Archives > The Economy

Life after neoliberalism

Has “free market” economics really “lifted millions out of poverty”? Or is this yet another example of wishful thinking in high places?

As we enter the second economic recession – or enter phase II of the present one – it is obvious to almost everyone that the Great Neoliberal Adventure, on which the world embarked in earnest in the 1980s, has well and truly run its course.

But among the few who don’t yet realize that the party is over are the powers-that-be: the corporates and banks who run the show, and the western governments who have hitched the world’s wagon to their coat-tails. Various of their representatives still appear on television to assure us that neoliberalism has served us well, and we simply have to tighten our belts for the next decade or so (or perhaps we must spend more; they’re not quite agreed on the details) to restore the status quo ante, and all will be well. So it was that the economist and erstwhile UKIP candidate Tim Congdon, from the Institute of International Monetary Research, popped up as is his wont on last Tuesday’s Newsnight (August 16 2011) to tell us that the global market has lifted many millions of the world’s poorest people out of poverty, notably in India and China, and that nothing else could have done this. Things may seem bad for the time being (and for the foreseeable future, for all but the mega-rich), but we must not sacrifice the gains we have made so far, just because most of us seem to be having a bad time. Great riches lie in store. Like the fundamentalist suicide bombers who have been promised a place in Heaven, we must keep faith.

If what Congdon says is true, then he deserves to be taken seriously – but is it really so? Are the desperate millions of India and China really much better off than they were before? Even if they are, do the neoliberal market and finance capitalism really point the way to the future? Or is the success, if such it is, a one-off, never to be repeated?

Subjective impression suggests that while poor Chinese and Indians may have gained in some ways – they do seem to have more stuff – it has not been all to the good. Visitors to China in the 1980s were wont to report that although life was hard, everyone had a bowl of rice. Is this still true? On my first visit to India in the late 1980s it was possible to eat well for pennies – chapattis, rice, and very tasty curries – but when we went again in the early 2000s prices were rapidly closing in on Europe’s. Worldwide there have been hunger riots; and some say that the uprising in Egypt, which helped to trigger the whole of the “Arab Spring”, began with food shortages – though Egypt was once was among the breadbaskets of the known world.

What has taken place, in both India and China, is massive migration – transhumance – from country to city. In China, according to Richard Swift in the New Internationalist (Issue 441 April 2011) it’s officially estimated that 20 million per year migrate from the countryside to the cities. Some estimate that up to 300 million have shifted to the cities in the past decade – more than the entire population of the United States. Shanghai in particular beckons, and the Special Economic Zone of Guangdong, next to Hong Kong.

Many who flood to the cities – though possibly less so in booming China than in the rest of the world – find very little to do when they get there. Indeed, the UN estimates that a billion people now live in urban slums – which is one in seven of all the people in the world and almost a third of all the world’s city-dwellers. The cities are not coping. By 2050, says the UN, there could be two billion people in urban slums.

Most of those who do find jobs in cities work in factories. This may be better than the traditional life of a coolie on the land: as the Chinese saying had it, “Peasants have their backs to the sun, and their faces to the earth”. But, again according to Swift, the new Chinese factory workers typically work for 12 hours a day and can expect to make less than three per cent of what their US counterparts would earn for the same jobs.  The goods they work so hard to produce are strictly for export – well out of the range of the people who produce them. If the new urban people are better off than they were before, they don’t seem very contented. In 1992 just over 8000 strikes were recorded, rising to 120,000 by 1999.

Yet by all the standard economic measures of the kind that Tim Congdon likes to quote — GDP, trade surpluses, domination of credit markets – China is now riding very high indeed. Its transformation, by these standard measures, has been miraculous. Indeed, China can now be seen either as the chief economic rival to the United States, or as its essential accomplice: providing the cheap goods to support the American consumer economy which provides the Chinese with their market, and so on round and round.

