Sunday, April 10, 2016

Neoliberalism is a Codependent Relationship

In spite of possible appearances to the contrary, neoliberalism has done much to provide means by which today's wealth becomes potential revenue, for redistribution through government in the form of infrastructure, knowledge use and services. How to account, then, for growing frustration re how wealth creation takes place thus far?

Besides...what are the alternatives being proposed to neoliberalism, from its naysayers? Neither neoliberalism or codependency are intended as derogatory terms in this post. Should "codependency" seem offputting, I would simply suggest that much has been taken for granted, in this mutual economic relationship, by all parties concerned. Interestingly enough, codependency as concept has its detractors and supporters, much as does neoliberalism. If need be, think of codependency as "interdependence".

Just the same, there is insufficient consideration how economic processes play out, in the realities of the present. Not everyone is on board with the conditions that are required for general equilibrium, and economic access remains a problem. Scott Sumner recently voiced his own frustration that neoliberalism receives the blame for problems it does not really deserve, and added:
Not all the problems in the world are caused by neoliberal economic theories for the simple reason that not all economic policies reflect neoliberal economic theories. Even if everything people say about income inequality is true, there's nothing wrong with the neoliberal model, which allows for the EITC, progressive consumption taxes, and sensitive reforms of intellectual property rights, occupational licensing, and zoning laws.
Note the utilitarian specificity in Scott's argument, as contrast with a lack of specificity in the majority of neoliberalism complaints. Indeed, this reaction from the left to policy makers and business interests alike, is akin to far right political reactions to government, as the supposed bogeyman for every problem imaginable. What is worrisome about this growing reaction from the left? Like so many on the far right, the intent appears more an urge to destroy what is "unloved", rather than promote means to improve economic realities for all concerned.

If destruction appears irrational - and of course it does - people have nonetheless been losing patience. In particular, there are two basic problems elites have refused to address in recent decades, which contribute to this quandary. Indeed, Washington and others waited so long, that many would still remain skeptical, should policy makers and business interests have a "change of heart", and begin to consider productive reforms.

What has been ignored? First, no one has been willing to grant the kinds of production options that would broaden consumption choices for all income levels. The result? Plenty of unnecessary confusion, as to the resultant inequality and how to go about addressing it. Second, the fact too much innovation has been disallowed, only makes new business formation and employment potential even more difficult. Today's income and asset levels particularly exemplify the benefits for today's non tradable sectors, in a codependent relationship of public and private interests alike.

Even though free trade and globalization has received much of the blame for society's ills, the reality of what is holding back progress, is decidedly unfree. Without a marketplace for time value, people remain held hostage to the dictates of knowledge use as decided by public and private interests alike. Without broader definitions and marketplace conditions for housing, millions of individuals are compromised in the lives they would like to create for themselves and for others.

Don't make free trade and globalization pay the price, for what populations have yet to accomplish for progress closer to home. It is far better to allow today's incomplete marketplace to further evolve, than to destroy multiple aspects of the global marketplace in the mistaken belief that globalization causes more harm than good.

1 comment:

  1. Put simply, give up

    1) You seem to think deflation has a place in economics. Not when 85% of your economy are services for which deflation is not a choice or option. Medicine, law, and haircuts have too large a labor component to get cheaper w/o reducing the incomes of those providing the services

    Last, deflation terrorizes animal spirits, for it cuts prices and raises interest rates (costs) at the same time.

    2) trade is a zero sum game. if China makes a widget the job is in China and the only way we can buy such is providing collateral in the form of a treasury bond or note. Warren Buffett and Munger have explained the hocking part of the farm many times but this simple lesson is last on too many of my fellow members of the AEA

    3) read Jefferson and Madison. High progressive taxes are essential to democracy