Ok everybody, if we’re going to solve the whole income inequality – racism – patriarchy – climate change gamish, we’ll need to get our terms straight.
Here’s Step 1: Instead of calling it “free market economics,” we’re going to call it neoliberalism.
This word will be useful for you to know when you’re reading David Harvey’s book A Brief History of Neoliberalism. If you don’t remember David Harvey from my post “Marxism for visual learners,” please refresh your memory now.
Go ahead, I’ll wait.
Ta dee. Ta dum.
Ok. Now that Harvey has blown ya mind wit his jeenyuss, let’s continue.
In his book, Harvey defines neoliberalism as:
a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade” (2).
This is also known as What JR Believed In College.
Let’s use Wikipedia to fill us in on what came before neoliberalism:
The term embedded liberalism refers to the economic system which dominated worldwide from the end of World War II to the 1970s. David Harvey argues that at the end of World War II, the primary objective was to develop an economic plan that would not lead to a repeat of the Great Depression during the 1930s. Harvey notes that under this new system free trade was regulated “under a system of fixed exchange rates anchored by the US dollar’s convertibility into gold at a fixed price. Fixed exchange rates were incompatible with free flows of capital.” Harvey argues that embedded liberalism led to the surge of economic prosperity which came to define the 1950s and 1960s.
Side note: Reading financial news gives me the kind of headache I assume other people get from reading about science. In other words, I have no idea what “fixed exchange rates anchored by the US dollar’s convertibility into gold at a fixed price” means either. I think it has something to with these things: $$$.
Picking up again:
David Harvey notes that the system of embedded liberalism began to break down beginning towards the end of the 1960s. The 1970s were defined by an increased accumulation of capital, unemployment, inflation (or stagflation as it was dubbed), and a variety of fiscal crises. He notes that “the embedded liberalism that had delivered high rates of growth to at least the advanced capitalist countries after 1945 was clearly exhausted and no longer working.” A number of theories concerning new systems began to develop, which led to extensive debate between those who advocated “social democracy and central planning on the one hand” and those “concerned with liberating corporate and business power and re-establishing market freedoms on the other. Harvey notes that by 1980, the latter group had emerged as the leader, advocating and creating a global economic system that would become known as neoliberalism.
In case you hadn’t already guessed, let me break it to you: one of Harvey’s primary arguments is that neoliberalism is a doctrine meant to provide intellectual cover for the accumulation of wealth by capitalists — would “white male capitalists” be redundant? — at the expense of poor and middle class folks.
Here’s a nice little figure (17) meant to show that rising income inequality in the U.S. correlated with neoliberal reforms of the late 1970s:
Obviously, you’ll want to actually read the book to get all the sexy details I’m leaving out — for lack of time, not because I don’t love you, loyal reader.