But GDP simply measures the total wealth produced in a country in any one year. Increase in GDP is called “economic growth” which governments like Britain’s now see as their prime target, and indeed their raison d’etre. But GDP has nothing to do with general human wellbeing – not unless the government is equally concerned with justice which, in the global market economy to which they all are supposed to subscribe these days, has gone missing. The money that’s now generated in the hyper-efficient, ultra-competitive global economy tends to stay at the top. Margaret Thatcher’s notion that the wealth would “trickle down” to the people below was never convincing (there don’t seem to be many examples of this in all of human history) and it certainly hasn’t worked this past 30 years. All the statistics show the rich growing richer, well beyond the dreams of most people’s avarice, while the poor have grown steadily poorer. The gap is growing both between countries, and within countries.

In the US, widely perceived as the world’s economic brand-leader, the lodestar of the past five British governments, the real wages of the bottom third of workers have not increased since the 1970s, although the country’s overall economy has “grown” hand over fist. In Britain, the badly-off now include a large proportion of what used to be the traditional middle class. Professionals who once would have expected as a matter of course to live in a nice house and send their children to nice schools – doctors, plumbers, teachers, architects, builders, farmers – now spend half their earnings on a mortgage for an ex-council house, built originally as a public service for people who didn’t want or couldn’t afford a mortgage at all.

So it is that many now argue, as the government of Bhutan realized decades ago, that we need to measure happiness rather than mere wealth. We need to measure GDH — Gross Domestic Happiness. GDP has raced away in much of the world over the past 30 years – spectacularly in India and China. But has GDH increased? It doesn’t look that way.

But even if life for the Chinese and Indians really was as rosy as Congdon would have us believe, we still shouldn’t put our faith in the neoliberal global market. India and China have boomed for a number of reasons – and none of them can be sustained. Both countries have enormous resources, which for centuries were left unexploited, including vast quantities of coal and metals. Now, primed by foreign money, those reserves have been un-corked. What we have seen, in these past three decades of economic miracle, is the first, explosive gush. But it’s a one off.

The global free market did indeed enable India and China to translate those resources into wealth, as they cashed in on the riches of the West. But the West grew rich in the first place largely through variations on a theme of imperialism: over several centuries, they had been accumulating the wealth of the whole world. Now, in a few brief decades, much of that wealth has been returned to some of the countries that first gave rise to it. The unleashing of resources from India and China has been real, and has indeed generated some new wealth. But to a significant extent the economic rise of India and China has been a giant game of pass the parcel – handing back the money that was expropriated in the past.

It’s clear, too, that the global resources that have been turned into commodities and hence into money are finite — with oil, fresh water, and phosphorus highest on the desperate list. Meanwhile, the collateral damage has been enormous, with mass extinction of our fellow creatures, massive erosion, and pollution of many different kinds including the atmospheric pollution that is changing the climate. For reasons of common sense and simple arithmetic, obvious to everyone except economists of the kind that governments prefer to listen to, this clearly cannot continue.

In all such discussion, farming must be at the centre. In its industrialized form agriculture is a prime cause of all that is wrong – the over-use of resources, the squandering of land and water, and the mass migration to the slums as people are thrown off the land in the name of economic “efficiency”. Agriculture is also, of course, a prime victim of all that is wrong as the countryside is neglected in favour of the newly booming factories, and the people are disregarded. The global epidemic of suicides among farmers reflects their desperation: 200,000 among Indian farmers alone over the past decade (although that figure doesn’t include women who are totted up separately as “famers’ wives”).

Clearly we need a different economy: nothing frightening, still basically capitalist, based on trade and largely on private ownership, but a million miles from the neoliberal extravaganza promoted by Congdon. We need a New Agrarianism, based on a proper use of land and respect for human beings and our fellow creatures. But since the powers-that-be have long since lost the plot, if we give a damn we just have to start doing the things that need doing ourselves. Which of course is the point of this whole Campaign.