Amidst the hyperbole and counter-hyperbole of Ute-gate, some words of sense (yes, really) from Mark Latham:
Neoliberalism is not without its shortcomings as an economic philosophy, but one thing its favour is the avoidance of conflicts of interest. As it does not support interventionist industry programs and government hand-outs to the corporate sector, MPs cannot be compromised in their dealings with businesspeople.
–AFR opinion page, 22 June 2009
Andrew Norton 
Is that link correct?
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The AFR is pay to view. The link is to a general story on the ute affair in The Australian.
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Hmmn – whenever socialism is mentioned we have to hear about gulags and starvation, so I think when neoliberalism is mentioned we can also look past the simplistic theory to the practice …. where we find at least as much corruption, favoritism, subsidising and general racketeering as we do with any social democrat sort of government. The Reagan, Bush, Clinton, Bush governments were the high point of neoliberalism, and hardly paragons of probity. Latham seems to be saying that the market is an instrument of ‘fairness’ which is of course ridiculous.
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Russell – The difference is that socialist regimes called themselves socialists, whereas no government I am aware of has ever called itself ‘neoliberal’, and the people who are called ‘neoliberals’ are always critics of corporate pork and favours. To the extent that these people had influence, it was to reduce the level of corporate welfare.
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I guess the governments I referred to were as much neo-con as neo-liberal, so not the best examples.
I still think Latham is confused about degregulation and fairness – poor guy, given the way the tide is running for government intervention, he’s going to be angrier than ever.
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Russell – But corporate handouts have nothing to do with either neoconservatism or neoliberalism. They come from beliefs in industry policy, pork-barrelling, or corruption; plus the occasional temporary and ad hoc measure, which I understand OzCar to be. That governments that are influenced by neo-whatever on some issue does not mean that neo-whatever has anything to do with other issues – especially for corporate welfare where neoconservatism has little to say on the subject and neoliberalism is actively opposed.
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I don’t see how having a “neoliberal” system of government would stop corporate welfare. Because of what public choice theory has taught us, especially work like Olson’s theory of collective action, there will always be lobbying by organised interests who will often prevail over non-organised interests who remain latent, and politicians will respond to this and supply “public bads” like corporate welfare. Unless lobbying and any form of government handouts were completely prohibited by the constitution then I don’t see any way out – And using the constitution to do that would effectively take away more sovereignty from parliament and elected politicians.
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“… no government I am aware of has ever called itself ‘neoliberal’, and the people who are called ‘neoliberals’ are always critics of corporate pork and favours.”
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There was a time when some Latin American politicians called themselves neoliberals. For example, according to John Martz, Jose Joaquin Trejos Fernandez successfully campaigned for the presidency in Costa Rica in 1966.
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“Characterizing himself as a ‘neo-liberal,’ Trejos discussed economic policies along fundamentally laissez-faire lines. His audiences were told that traditional Costa Rican politics was inherently devious and unsavory , and that he, a man of integrity who was completely free of prejudicial political commitments, could restore stature to political life. His campaign was liberally dotted with the slogan ‘manos limpios’ — clean hands.”
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Of course these days ‘neoliberal’ means helping a handful of rich people get even richer. Nobody’s too interested in distinguishing between promoting inequality by impartially enforcing a set of rules or promoting inequality by outright cronyism.
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A lot of neoliberalism’s critics think that kind of distinction is just splitting hairs.
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Krystian – You are right that favours in politics can never be eliminated. But we only need to look at how Western governments are run to the way governments run in the rest of the world to see that we have created a strong political culture that separates the idea of a public office from the other interests of the people who hold those offices. That minor favouritism to some car dealers is being taken seriously as a potential scandal indicates that this is a strong part of the political culture.
There have also been significant public policy improvements that reduce special deals and favours: eg reduced tariff protection, competition law, a single GST replacing many specialised taxes, competitive tendering for government contracts. Public choice theory can be taken as saying ‘give up’, but I think the historical record shows that it is possible to improve things.
Don – Thanks for the Costa Rican example; I expect to see the detail in the Policy article:) Was he actually able to reduce the power of special interests in Costa Rican politics, or is Krystian’s analysis right?
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True, I think we can change the political culture and that can and does decrease potential conflicts of interests – I was just responding to the sweeping generalisation in the statement by Mark Latham.
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This rather reminds of the suggestion, made with all seriousness during the Roger Douglas era that the Business Roundtable were the only lobby that weren’t pushing for a sectional interest. Oddly enough, the policies pursued in this period greatly enriched the groups represented on the Business Roundtable. And since growth in this period was miserably slow, this enrichment was pretty clearly at the expense of everyone else.
