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