New IMF Paper Challenges Neoliberal Orthodoxy

[GRhodes]

Good paper, worth reading. However, I doubt it will make a difference as far as what the IMF actually does. They did a staff report on the failure of austerity a few years ago and did exactly what that paper critiqued thereafter. Good reading anyway.

Here's a summary from Nakedcapitalism, with the link to the paper. How many "moderate" and right wing Democrats (in power and on this site) will ignore this? Many, as it challenges the some of the essential elements of the very economic model the Clintons and president Obama support.

http://www.nakedcapitalism.com/2016/05/new-imf-paper-challenges-neoliberal-orthodoxy.html

While the IMF’s research team has for many years chipped away at mainstream economic thinking, a short, accessible paper makes an even more frontal challenge. It’s caused such a stir that the Financial Times featured it on its front page. We’ve embedded it at the end of this post and encourage you to read it and circulate it.

The article cheekily flags the infamous case of the Chicago Boys, Milton Friedman’s followers in Pinochet’s Chile, as having been falsely touted as a success. If anything, the authors are too polite in describing what a train wreck resulted. A plutocratic land grab and speculation-fueled bubble led quickly to a depression, forcing Pinochet to implement Keynesian policies, as well as rolling back labor “reforms,” to get the economy back on its feet.

The papers describes three ways in which neoliberal reforms do more harm than good.

...Overly mobile capital...Austerity...Increasing inequality.

[lakeguy]

1. nice find!

these kinds of studies rarely see the light of day because they don't support the continued flow of resources to the top.

[ReRe]

3. "Neoliberalism: Oversold?"...

... Well now's a fine time to be discovering this, since the neocons have ruined innumerable countries all over the world, including the USA. So, I wonder what the social engineers of the earth are going to do now? Back up? Do they have another trick up their sleeves to take the place of that one? Can we trust anything the IMF says anymore? The many exposes in the last 10 years or so have exposed the truth to the world about the "Chicago Boys" shtick. I will admit I didn't read the whole article. (Been reading all night...eyes about gone. ) Have marked to come back to.

[Dhantesvz]

4. As an econ major

As an economic undergraduate, hoping to go to graduate school, my impression has been that Conservative Neoliberalism isn't seen as mainstream but is in fact a fringe element of the economic community, kind of like climate deniers. Now I could be wrong but that is the general perception at my university economic department. Though my interpretation is that there is a lot of room between the failed Neoliberal policies of South America US colonialism and being pro free trade. I mean I consider myself very liberal, pro union, and probably plan to specialize in Marxist economics but so far in my studies FAIR free trade still makes sense in terms of an efficiency point of view and should be encouraged. With that said free trade does not = austerity.

[Hortensis]

7. For 30 years ultraconservative billionaires

have been funding schools of economics, law, government, etc., at most American universities to move their fringe ideology into the mainstream, displacing mainstream thought and moving an entire nation right.

Want the money, turn your heads to the ideology being pushed. The laissez-faire, anti-regulation, privatizing, anti-taxation form "neoliberalism" takes today is of course extremely right wing.

Grimly, UCLA I believe was one of very few to say no over the years, and perhaps yours also -- although you might want to be careful where you pursue an advanced degree. These schools have very benign-sounding names that give little or no clue to what their occult purpose is, and of course it's not in the prospectus.

Btw, what a great field to study. If I could go back...

[GRhodes]

9. I have a background in economics

hope to start a PhD in a couple years. I wish you luck. The truth is that there are very few heterodoxical schools out there. UMKC and UMass Amherst a two, there are a few others. However, most schools teach macroeconomics with microeconomic foundations. "Liberals" like Krugman are proud of this fact. Their solutions to environmental issues is to not limit the role of markets, since markets miss massive amounts of information, but to expand the role of markets to places they shouldn't. They generally give very superficial views on things like free trade and ignore the fact that people like David Ricardo and Adam Smith explicitly said that they assumed that factories would NOT go from country to country freely, labor and goods would (which is the opposite of today). They also almost entirely ignore the role that protectionism has played in economic development. The US developed behind the highest industrial tariffs in the world for a century and a half and most every country has developed behind protectionism. If you are interested, read Ha Joon Chang on that.

Also, if you are interested, read the articles at Nakedcapitalism on how Paul Krugman treated heterodoxical economists like James Galbraith in the 1990's and how he treats people like Steve Keen and the MMT school today (notice too how totally off he is on things like how banks and the monetary system works). There's a reason for that stuff.

