Neoliberalism

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Published on March 12, 2014

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an account of neoliberalism

Neoliberalism and After? Education, Social Policy and the Crisis of Western Capitalism Michael A. Peters University of Waikato September, 2011

The Politics of Neoliberalism

Table of Contents  Introduction  Chapter 1 : Neoliberalism and After? Education, Social Policy and the Crisis of Western Capitalism  Chapter 2: „Individual‟ and „Community‟ as Political and Policy Metaphors  Chapter 3: Neoliberalism, Higher Education and Knowledge Capitalism  Chapter 4: Neoliberal Governmentality: Foucault on the Birth of Biopolitics  Chapter 5: Postmodernity, Neoliberalism and the Restructuring of Education

Cont‟  Chapter 6: The New Zealand Education Experiment  Chapter 7: Rethinking Education as a Welfare Right  Chapter 8: Postmodernity and the Philosophy of Educational Reform  Chapter 9: Governmentality, Education and the End of Neoliberalism?  Chapter 10: The Global Recession, Education and the Changing Economics of the Self  References

Book synopsis  Neoliberalism represents a struggle between two forms of welfare or social policy discourse based on opposing and highly charged ideological metaphors of „individualism‟ and „community‟.  The one form posits the sovereign individual or family emphasizing the primacy over community and State; the other, what might be called a rejuvenated social democratic model, inverts the hierarchy of value to emphasize community or „the social‟ over the individual.  As such it is an intellectual struggle that runs through twentieth century thought and traverses a range of subjects, with roots going back at least to the Enlightenment in different native traditions.  It is therefore complex, subtle and dynamic, changing its historical and disciplinary forms as its matured as a political doctrine, international activist movement, and set of political and policy practices.

The Setting  The Fourth Labour Government, New Zealand, 26 July 1984 to 2 November 1990

Rogernomics  Floating the NZ dollar  Removing farm subsidies  Introducing GST  Reducing income and company tax.  Removing controls on foreign exchange.  Abolishing or reducing import tariifs  Corporatising many SOE (PO, Telecom, AIrNZ); privatisation  Reserve Bank new inflation target.  Improving the reporting and accountability for government expenditure (Public Finance Act, 1989)

„New public management'  a systematic programme of corporatisation, privatisation and commercialisation;  a greater reliance on competitive tendering and contracting out;  the devolution of human resource management to the chief executives of individual departments and agencies;  a move from cash-based to accrual accounting;  improved systems of budgetary control;  a greater reliance on financial incentives;  major changes in institutional design, including the placement of many service  delivery functions in separate, non-departmental agencies.

Problems from the New Public Management Reforms  Fragmentation & proliferation of agencie– – eg. high risk families can be involved with 23 separate agencies  Coordination problems and costs.  Reduced trust & cooperation between agencies.  Reduced public servants capacity to collaborate. (Walker 2004)  Policy/funders isolated from direct accountability to users.  Weakened public service ethic – – corruption.

Distinctive NZ features  Contractualism: governing the relationship between agents and principals within the public sector, as well as between public and private organisations.  Strategic management under which ministers specify their strategic objectives over the medium term and use these to set departmental priorities  Minimisation of provider (or bureaucratic) 'capture' via the vigorous pursuit of organisational specialisation and the decoupling of potentially conflicting functions. (Boston & Eichbaum, 2005)

Neoliberalism in NZ  • Neoliberal economic institutionalisation  • Punitive economic policy  • Neoliberal public sector institutionalisation  • Punitive social policy  Social consequences of inequality

Phases of Neoliberalism  • 1984-89 The New Zealand Experiment - Instituting competitive mechanisms - alongside attempts to preserve or extend social democratic welfarism  • 1990-99 Punitive neoliberalism - Neoconservative authoritarianism  1999- ‘”Partnering”ethos - Labour-Alliance coalition - Labour-PC-UFP coalition (Larner 2004)

Phases of neoliberalism?  1999-2002 Helen Clark with Alliance  2002 reelection of Helen Clark‟s government (2nd term) with 41% of the vote ..Jim Anderson‟s Progressive Party  2005 Clark‟s minority government coalition, alliance with NZ First  2008 John Key‟s coalition government with ACT, United First and Maori Party  2011 election : 50th NZ Parliament

Key‟s Policies  National‟s plan is to sell off 50% of the state-owned electricity companies and Air New Zealand if they win this year‟s election.  Health privatisation: selling off the public hospital and health facilities and replacing them with corporate healthcare on contract to the Government.  Education: National cut funding for night classes and tertiary education; slashed $400million in funding for trained teachers in early childhood centres. According to the NZEI, “The cuts will affect 93,000 children enrolled in 2000 early childhood services”.  The Trans-Pacific Partnership Agreement (TPPA) is a free trade agreement being negotiated between New Zealand, the US and seven other countries.  In 2010 John Key brought in his long awaited tax cuts. Yet of the $14 billion of tax cuts that Key announced for the next four years the richest 10 per cent of people got 42 per cent of the tax cuts and the bottom 20 per cent got just 2 per cent.  http://socialistaotearoa.blogspot.com/2011/06/guide-to-john-keys-war-on-working.html

