Neoliberalism Flashcards
1
Q
Break-down of Keynesianism
A
- End of 1960s embedded liberalism break-down (signs of crisis)
- Unemployment and inflation surge - stagflation throughout 1970s
- Keynesianism no longer working
- Fixed exchange rates - US dollar flood world, escape US controls (collapse of Bretton Woods Order)
- Exchange rates float
- What to do?
1. Deepen state control/ economic regulation - socialists (BUT inconsistent with capital accumulation requirements)
2. Liberate corporate and business power - re-establish market freedoms
2
Q
What is Neoliberalism?
A
- Social, cultural, economic and political changes to the structure of Western Capitalism since 1970s
- Hayek - freedom in economy key to personal freedom
- Individual freedoms guaranteed by freedom of market/ trade
- Socialism inhibits freedom
3
Q
Against State Intervention
A
-Opposed to theories of centralised state planning
-State decisions bound to be politically biased
-Decisions on investment and capital accumulation bound to be wrong
(Info available to state not better than market signals)
4
Q
Britain and the US Neoliberalising
A
- Thatcher and Reagan key political proponents
- Cut government spending, privatisation, decrease tax on capital
- Shift in industry to financial services
- Increasing social inequality - income gap increase 1980s
- Project to restore class power
- Market best way to foster competition and innovation
5
Q
Thatcher and Neoliberalism
A
- 1979
- Supply-side solutions essential to cure stagflation
- Revolution in fiscal and social policies
- Confront trade union power, roll back welfare commitments
- Favour private property/ personal responsibility
6
Q
Reagan and Neoliberalism
A
- Change from New Deal commitment
- Deregulation/ tax cuts (70%-28%)
- Federal minimum wage 30% less 1980-1990
7
Q
The Classes!
A
- Thatcher against traditional class power
- Supported by a new class of entrepreneurs
- Traditional conservative wing appalled
- Attacked Aristocratic domination of military/ judiciary
- Restoration of class power but to different people
- Interpret neoliberalism 2 ways
1. Utopian project to realise theoretical design for reorganisation of international capitalism
2. Political project to re-establish conditions for capital accumulation - restore power to economic elites
8
Q
What Constitutes the Global Economy?
A
- 2 separate interlinked systems impacting the Real Economy ARE production and trade in goods and services
- International Monetary System: exchange rate system
- International Financial System: System of creating, buying and selling credit (e.g. financial assets)
- Above part of Financial Economy
- 1960s-present private actors growing significance - financial economy eclipse real economy (exponential growth)
- 1980s-1990s states made central banks independent of Government instruction (directed to achieve low inflation)
- Real Economy: part of economy for production of goods and services
- Financial Economy: part of economy for trading financial assets
9
Q
Is the Financial System good?
A
-Keynes and White say BAD
(buying and selling currencies to chase profits leads to instability)
-Freidman and Hyek say GOOD
(Open financial system increases liquidity)
(Allows money to flow where supposed to)
(State intervention leads to sub-optimal results)
10
Q
Why did the Financial System Grow?
A
-Technological developments - telecommunications/internet?
-Keynesianism crisis and liberalism solution?
OR role of states and markets in deregulation and liberalisation
11
Q
Growth of International Financial System
A
- UK restore currency convertibility 1959
- Trading goods and services internationally - only activities in the Real Economy until 1960s
- Complete financial openness not until Thatcher
- 1962 Bank of England allows foreigners to hold dollars with bank - start of Eurodollar market
- Dollars in UK escape US regulation AND not taxed - higher interest rate
- Financial business back to London (off-shore)
- London world’s leading Eurodollar market
12
Q
Eurodollar Market
A
- Financial market reliant on bankers
- All actors see as beneficial (Gov and bankers) - lots of transactions, more people to manage, more banks, more jobs
- UK see as opportunity to regain status as financial centre
- US want increased liquidity of dollars
- Helped US finance debts from too many imports
- Foreigners able to buy American treasury bonds = access short term funds
- By 1970 deposits in off-shore markets equalled value of US gold reserves
13
Q
Oil: more dollars to the market
A
- 1973 oil crisis - October price of oil quadrupled
- Billions of dollars from oil-producing states moved to off-shore markets - swell Eurodollar markets
- By 1980s Euromarket = $4.5 trillion
- London only place for finance capitalism
- Gets lots of money - America pressured to liberalise
- Competitive deregulation
14
Q
Neoliberal Testing Chile 1970s
A
- Restructure economy according to Freidman’s economic ideas
- Reverse nationalisation, privatise public assets
- Revived economy! - growth rates/ capital accumulation/ high return rates on foreign investment
- Short-lived - debt crisis 1982
- Periphery country became model for formulation of policies in Britain and US - showed benefits of privatisation
15
Q
Developing countries
A
- Some see Washington Consensus/ liberalising as harmful and arrogant policies determined by financial and Western elites imposed on developing states
- Effects devastating - economies smaller/ poorer by 1990
- Little choice but to open economies to foreign investment and trade
