Down under observations

by reader OSO


The two best examples of neoliberalism working are Australia and New
Zealand. These two nations (of which I am a citizen of one) enacted
major economic reforms in the early 1980s and have benefited since.

The Washington Consensus, despite being out of fashion these days, is a
blueprint that both Australia and New Zealand have followed and it has
brought them better economic security than what they were experiencing

Naturally, such economic changes came at a price, and many mistakes were
made and many people’s lives badly affected. The net result, however,
has been positive. Moreover, these economic changes have occurred side
by side with universal health care and a generous pension system.

What America has experienced since Reagan has not been neoliberalism.
Had Washington followed the Washington Consensus, the economic crisis
now being experienced would probably not have occurred.

Of course, I am Australian, and so I am biased in many ways towards my
own country’s economic achievements over the years. Moreover, I am
realistic as well – market reform has not been all good and many people,
especially the poor, are worse off as a result. Workplace Reform,
undertaken by the Howard Government in its later years, was also deeply
unpopular with ordinary people and eventually led to his electoral
defeat in 2007.

Yet there is one thing which you can say about neoliberalism in
Australia and New Zealand – it worked, and continues to work. The
Washington Consensus, now so out of fashion, was the blueprint for
Australia’s and New Zealand’s success. Fiscal prudence, deregulation,
removal of subsidies and trade barriers, positive real interest rates,
privatisation of government enterprises – all these things have been the
basis of economic reform in these two nations.

And yet the neoliberalism experienced by these two nations never moved
into supply-side stupidity or a strong pro market ideology. Both
Australia and New Zealand continue to have universal health care and a
generous pension system to help those who cannot help themselves. The
neoliberalism experienced was thus more centrist than right wing.

For us here in Australia, the term “deregulation” means to free up a
sector of the economy to allow market forces to dominate what is
produced and at what price. In America, however, “deregulation” means a
continual relaxation of laws to allow businesses to become more
profitable while having less regulations holding them back, such as
safety and environmental laws. The difference is obvious – Down under,
deregulation was “market friendly” and takes into account various
stakeholders while in the US, deregulation was “business friendly” and
only helps one or more companies. There is a world of difference between
the two – the former allowing the market to work effectively, the latter
being a form of “you scratch my back I’ll scratch yours” mentality.

The current economic crisis will inevitably drive America away from its
ideological and fiscally irresponsible actions. That is good. But what
will replace it? The populist solution – and one which is increasingly
being touted by American economists and econ-bloggers – is to renege on
the principles of free trade and to abandon neoliberal principles and
such things as the Washington Consensus for… whatever Obama and
congress will do presumably.
by reader OSO