Economic Policy Framework  Free Trade and Investment, Estalished as a principle  Capital Controls lifted  95% of imports duty free Average weighted tariff 0.7% (Conway 2002)  Privatisation: 40 state enterprises sold for $19billion, 80% to overseas investors (Goulter 2002)  Reserve Bank Act (1989)– Reserve Bank Independence Priority to price stability in public contract  Fiscal Responsibility Act (1993)  Government publishes long-term fiscal objectives eg. Levels of public debt, spending, taxes, debt.  Sets a policy norm of fiscal restraint.  Employment Contracts Act (1991)  Abolished compulsory conciliation & arbitration – abolished guaranteed bargaining role for unions.

Labour‟s Modifications  Reserve Bank negotiations – Did not reappoint neo-liberal gover Renegotiated Policy Targets Agreement: – “ “In pursuing its price stability objective ‘… shall seek to avoid unnecessary instability in output, interest rates and the exchange rate"  • Renationalisation – Air New Zealand – tourism lifeline. Accident compensation – Auckland metropolitan rail network $200m (cf. $328m from sale of whole rail system)

Cont‟  Ministry of Economic Development – Small venture capital fund aimed at regional development  Employment Relations Act 2000 – No significant change to legislation but increased union confidence. – recognises need for good faith behaviour – promotes mediation but little use has made - 4,802 cases in 2002/03 (Lafferty & May 2004) – Further amendment in progress to encourage collective bargaining – Holidays Act 2003 providing penalty payments for work on public holidays and 4 weeks annual leave from 2007

Social Policy  Top marginal tax rate cut from 66% to 30% (Darwell 2003) – One third of the tax reductions 1996-1998 went to those on highest income quintile (Goulter 2001)  Welfare Payments – 1990 – – Social welfare income entitlements cut 1.7% GDP (Goulter 2001)  Employment Relations (from ECA) – Union membership fell from 56% of wage & salary earners to 21% 1989-99. (Lafferty & May 2004) – Workplace coverage by collective bargaining halved. (Goulter 2001) – Significant reductions in penal and overtime rates, maximum hours of work, service and other allowances. (Goulter 2001)

Labour’‟s modifications  – Top marginal tax rate increased from 33% to 39% (applies at 3rd income quintile). (Darwell 2003)  • Transfers – Reduced state housing rents from market rates – Reduced interest rate on student loans from market rates (Goulter 2001)  • Labour Market – Increased minimum wage

Employment and Incomes  Unemployment - 1986 4.0% (Mäori 10.7%) - 1991 10.3% (Mäori 25.4%) - 1996 6.1% - 2003 4.7% (Mäori 10.2%)  Real per capita national disposable income ($1996) – – - 1988 $22,573 - 1992 $21,000 - 2003 $27,237

Income Inequality  Living Standards – Lower for 90% of Nzers in1996 than in 1981(O‟Dea2000)  Income Inequality (top quintile/bottom quintile disposable income) – – 1988 2.4times – 200 12.7 times  Families with Low incomes (less than 60% of median income)  – 1998 23.2% – – 2001 23.2%  Foodbanks in Auckland – – 1984 16 – – 1996 130(Conway2002)

International Context  Thatcherism: low inflation, the small state and free markets through tight control of money supply, privatisation and constraints on the labour movement.  Reaganism: Reduce Growth of Government spending; Reduce Income Tax and Capital Gains Tax; Reduce Government regulation; Control the money supply to reduce inflation.

Washington Consensus  Fiscal discipline  A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure  Tax reform (to lower marginal rates and broaden the tax base)  Interest rate liberalization  A competitive exchange rate  Trade liberalization  Liberalization of inflows of foreign direct investment  Privatization  Deregulation (to abolish barriers to entry and exit)  Secure property rights

The theorist  Michael Foucault, The Birth of Biopolitics (2008)  “I thought I could do a course on biopolitics this year. I will try to show how the central core of all the problems that I am presently trying to identify is what is called population. Consequently, this is the basis on which something like biopolitics could be formed. But it seems to me that the analysis of biopolitics can only get under way when we have understood the general regime of this governmental reason I have talked about, this general regime that we can call the question of truth, of economic truth in the first place, within governmental reason.”

The Birth of Biopolitics Lectures at the College de France, 1978-1979

The Liberal Art of Government  What are the specific features of the liberal art of government as they were outlined in the Eighteenth century? What crisis of governmentality characterises the present world and what revisions of liberal government has it given rise to? This is the diagnostic task addressed by Foucault's study of the two major twentieth century schools of neo-liberalism: German ordo- liberalism and the neo-liberalism of the Chicago School. In the years he taught at the Collège de France, this was Michel Foucault's sole foray into the field of contemporary history. This course thus raises questions of political philosophy and social policy that are at the heart of current debates about the role and status of neo-liberalism in twentieth century politics. A remarkable feature of these lectures is their discussion of contemporary economic theory and practice, culminating in an analysis of the model of homo oeconomicus.

