has Someone Told Bob Rubin?

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Doha is dead. The “bicycle of global trade” as C. Fred Bergsten often called it has stopped. We have yet to see whether the bike falls over — but Joseph Stiglitz is already writing the epitaph.
I think that former Treasury Secretary Robert Rubin will be the most interesting personality to watch in coming months and years as he clearly became the head of the neoliberal movement.
I think that neoliberalism is not really dead; just tuckered out. I think that global trends and habits will morph in some new directions — which I hope will be a smarter globalization than that which we have seen.
But that’s not a given — and no one should underestimate the tenaciousness of ideological economists. More on that soon.
But from Stiglitz:

The world has not been kind to neo-liberalism, that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently, and serve the public interest well. It was this market fundamentalism that underlay Thatcherism, Reaganomics, and the so-called “Washington Consensus” in favor of privatization, liberalization, and independent central banks focusing single-mindedly on inflation.
For a quarter-century, there has been a contest among developing countries, and the losers are clear: countries that pursued neo-liberal policies not only lost the growth sweepstakes; when they did grow, the benefits accrued disproportionately to those at the top.
Though neo-liberals do not want to admit it, their ideology also failed another test. No one can claim that financial markets did a stellar job in allocating resources in the late 1990’s, with 97 percent of investments in fiber optics taking years to see any light. But at least that mistake had an unintended benefit: as costs of communication were driven down, India and China became more integrated into the global economy.
But it is hard to see such benefits to the massive misallocation of resources to housing. The newly constructed homes built for families that could not afford them get trashed and gutted as millions of families are forced out of their homes, in some communities, government has finally stepped in – to remove the remains. In others, the blight spreads. So even those who have been model citizens, borrowing prudently and maintaining their homes, now find that markets have driven down the value of their homes beyond their worst nightmares. To be sure, there were some short-term benefits from the excess investment in real estate: some Americans (perhaps only for a few months) enjoyed the pleasures of home ownership and living in a bigger home than they otherwise would have. But at what a cost to themselves and the world economy! Millions will lose their life savings as they lose their homes. And the housing foreclosures have precipitated a global slowdown.
There is an increasing consensus on the prognosis: this downturn will be prolonged and widespread.

— Steve Clemons

Comments

11 comments on “The End of Neo-Liberalism? Has Someone Told Bob Rubin?

  1. Peter Gerbolka says:

    LIBERALISM: a mental disorder defined by beliefs
    in Marxism, environmental Fascism,
    high taxes, high energy costs,
    constitutional rights for foreign
    terrorists, & profound hatred of
    America !
    synonyms: CAPITULATION, DEFEATISM,
    RUINATION, SUBMISSION,
    ECONOMIC DECLINE,
    MILITARISTIC LOATHING

    Reply

  2. M. Dean Jones says:

    I have to laugh at the quote because, truly, a central bank screwing with the nation’s money supply and interest rates is giant stirring-stick in the pot of the free market. It’s intervention at its most base form and automatically no longer makes the market “free.”

    Reply

  3. PissedOffAmerican says:

    “You criticize me for your interpretation of what I said, not what I actually said….”
    Thats it in a nutshell. Thats what these jackasses do. But you have one thing wrong. Its not their honest “interpretation”. Instead, it is a purposeful misrepresentation of your comments. Its a tactic I see from them time and again.

    Reply

  4. WigWag says:

    I will only say in my defense that my comment consisted of 594 words. Of these only 48 were related to Senator Obama at all.
    The comment was a response to the Steve Clemons post about Joe Stiglitz, Robert Rubin and neoliberalism. Almost the totality of my comment was pertinent to that subject.