If you like Marxist/radical economics, check out Michael Hudson, Robin Hahnel, Karl William Kapp, Elinor Ostrom, Michal Kalecki, Ha Joon Chang, Steve Keen, Joan Robinson, James Galbraith, and Joan Martinez Alier. Oh, and Bernie Sanders' top economic advisor, Stephanie Kelton, and her writing on Clinton's supposedly good budget surpluses. Good luck too!

[Dhantesvz]

10. @GRhodes

Just wanted to send you a thank you letter for your post but was waiting until after I finished my term papers for the quarter. Now I have discovered that I have to make 50 posts till I can do that so just wanted to leave a short one here since I'm not sure how long it will take, considering I lurked on this board for about 10 years just reading until now. One of my schools favorite professors does come from UMass Amherst and one of his courses I am right now is conceptualized around the whole Herndon and Reinhart/Rogoff debacle.

Read a few articles off nakedcapitalism and I didn't necessarily agree with some of the ideas that i noticed on there it was still interesting to read. At the moment my macro professor suggested we look at economistview.typepad.com so I try to check out the stories there every other day plus the stuff I get off google news and here but I'm grateful for another site to view.

I feel like my university classes spend a ton of time talking about the failings of capitalism and some time on soviet style communism but I wish there were courses that looked more closely at market socialism; mainly European and Asian economies like China and Vietnam. At the moment I am planning to try take as an elective a history course on 1950 china to modern day just to get some limited economic and cultural information.

[GRhodes]

11. Sounds interesting

If you want something on market socialism, Oskar Lange probably has the most well known market socialist model. You can find his books for pretty cheap. Robin Hahnel has very good critiques of market socialism, as well as communism, and markets entirely. You can see a really good video on youtube called the Case Against Markets. He also has a published article of that title. Well worth reading.

If you're interested in a radical take on China, I would recommend Minqi Li. He's an interesting guy. He took part in the Tiananmen Square uprising, was imprisoned, started to read Marx's economics and turned to the left. He has a good book, called, "The Rise of China and the Demise of the Capitalist World-Economy." You might not agree with everything, but he gives a really interesting tour through China from about the early 19th century until today, with lots of data.

Any rate, good luck.

[Ghost Dog]

5. FT front page? It could make a difference...

...The publication of this IMF paper is a sign that the zeitgeist is, years after the crisis, finally shifting. It is becoming too hard to maintain the pretense that the policies that produced the global financial crisis, which are almost entirely still intact, are working. And the elites and their economic alchemists may also recognize that if they don’t change course pretty soon, they risk the loss of not just legitimacy but control. With Trump and Le Pen at the barricades, the IMF wake-up call may be too late...

[malaise]

6. Thanks

Neo-liberalism is the ideology of the 1%

[pampango]

8. "The paper gratifyingly says that both austerity and highly mobile capital increase inequality, and

inequality is a negative for growth. And it firmly says Something Must Be Done:

The evidence of the economic damage from inequality suggests that policymakers should be more open to redistribution than they are. Of course, apart from redistribution, policies could be designed to mitigate some of the impacts in advance—for instance, through increased spending on education and training, which expands equality of opportunity (so-called predistribution policies). And fiscal consolidation strategies—when they are needed—could be designed to minimize the adverse impact on low-income groups. But in some cases, the untoward distributional consequences will have to be remedied after they occur by using taxes and government spending to redistribute income. Fortunately, the fear that such policies will themselves necessarily hurt growth is unfounded.

In some ways, the fact that this article was written at all, and that it is apparently fomenting debate in policy circles is more important than the details of its argument, since it does not break new ground. Instead, it takes some of the findings and analysis of heterodox and forward-thinking development economists and distills them nicely.

The publication of this IMF paper is a sign that the zeitgeist is, years after the crisis, finally shifting. It is becoming too hard to maintain the pretense that the policies that produced the global financial crisis, which are almost entirely still intact, are working. And the elites and their economic alchemists may also recognize that if they don’t change course pretty soon, they risk the loss of not just legitimacy but control. With Trump and Le Pen at the barricades, the IMF wake-up call may be too late.

Weird to see right wingers like Donald Trump and Marine Le Pen showcased as reasons for economic elites to change course on their prevailing policies of austerity and inequality.

It is gratifying to see the IMF itself recognize that hyper capital mobility and austerity aggravate inequality which is bad, even from an elites' perspective, for growth itself. Perhaps Christine Legarde's past experience as an anti-trust and labor lawyer is causing the IMF to take a different view.