Distinctiveness of Foucault  „Neo-liberalism is not Adam Smith; neo-liberalism is not market society; neo-liberalism is not the Gulag on the insiduous scale of capitalism‟ (BB: 131). This assertion is meant to distinguish his position from three approaches to neo-liberalism, namely, the economic point of view that it is „no more than the reactivation of old, secondhand economic theories‟ (BB: 130), the sociological point of view that „it is just a way of establishing strictly market relations in society‟ (ibid), and the political point of view which claims neo- liberalism to be „no more than a cover for a generalized administrative intervention by the state‟ (ibid.).  Cousins Venn

The problem of neo-liberalism  „The problem of neo-liberalism is rather how the overall exercise of political power can be modeled on the principles of a market economy ... to discover how far and to what extent the formal principles of a market economy can index a general art of government‟ (BB: 131).

Three Schools of Economic Liberalism 1. Austrian Economics: methodological individualism, spontaneous self-organising markets (thru‟ price mechanism); Carl Menger, Eugen von Böhm-Bawerk, von Mises, Hayek 2. German Ordoliberalism – 2a Ordoliberalen: state ensures free market order; Alexander Rüstow, Wilhelm Röpke 2b Frieberg Law and Economics: Husserl; Walter Eucken and „social market economy‟; Franz Böhm – the market as a juridical construction 3. American, Chicago School: neoclassical revival of homo economicus (individualism, rationality, self interest); Stigler, Friedman, Becker, Posner, Lucas

Human Capital Theoryin neoclassical literature  "Investment in Human Capital and Personal Income Distribution” Jacob Mincer, 1958  Theodore Schultz - the speed of recovery in postwar Germany and Japan was due to a healthy and highly educated population; The Economic Value of Education (1963)  Gary S. Becker (1964, 1993, 3rd ed.). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. Chicago, University of Chicago Press.  The theory of human capital investment relates inequality in earnings to differences in talents, family background, and bequests and other assets

Gary Becker  1992 Nobel prize  His foremost achievement is to have formulated and formalized the microeconomic foundations of the theory. In doing so, he has developed the human-capital approach into a general theory for determining the distribution of labor income. The predictions of the theory with respect to the wage structure have been formulated in so-called human- capital- earnings functions, which specify the relation between earnings and human capital.  http://home.uchicago.edu/~gbecker/Nobel/nobel.html

The Global Failure of Neoliberalism  Privatize Profits; Socialize Losses  The ideology of „market fundamentalism‟ has failed  Bush‟s policies have served the military-industrial complex.  “Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy” – Stiglitz

„The End of Neoliberalism?‟ “The fact that the credit crisis has reached this point marks the failure of the central claim of the neoliberal program, namely that private capital markets, free from intrusive government regulation, can enable individuals and households to handle the risks they face more flexibly and efficiently than a social-democratic welfare state.” --John Quiggin (2008)

Neoliberalism and the debt crisis  The recent financial crisis has led to a sharp increase of public debt on a scale unprecedented since the end of Second World War. Today the debt-to-GDP ratio (that is the cumulative total of all government borrowings less repayments that are denominated in a country‟s home currency) of the G7 group of nations is at its highest level for 60 years.  In United States the federal government between 2011 and 2020 is expected to accumulate a deficit of almost $10 trillion as calculated by the Congressional Budget Office. By 2023 total government debt is expected to reach 100% of GDP.

Austerity politics  Austeritys measure to avoid sovereign default  Wage reductions to public sector workers (20% Greece)  Massive cuts to social welfare  Cuts to education; rise in student debt  Rise in poverty especially for single women led families (Blacks & Hispanics)  http://revolutionarydemocracy.org/rdv16n2/pratyush.htm

Longtime critics of neoliberalism  The imposition of market fundamentalism runs in complete opposition to neoliberalism‟s own libertarian premises and emphasis on negative freedom.  neoliberalism is a class project that benefits the rich and leads to ever-increasing inequalities both within and between states.  “Ironically, a free-market-loving Republican administration is presiding over the most ambitious intrusion of government into the market in almost anyone‟s memory.” –Robert Riech

Neoliberal state-centrism?  The move to state-centric policies and to forms of Federal regulation in the U.S. and elsewhere now seem almost inevitable. Government intervention is now suddenly back in fashion and on the books at the IMF and World Bank.  “Neoliberal globalization will be written about ten years from now as a cyclical swing in the history of the capitalist world- economy. The real question is not whether this phase is over but whether the swing back will be able, as in the past, to restore a state of relative equilibrium in the world-system.”  -Wallerstein

Changing nature of world markets  Economic decline of US and break up of Euro-zone  Rise of BRICS and state capitalism especially in China  Enforced neoliberalism – increasing social conservativism with emphasis on austerity policies  Legitimation of bail outs of banks and insurance companies; massive stimulus to capital  Emergence of algorithmic capitalism – 90% of equity markets with greater risks of uncertainty and system-event failures

BBC - independent trader on global crisis  http://www.youtube.com/watch?v=lqN3amj6AcE&feature=share The end

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