    Reply

  5. Paul Norheim says:

    PasificCoastRon,
    running the risk of being a little bit ad hominem here – but
    hopefully not in a nasty way – I have to say that you`re wasting
    your time arguing with WigWag on this particular issue.
    I`ve often disagreed with WigWag at TWN, but usually it has
    also been a pleasure to argue against and discuss with her,
    despite, or precisely because of our disagreements. In my view,
    her judgment is not bad, occasionally excellent, if you see it
    from her point of view, and there is certainly nothing wrong
    with her intelligence or knowledge.
    To her credit, she have declared that she is a zionist. You may
    disagree strongly with her opinions on issues related to this (as
    I have done frequently), but you have to admit that her
    arguments for these related cases are not more stupid, or less
    rational or informed than most of the arguments coming from
    other commentators here, whatever their position.
    But don`t even try to argue with WigWag about Barack Obama.
    Why not? Well, it´s as simple (and mysterious) as this: WIGWAG
    DOES NOT LIKE OBAMA. Nothing wrong with that; we all are
    biased in ways that occasionally are enigmatic even to
    ourselves.
    However, WigWag has made considerable efforts to explain her
    dislike and distrust for Obama: His lack of experience… His
    silence when some talking heads made sexist comments against
    Hillary Clinton… His arrogance… His elitism…. His flip flop…
    And hundreds of other arguments. Much of this seemingly in an
    effort to support her gut feeling: she does not like the guy.
    None of those arguments are really convincing. The accusations
    may be applied to a lot of former candidates or politicians. The
    democratic candidate`s opinions seem to be more in
    accordance with her own opinions than the opinions of the
    republican candidate. And I believe that most of her Obama
    bashing arguments are substitutes and rational support for that
    basic feeling that she probably can`t explain for herself, that
    she simply doesn`t like the guy. If not, she would not spend so
    much energy at TWN in arguing against him, since the majority
    of the commentators here either distrust Obama or see him as
    someone that may be good, may be bad – we just don`t know
    yet (as is the case regarding most presidential candidates: they
    have never been US Presidents before, and you`ll never know
    before they enter the White House).
    My point? WigWag is wasting her (and our) time arguing against
    Obama here. And we are wasting our time (and her) arguing
    against her dislike of Obama. I would recommend you to
    discuss other issues with her. It`s more interesting.
    And if you really, really want to waste your time, try to talk to
    TahoeEditor about Obama.

    Reply

  6. PacificCoastRon says:

    You criticize me for your interpretation of what I said, not what I actually said … and show in the process that you are incapable of understanding what I am trying to get at.
    It is an actual accomplishment, a melding of many tasks and many delegations of authority to many team players, to build a political vehicle THAT BEAT THE CLINTONS who were supported by 70-90% of the Democratic establishment from state to state.
    McCain faced nothing like the same obstacle this time, and he failed when he did face it in ’00. And I said nothing about Obama’s actual success or not once in office, I just said that what I perceived of his character was the only thing that gave me hope. You’ll note I did not describe or contextualize that hope, either absolutely or relative to other phenomena.
    Perhaps I haven’t mentioned it here, but in other forums, during the period we were still considering the trio of McCain, Obama and Hilary, I maintained that American history shows that any of the three could surprise us once in office by unanticipated moves to the right, left or unusual places in the center. (But that it is up to our judgment of character as to what probability we would assign to any particular movement by any particular elected candidate.) And I’ll make no predictions about the success or failure of those moves until we get a lot closer to the events, and I have some context for analysis.
    So anyway, you don’t want to recognize the one HUGE accomplishment that Obama has made, and which gives him a majority of the delegates at the Democratic Convention to certify him as the Democratic nominee. My historical/scientific philosophy does give you the right to make that judgment of the evidence, that this fairly objective (and massive) accomplishment is like nothing, that it’s just a matter of “fancy words.”
    Yet then I also have the right to judge your abilities of judgment. I don’t think much of them.

    Reply

  7. WigWag says:

    The Right Kind of People
    By Edwin Markham
    Dedicated by WigWag to Pacific Coast Ron as a contemplation on knaves and fools
    Gone is the city, gone the day,
    Yet still the story and the meaning stay:
    Once where a prophet in the palm shade basked
    A traveler chanced at noon to rest his mules.
    “What sort of people may they be,” he asked,
    “In this proud city on the plains o’erspread?”
    “Well, friend, what sort of people whence you came?”
    “What sort?” the packman scowled; “why, knaves and fools.”
    “You’ll find the people here the same,” the wise man said.
    Another stranger in the dusk drew near,
    And pausing, cried “What sort of people here
    In your bright city where your towers rise?”
    “Well, friend, what sort of people whence you came?”
    “What sort?” the pilgrim smiled,
    “Good, true, and wise.”
    “You’ll find the people here the same,”
    The wise man said.

    Reply

  8. WigWag says:

    Sorry, PCR, I heard you the first time (and the second time.) I understand that you think that Senator Obama’s exemplary “organizational skills” helped him secure the nomination under adverse circumstances. And I understand that you think you can infer from this that he has the skills necessary to be an excellent president.
    Sorry, but I’m not buying your argument. A few months ago everyone declared John McCain’s nomination dead. He came back from the dead to get nominated. Does this mean his political and organizational skills guarantee that he will be a good president?
    Ronald Reagan created a conservative movement that lasted a generation. His organizational skills, as evidenced by power of the movement that he brought to power, dwarfs what Obama has accomplished. Did that make Reagan a good president?
    And on a personal note, you must be right. I must be a knave or lack “brainpower.” It’s probably both.
    I wish I could be as smart as you!

