Welcome to DU!
The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards.
Join the community:
Create a free account
Support DU (and get rid of ads!):
Become a Star Member
Latest Breaking News
General Discussion
The DU Lounge
All Forums
Issue Forums
Culture Forums
Alliance Forums
Region Forums
Support Forums
Help & Search
Neo-liberalism has failed but we still don’t get it
For the few left behind...
Neo-liberalism has failed but we still don’t get it
by Bill Mitchell
One of the puzzles that accompany this gruelling economic crisis is why neo-liberal economic thinking, which when applied caused the crisis and has delivered very little to so many, remains the dominant paradigm in economic policy making and has managed to turn a disaster for practitioners of that ideology into a triumph. How is it that the leading voices now are preaching exactly the same policies that caused the crisis as the solution to the crisis. Is there that much asymmetry? I noted a recent comment on my blog (Tom) that raised issues relating to the philosophy of science along the lines of how are we to judge whether the mainstream macroeconomics paradigm has failed. I understand the demarcation issues involved and the problems of “truth testing”. But we can take a more simple approach to the question. Here are two ways we know that the mainstream approach failed – they didn’t have a clue what was happening in the years leading up to the crisis and now they are scrambling in a stunned state to add banks and financial markets to their defective models. The problem is that they are just building more defective approaches. But the continued dominance demonstrates that their failures are not yet fully understood.
False claims
Prior to the crisis, the mainstream economics profession boasted how they had solved the business cycle by implementing inflation targetting-type policies and pursuing fiscal austerity. This was the narrative of the late 1990s and early 2000s.
The mainstream macroeconomists increasingly tried to claim in the 1990s and up until the recent crisis that they had “won” – been vindicated and those stupid Keynesians would never see the light of day again. They claimed that Keynesian policies had failed and vindicated their view that self-regulating markets would deliver the maximum prosperity for all of us.
It was government that was to blame for any economic ills – unemployment (excessive minimum wages, etc); poverty (welfare reliance); inflation (ill-disciplined central banks and treasuries) – and so the solution was to reduce the role of government in the economy.
read more: http://bilbo.economicoutlook.net/blog/?p=19990
by Bill Mitchell
One of the puzzles that accompany this gruelling economic crisis is why neo-liberal economic thinking, which when applied caused the crisis and has delivered very little to so many, remains the dominant paradigm in economic policy making and has managed to turn a disaster for practitioners of that ideology into a triumph. How is it that the leading voices now are preaching exactly the same policies that caused the crisis as the solution to the crisis. Is there that much asymmetry? I noted a recent comment on my blog (Tom) that raised issues relating to the philosophy of science along the lines of how are we to judge whether the mainstream macroeconomics paradigm has failed. I understand the demarcation issues involved and the problems of “truth testing”. But we can take a more simple approach to the question. Here are two ways we know that the mainstream approach failed – they didn’t have a clue what was happening in the years leading up to the crisis and now they are scrambling in a stunned state to add banks and financial markets to their defective models. The problem is that they are just building more defective approaches. But the continued dominance demonstrates that their failures are not yet fully understood.
False claims
Prior to the crisis, the mainstream economics profession boasted how they had solved the business cycle by implementing inflation targetting-type policies and pursuing fiscal austerity. This was the narrative of the late 1990s and early 2000s.
The mainstream macroeconomists increasingly tried to claim in the 1990s and up until the recent crisis that they had “won” – been vindicated and those stupid Keynesians would never see the light of day again. They claimed that Keynesian policies had failed and vindicated their view that self-regulating markets would deliver the maximum prosperity for all of us.
It was government that was to blame for any economic ills – unemployment (excessive minimum wages, etc); poverty (welfare reliance); inflation (ill-disciplined central banks and treasuries) – and so the solution was to reduce the role of government in the economy.
read more: http://bilbo.economicoutlook.net/blog/?p=19990
10 replies
= new reply since forum marked as read
= new reply since forum marked as read
I think those who do understand must educate, your points are excellent & I've long been a fan of Naomi Klein, she's incredible!
Welcome to DU, hope you expand upon these points here. People read & lurk & what is posted here matters, esp. in these times, everything matters.
