Neoliberalism and the Decline of Global Growth

The post-World War 2 world saw global growth reach 3.5% in the 1960s and even during the crisis years of the 1970s the world enjoyed 2.4% growth. John Ruggie famously described the international system of this period as ‘embedded liberalism’ (Ruggie, 1982). Industrialised states pursued liberal economic policies but international agreements legitimised state intervention in the economy to protect the interests of labour and the socially marginalised. This was largely a compromise between the interests of labour and capital such that free-markets prevailed but the vulnerable could be protected. Neoliberalism then emerged in the midst of the 1973 oil crisis to break this compromise by prioritising capital and the interests of business primarily through privatisation of services, reduced public spending on social services, and the restriction of power of organisations which represented the interests of workers (Trade Unions). Since the adoption of neoliberalism under Thatcher in the UK, Reagan in the US and promoted globally through the IMF, the 1980s saw global growth fall to 1.4%, 1.1% in the 1990s and less than 1% in the 2000s. Meanwhile the top 1% of earners in the UK increased their share of wealth from 6.5% to 13% (Harvey, 2007). The world is getting poorer and the poor are bearing an ever increasing burden to pay to maintain a global financial system which is keeping them poor. Banks have been bailed out and nationalised because we are told we need them and this is a ‘crisis’. On the other hand, Malaria, an easily preventable disease, kills 800,000 people every year. We hear nothing of this ‘crisis’ because it occurs in regions such as Sub-Saharan Africa which have little political power at the global level and limited economic value. We are now in the midst not of a debt crisis but a growth crisis, which has to be paid for by previously protected vulnerable groups. This is being made worse as the UK continues on an economic course which cuts people's ability to support themselves by cutting pensions and restricting public sector pay so that it does not reflect inflation. Fanatical commitment to neoliberalism has meant that when growth slows, neoliberal states demand that the poor and lower middle classes get paid less in order to ‘balance the books’. This will lead people further into the debt, which is supposed to be the wiped out according to the Conservatives.

The Conservatives did not win the election in the UK outright and they did not outline their plans for pensions, the NHS, and public sector pay in their manifesto. They do not have the mandate to proceed with a plan that promotes the interests of capital over those of labour. Support the strikes before there are no social services left.

References:

Ruggie, John (1982) ‘International Regimes, Transactions, and Change: Embedded Liberalism in the Post-War Economic Order, International Organization, 36/2, pp.379-415.

Harvey, David (2007) ‘Neoliberalism as Creative Destruction’, Annals of the American Academy of Political and Social Science, 610, pp.22-44.