Looking at the Australian scene (and noting Latham as an exception) it’s notable during the period of neoliberalism that virtually everyone with any success in politics expects (correctly in most cases) to be able to parlay this into (at the very least) a lucrative sinecure in the business world.
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If big business still thinks that political networks are highly valuable (as they reasonably do) then perhaps ‘neoliberalism’ didn’t have so much influence – though as I note in column 9 things did get better for several years. Alas, I fear that a new rent-seeking era has begun.
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RHETORICAL QUESTION FOR Q
John said:
I don’t suppose you could specify which was Australia’s “period of neoliberalism” could you, John, in a way that is consistent with one of the increasingly weakening definitions of it that you have provided on your blog?
(Sorry for raising this again – although I’ve restrained myself for quite a while now – but you do continue to repeat offend).
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Seconded, Tom N, the meaning implied by that comment is ‘that period when people I didn’t like where in power’, I think. In the context of PrQ’s comment, unfortunately, the evil period of n-l is indistinguishable from any other period in the last half-century or so.
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I think these questions are better directed at either Mark L or at Andrew aren’t they? I used the term “neoliberalism” to maintain consistency with the original post, not because it’s my preferred terminology, as Tom N at least should be aware.
More generally, there is of course no precise dating for the period when the Policy Framework That Must Not Be Named was dominant, but that doesn’t mean it never happened.
Conventionally, the beginning is dated to the floating of the dollar in 1983, and I’m happy to adopt that date. Both the post and the comment imply that the period of PFTMNBN is now over, and I’m happy to agree that, at the very least, it has lost its ideological hegemony.
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As regards Tom N’s general critique, it seems to me to be an exercise in avoiding engagement with the issues by quibbling over dates and definitions, and by the kind of rhetorical two-step implied in his jibe about “increasingly weakening definitions”. If I give a short and sharp definition, like “neoliberalism (called economic rationalism in Australia) began with the float and ended with the defeat of the Howard government” you rightly point out that there are sorts of problems with such a claim. On the other hand, if I’m more careful, you come up with comments like the one above.
But, however much you want to avoid naming them, the ideas that dominated policy debate in Australia and elsewhere in the 1980s and 1990s were very different from those that were dominant in earlier decades, and experience has shown those ideas to be false in crucial respects.
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To clarify my last but one comment, I assert that standards of public probity in the Commonwealth government in the period from 1983 to 2007 were far below those prevailing from (to pick a beginning date on which I’m confident) the Curtin government to 1983. Hawke started out well, but things fell off sharply, and Howard held to high standards for a year or so, but other than that there was a steady decline. I’ll post more on this on my blog if I get time.
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JQ says: Looking at the Australian scene (and noting Latham as an exception) it’s notable during the period of neoliberalism that virtually everyone with any success in politics expects (correctly in most cases) to be able to parlay this into (at the very least) a lucrative sinecure in the business world.
Who has done this? Hawke perhaps – I can’t think of anyone else. Hewson took up the kind of thing he had been doing before politics. If you changed “expected” to “hoped” I’d agree.
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Off the top of my head: Wooldridge, Reith, Vaile, Carr, Stockdale, Greiner, Egan. I think I could fill the comments box if I tried.
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Keating and Bracks have also supplemented their parliamentary pensions very nicely with business appointments.
On the other hand, I doubt that John Howard is going to join the big end of town. True, he is about to turn 70, so might have left his run a little late. But even if he’d retired in, say, 2001, it’s unlikely he would adorned the Board of BHP or turned up as an adviser to Macquarie Bank. He just isn’t the type and he probably wouldn’t have got of invitations anyway.
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John,
I’m happy for you to name the period – just not to misrepresent it. In this context, you say that “the ideas that dominated policy debate in Australia and elsewhere in the 1980s and 1990s were very different from those that were dominant in earlier decades, and experience has shown those ideas to be false in crucial respects”. But your ‘(supposedly) debunked economic doctines’ series contains very few ideas that drove policy in Australia.
TN
PS: Latham (as quoted above) didn’t talk about a neoliberal period in Australia – he talked about the benefits of neoliberalism. Clearly, one of the benefits of neoliberalism – as you initially defined it – is that there would be very little scope for business welfare and thus for the corruption associated with it. Of course, since we have never had such a period in Austrtalia, we have never enjoyed those benefits.
PFTMNBN
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“f course, since we have never had such a period in Austrtalia, we have never enjoyed those benefits.”
