David Cameron and the neo-liberal conservatism
Posted on February 24, 2011 by hpx83

There are two interesting pieces in the Telegraph, first one by David Cameron himsielf (How we will release the grip of state control), and then another one titled “David Cameron promises public sector revolution“. It is a well-known fact that Cameron is rather friendly towards the “New Swedish Model”, which has been impiosed since the 90′s collapse in my corner of the world. Around here, people call it “New Liberalism” or “Neo-liberalism”. I thought I would take the time to highlight a few things that are problematic with this model, especially when viewed against how classical liberalism worked.

First, let’s get a few things straight. Neo-liberalism is not laissez-faire, nor is it even liberalism. It is a band-aid fix to save the welfare state, and the aim is for the state to de-socializse ergo stop running business ventures, but still remain in control (which means funding and regulating them). This becomes especially apparent when you look at things like healthcare. Most primary care in Sweden is actually now run by private companies. But it is still funded and regulated by the state.

Barack Obama and Keynesian Economics Will Prevail
Many saltwater economists have supported the notion of a big stimulus. Freshwater economists, on the other hand, have been skeptical, if not totally opposed, to such fiscal policy because of their fear that it would cause inflation and impede private investment rather than promoting economic growth.

Although saltwater economists would have preferred a bigger stimulus program, the success of the stimulus bill in restoring economic growth has shown that the prediction made by many freshwater economists has come to naught. Hence, the evidence has shown that saltwater economists have won that economic debate.

Saltwater economists are so named because they teach at universities that are located in the coastal region of the country whereas freshwater economists are found in inland universities. The University of Chicago has been the main bastion of freshwater economists. For the past few decades, their economic ideas have dominated macroeconomics. They had collected a number of Nobel Prizes, which have allowed them to exert tremendous influence not only in the field of economics but on public policy.

The march of the neoliberals

The coalition's neoliberal agenda is the most radical social revolution in decades – with the dismantling of the tyrannical state at its heart. Cultural theorist Stuart Hall looks at the rapid advance of the ideology and asks: can it be reversed?

By Thomas I. Palley, May 5, 2004


The intellectual foundations of neoliberalism

“(T)he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slave of some defunct economist.”...

For the last 25 years, economic policy and the public’s thinking have been dominated by a conservative economic philosophy known as neoliberalism. The reference to “liberalism” reflects an intellectual lineage that connects with 19th century economic liberalism associated with Manchester, England. The Manchester system was predicated upon laissez-faire economics and was closely associated with free trade and the repeal of England’s Corn Law, which restricted importation of wheat. Contemporary neoliberalism is principally associated with the Chicago School of Economics, which emphasizes the efficiency of market competition, the role of individuals in determining economic outcomes, and distortions associated with government intervention and regulation of markets.

Two critical tenets of neoliberalism are its theory of income distribution and its theory of aggregate employment determination. With regard to income distribution, neoliberalism asserts that factors of production—labor and capital—get paid what they are worth. This is accomplished through the supply and demand process, whereby payment depends on a factor’s relative scarcity (supply) and its productivity (which affects demand). With regard to aggregate employment determination, neoliberalism asserts that free markets will not let valuable factors of production—including labor—go to waste. Instead, prices will adjust to ensure that demand is forthcoming and that all factors are employed. This assertion is at the foundation of Chicago School monetarism, which claims that economies automatically self-adjust to full employment and that the use of monetary and fiscal policy to permanently raise employment merely generates inflation.

This week, I want to focus on the following public news themes:

David Cameron’s NHS speech on the theme “Sticking to the Status Quo is not an Option”
Benedict Brogan’s interesting blog entitled ”David Cameron has lost his zeal for the radical in favour of retreat” (Brogan is Deputy Editor at the Daily Telegraph)
The future of the IMF

The common thread to the blog is my own further reading on neoliberalism. This week, I have completed Steger and Roy’s excellent book entitled “NEOLIBERALISM A Very Short Introduction, published by Oxford University Press (the Very Short Introductions series is highly recommended).

Steger and Roy describe the two waves of neoliberalism:

First Wave dominated by Thatcherism and Reaganomics - Thatcherism “unleashed a comprehensive set of neoliberal reforms aimed at reducing taxes, liberalizing exchange controls, reducing regulations, privatizing national industries, drastically diminishing the power of the labour unions” – strongly anti-Keynesian and pro-Monetarism.
Second Wave was characterized in the 1990s by Clinton’s market globalism and Blair’s Third Way.

Unfortunately neoliberalism was severely criticized and discredited in the global financial crisis of 2008. In January 2009, Nicholas Sarkozy, French President, declared “Laissez-faire is finished” and in April 2009 Gordon Brown, UK Prime Minister, argued “the old world of the Washington Consensus is over”. The Washington Consensus (synonymous with neoliberalism”) was dominated by the IMF, the World Bank, and other Washington-based international economic institutions and think tanks – with the Federal Reserve close at hand. Economic orthodoxy and soft loans were offered to the developing world and more recently, financially troubled European economies, like Greece, Ireland etc. Unfortunately, the strong medicine generally brings much pain to poorer and weaker members of society, with potentially vast financial rewards to the wealthy. I have started to notice a number of commentators offering alternative medicine for Greece, for example Der Spiegel argued in favour of a Marshall Plan (a Keynesian remedy).

Steger and Roy concluded that neoliberalism was still smouldering and looked towards a third-wave neoliberalism (built on Keynesian principles) being a distinct possibility for the second decade of the 21st century. This brings me back to David Cameron and George Osborne who have applied very strong medicine to the UK economy