    Reply

  9. PacificCoastRon says:

    WigWag, you continue with a line of argument that is completely tendentious and discredited … you claim to be an admirer of centrist Democrats, yet you maintain a line of argument on Obama (“he’s just a fancy talker, no substance there”) that just happens to coincide very precisely with the Lines of Argument that McCain and Rove are trying to maintain on Obama … and doing quite well in maintaining on Obama, as every Big Traditional Media article on Obama contains all on McCain’s talking points, while none of their articles on McCain contain Obamam camp talking points.
    For the third time now since Mid-May, I am telling you that Obama has clearly demonstrated by his ACCOMPLISHMENT in organizing a political vehicle that was just big enough to defeat the Hilary/Demo. establishment machine … clearly he knows a thing or two about organizing, at least how to hire a staff that knows about organizing. If you continue to maintain your argument that Obama is “just a fancy talker,” we shall know you for either a troll or an idiot.
    I cry every night that Obama seems determined to use his considerable skills in service of the same tired Democratic Party centrism that has failed America’s citizens so many times since 1988 or so … yet I remain highly impressed by the ultra-coolness of Obama’s character. It’s the only thing that gives me any hope in the situation, he will be capable of intellectual/moral leaps in the face of adversity.
    You, Wigwag, are the exact opposite … stuck on your false line of reasoning, whether by knavery or lack of brainpower, despite repeated evidence that you are 100% wrong.

    Reply

  10. WigWag says:

    Look, I like Joe Stiglitz alot. I was glad when he won his Nobel Prize and I was delighted when Bill Clinton nominated him to be President of the World Bank. The World Bank never had a more articulate, passionate and committed leader fighting for the interests of the less developed nations. And there is no question that he fought the IMF tooth and nail when it tried to impose heartless and counterproductive measures on the developing nations they lent money to.
    As much as I can’t stand Obama, if he would promise to make Joe Stiglitz Secretary of the Treasury, I might actually have to vote for him.
    But with all this said, the comment from Stiglitz that Steve quotes is disingenuous.
    He says, “The world has not been kind to neo-liberalism…It was this market fundamentalism that underlay Thatcherism, Reaganomics, and the so-called “Washington Consensus” in favor of privatization, liberalization, and independent central banks focusing single-mindedly on inflation.”
    He knows perfectly well (but forgets to mention) that neoliberalism was also the ideology of Bob Rubin and the Clinton administration that he served as Chairman of the President’s Council of Economic Advisors (1995-1997). While Reagan and Thatcher may have been neoliberals and while economic growth in their administrations may have been reasonably good, Stiglitz is right; income distribution took a wrong turn in those years.
    The difference is that the neoliberals in the Clinton administration including Rubin and Stieglitz (and Bill Clinton himself) got it right. They weren’t ideologues, they were pragmatists. They were neoliberals, but they were smart neoliberals.
    And the whole thing worked. The American economy experienced its greatest expansion in modern times, income distribution began to improve and a plethora of programs were put in place to protect working and middle class families.
    And it wasn’t just an American expansion. Less developed nations prospered more during those years than at any time in the previous 50. And Stiglitz forgets to mention that when the world economy shuddered as a result of the Asian monetary crisis and the Russian default, it was the neoliberal Bob Rubin and Alan Greenspan (whatever he was in those years) who saved the day. The U.S. economy was so strong in those days that it would have survived those two crises unscathed, but the developing world (and perhaps Europe which had been in a recession)would have suffered. When the world really needed it, that brilliant and capable neoliberal, Bob Rugin came to the rescue. And contrary to Stiglitz, Greenspan and Rubin did it by abandoning the so called central bank “single-minded” focus on inflation.
    Of course, Bill Clinton was more than a good talker. Years of experience in government prepared him to solicit advise from people as diverse as Greenspan, Rubin and Stiglitz (and Lloyd Benson before that)and synthesize their advice to produce economic policies that were stunningly good.
    With Senator Obama we also have a good talker. All we can do is hope that his days as a part time teacher of constitutional law, a state legislator, and a few years as a “community organizer” equip him to do the same thing.
    I have my doubts.

    Reply

  11. Toronto condos says:

    Hi Steve…Reading Mr. Stiglitz´s words I got pretty surprused as I have read one of his big works (Economics, a book recomended for university students), which sounds much more pro-liberalist to me…Anyway, as a person working in the environmnet of the Toronto condos , the last paragraph interested me the most. I would appreciate very much developing those ideas more. They seemed to be little bit more pesimistic. Look, everything today has its pros and cons…there is no an ideal model. If there was not NL, there would be another approach whose shortcomings would be emphasized. This is valid also in the context of real estate. All those problems discussed above are simply too complex to reduce them this way and though provide this narrow onlook. Anyway, thanks for inspiration.
    Elli

    Reply

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