As I said on my blog, this is a standard piece of rhetoric from apologists for Communism (“never truly tried”). I’ve repeatedly offered users of this line a good deal: I’ll admit that you are totally right, provided you refrain from any participation in policy debate that might sully the purity of your unattainable ideal..
As regards my debunked doctrines series, its focus is international, not specifically Australian. But the argument about privatisation is motivated very much by Australian experience, and, in combination with EMH, the critique applies to financial deregulation, which is (correctly I think) seen as the crucial step in the Australian road to micro reform. Much of my thinking on this topic is informed by the recession of 1989-91 in Australia.
SotR: I agree. In this regard, Howard adheres to the standards of a bygone generation, and I respect him for it.
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Wooldridge, Reith, Vaile, Carr, Stockdale, Greiner, Egan
OK, I hadn’t thought of those. It’s notable that they were not very recent – Carr probably the most recent and I believe his relationship with Mac Bank did not last long. I doubt that the redundant former coalition ministers will get many or any offers. Costello has been trailing his coat but there seems to be no interest in him.
It seems to me that giving former politicians jobs was a passing fad rather than an artifact of neo-whatever. It didn’t take long for people to see that most were useless.
Exceptions are a few like Warwick Smith who built a new career on his abilities rather than any valuable contacts or political knowledge.
On the other side, academic jobs (sinecures?) seem readily available.
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“the ideas that dominated policy debate in Australia and elsewhere in the 1980s and 1990s were very different from those that were dominant in earlier decades, and experience has shown those ideas to be false in crucial respects”.
Too early to tell. I suspect that when we can compare the period, say, 1980-2015 (after recovery from the current problems) with 1950-1980 we will see that the former period was better in terms of productivity improvements, economic growth, prosperity and all the things that follow in most of the developed world.
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NEVER TRULY TRIED
True, but as you also said on your blog, even the neoliberals you most love to hate engaged in business welfare for favoured firms and other interventionist policies. The policies of Howard and Bush II were about as neoliberal, according to the criteria you set out, as Stalin’s were communist. (BTW, I am not an apologist for communism. Its just that I don’t need to pretend in forming my judgments about the likely (adverse) effects of communism that it has truly ever been tried. Accordingly, your communist ‘challenge’ doesn’t have much traction with me).
REJECTED HYPOTHESES
You convincingly demolished the strong form of the EMH that no one in policy circles here ever believed, plus drew a long bow (as I pointed out at the time) between the GFC and the demerits of privatisation. I accept that, as you clarified, your focus was international and not necessarily on what policy economists do. Looking at your recent comments threads, its not clear that all your followers have the same understanding.
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I’d love to know what Latham thinks those shortcomings are. And compared to what? While it’s easy to pick instances of ‘market failure’, these are usually best addressed by fixing the design of the market rather than by giving governments more control over resource allocation decisions.
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Even taking it at face value, the Communism argument is a bit different, isn’t it? We have had extensive experiment with various versions of common ownership of the means of production, and they basically all failed to deliver anything except State control (and in the end they failed to deliver even that).
Whereas we have indeed had numerous experiments in at least neo-liberalism lite, and they have mixed results.
Communism:failed, you’d be a complete fool to want to try it again; Neo-liberalism: results mixed, some impressive-looking apparent successes, worth another look.
Oh, my bad, there’s another argument: Communism can’t be ‘implemented’ but has to spontaneously evolve, and this is the Communism that has never been tried. The easy answer to that is why are we still talking about it then and shouldn’t you get back to the commune ?
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“[Communism] basically all failed to deliver anything except State control (and in the end they failed to deliver even that).”
Well, no. Communism’s never been tried (it would likely fail, but, that’s another debate). Soviet Socialism was actually a staggering success for most of its time. You can’t judge the success and failure of socialism vs the free market without looking to where your examples of each have started from.
Soviet Socialism managed to take a poverty-striken agrarian backwater state in 1917 and developed its industry and education systems quickly such that they became a space-race winning super-power 50 years later — all the while also providing significant material subsidies to other developing socialist nations also climbing out of agrarian industry poverty.
Comparing their success to the USA, already a very healthy economy in 1917 — who managed to make World War I a huge money earner by staying out of the war and selling weapons to both sides, and arguably did much the same for a chunk of World War II too — would be about as fair as comparing the average Soviet Socialist state to the essentially free market economies of Ethiopia and Angola.
The real failure of Soviet Socialism was in human rights and the erosion of personal and political freedoms. The early 1990s heralded a world wide recession, the USSR wasn’t immune, and without material prosperity the lack of freedom became unbearable. Societies will accept one or the other but not both.
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