The recent negative response by the European Commission to the Italian governments rejection of the former’s budgetary constraints, is an attempt by them to prevent the implementation of a strategy of investment-led growth by a leading EU member state. It also serves as a timely reminder of the prevailing neoliberal paradigm that exists at the heart of the European project.
The said paradigm is predicated on economic liberalization policies such as privatization, austerity, deregulation, free trade, welfare retrenchment, a shrinking public sector and the increasing role of the private sector in the economy and society. If successful, the breaking of the neoliberal consensus by the Italian government would set a precedent, a situation that the European Commission would be unlikely to tolerate.
Debt alongside growth
The contention by European Commission vice-president Valdis Dombrovskis that “higher fiscal deficits and debt do not bring lasting growth”, is a hitherto consensus view that, historically, is nevertheless unfounded. As commentator John Wight noted in a tweet, “In 1945 Britain’s national debt stood at 215% of GDP. Despite this Labour borrowed to invest, creating the NHS, council housing, and welfare state. This investment created full employment and most sustained period of economic growth/stability in UK history. Neoliberalism is dead.”
Italy’s attempts to break free from the fiscal rulebook set by the Stability and Growth Pact is perhaps a sign the neoliberal experiment is indeed dead or at least coming to an end.
Members of the elite political and corporate media class who are in awe of neoliberalism’s supposed achievements are almost certainly living on borrowed time.
So why do so many appear to agree with Theresa May’s claim that neoliberalism is the “greatest agent of collective human progress ever created?”
Ideology of progress
Apologists for neoliberalism take as their starting point a particularly rigid interpretation of economics as if it formed a key discipline transposed from the biological sciences embodied in Darwin’s concept of the survival of the fittest. That Neoliberalism’s alleged virtues are negated by the chaos wrought by global warming, the spread of wars, the growth in relative poverty and the lack of disposable income for millions of people, is largely unmentionable in the ‘mainstream’. On the contrary, the view that a symbiotic relationship exists between neoliberal economic dogma and social progress is one that appears to have inculcated much of intellectual life. In truth, the link is as Chris Harman has posited, an ideological construct that can be traced back to the 19th century period of industrial capitalism.
For neoliberal ideologues, progress is measured in terms of the extent to which people are able to consume what the advancements in technology the market is able to deliver.
While it is true that more people than ever have access to “luxury” technologies like flat screen TVs, mobile phones and computers, it’s still the case that the majority of the worlds population are denied these things.
Moreover, it doesn’t necessarily follow that those who do have access to them are not struggling to feed their families. There is no correlation between poverty and the number of consumer goods people have access to.
Socialism for the rich
What neoliberalism embodies is not the ability of consumers to acquire things they don’t need with money they haven’t got, but the systematic stripping away of the public institutions and publicly owned assets that glue society together which enable a hitherto super-rich class at the top of society to enrich themselves even further. Farm subsidies, public sector retrenchment, corporate tax avoidance and evasion, government share giveaways and housing benefit subsidies, are just some of the ways in which neoliberalism continues to greatly enrich the top layer in society at the expense of the rest.
Contrary to what is commonly understood, this form of crony capitalism does not engender genuine free markets, nor does it redistribute wealth downwards.
Rather, it’s purpose is to ensure the opposite. Figures reported in the Guardian, indicate that the richest one percent in Britain have as much wealth as the poorest 57% combined. Moreover, the wealth gap is growing as wages have regressed. The sustained growth in productivity against a backdrop of wage growth regression, would appear to suggest a correlation between the emergence of neoliberalism and the intensification of the theft of surplus value created by workers.
More evenly shared
The rise in inequality during the neoliberal era contrasts with the thirty-years “post-war settlement” period in which the wealth created was shared much more evenly. For example, data indicates that the share of income going to the top 10% of the population fell over the pre-neoliberal years from 34.6% in 1938 to 21% in 1979 while the share going to the bottom 10% rose slightly. The decline in the share of income to the top began to reverse under neoliberalism from 1979 onward where the poorest have lost the biggest ground.
The redistribution of wealth from the bottom to the top should be seen against a backdrop of sustained economic growth. Figures show that GDP in the UK, adjusted for inflation, has grown over the last 60 years from £432bn in 1955 to £1,864bn in 2016. The Tory exchequer has roughly four times as much money at its disposal in real terms compared to 60 years ago. Moreover, the ratio of national debt to GDP was 3 times higher in the post-war years. What this indicates, is there is no need for Theresa May’s much pilloried magic money tree because the money already exists but is in the hands of the few as opposed to the many.
Neoliberalism is in place to ensure that the redistribution of wealth from the poorest to the richest continues.
The Italian government has other ideas.