I have been travelling for most of today so I have to keep this post…
There have been several interrelated strands in research and practice associated with the dominance of neoliberalism over the last decades. The problem has been that these approaches have been as much enthusiastically promoted by social democratic or progressive forces as they have conservatives. Indeed, conservative political forces have gone down the ‘Trumpian’ far right sink hole and the social democratic parties have moved into the political space vacated – that is, further right than centre. Over the years we have been confronted with social entrepreneurship, new regionalism, corporate social responsibility and self regulation, volunteerism, light touch regulation and more – as part of a so-called ‘Third Way’ where class divisions are dead and the ‘market’ is supreme. More recently, so-called progressive politicians have been touting the ‘de-risking’ narrative as a way of fixing the mess left by the other Third Way approaches. Accordingly, the role for government is to de-risk the vagaries and flux of capitalism, so the entrepreneurs can make profits with surety and if there are issues the government will bail them out. It is a disastrous denial of government responsibility and will fail just as surely as all the rest of the ruses have combined to create the mess societies are in around the globe.
The evolving neoliberal narrative that has captured progressive political movements
We saw in the 1990s and beyond the rise of the so-called ‘social entrepreneurship’ movement, whereby traditional welfare agencies bought the government line that they could no longer afford to provide adequate social protection and therefore another solution would be necessary.
The responsibility for welfare provision thus became ‘commodified’, meaning that the solution, apparently, had to be found in the ‘market’ and not government.
Enter the social entrepreneurs under the moniker of ‘New Labour’ (in Britain) and whatever jargonified term social democratic political movements were adopting around the world.
We were told that we had entered a period defined by the ‘end of ideology’ and the irrelevance of class distinctions (labour and capital).
British Labour Party claimed there was now a ‘Third Way’ of doing things which drew on the best of capitalism supported by government.
Social democratic parties around the world started sprouting this nonsense.
Social entrepreneurship was a central plank of this movement and was full of neo-liberal ‘market’ constructs.
It reinforced the abandonment of sound macroeconomic policy, the persistence of high unemployment and rising levels of underemployment.
We were told that the government could not do anything to create jobs and reduce poverty through spending and taxation.
Rather, a sustainable solution lay in the ‘market’ – and instead of providing income support for the disadvantaged, the solution required this cohort to create wealth through commmercial ventures – become entrepreneurs.
This was all housed within the mainstream fiction that fiscal policy was ineffective and only micro reforms (read: deregulation, privatisation, outsourcing, pension cuts, etc) would increase productivity and wealth.
One would think that the experience of the GFC and then the Pandemic, where it was only fiscal policy interventions that averted catastrophies, would have disabused any thinking person of that lie.
But mainstream economists don’t play by the usual rules that facts may invalidate theory.
To them, if the facts violate theory (and predictions fail badly) then it is the facts that are wrong.
Social entrepreneurship amounted to a denial that mass unemployment is a systemic failure of the national economy to produce enough jobs and the cause was a lack of spending, which governments could always remedy.
Instead, it took the ‘welfare problem’ as given and then determined there were better ways of dealing with it.
To wit: make the unemployed become part of a entrepreneurial crusade.
So we saw a whole range of localised ‘solutions’ pop up – tea and biscuit shops at welfare agencies, handicrafts shops, and all sorts of other pretty marginal enterprises, which, as the narrative went, would generate revenue that could cross-subsidise the other work these welfare agencies was involved in.
I wrote about these trends in these blog posts (among others):
1. Social entrepreneurship … another neo-liberal denial (November 11, 2009).
2. ABCD, social capital and all the rest of the neoliberal narratives to undermine progress (November 12, 2020).
They were flawed from the start but reflected the way progressives were being duped by the ‘market’ solution narrative which has characterised the neoliberal era.
Related to that trend was the idea that regional development strategies from government were inferior to allowing the ‘market’ to identify spontaneous outbursts of local entrepreneurship which would become the basis for prosperous development.
Planning out, market in.
The idea was that regions are self-contained geographic spaces and their fortunes depended on the capacities of the wealth creators living there.
The fact that regions are part of a nation and macroeconomic policy settings dominate the national space was eschewed.
This was the so-called ‘New Regionalism’ movement that accompanied the Third Way, which alleged that the nation-state was no longer relevant in the global world and ‘the region’ is now the “crucible” (to use the words of British regional scientist John Lovering) of economic development and should be the prime focus of economic policy, which should concentrate on deregulation and providing export incentives.
In this way, the claim is that regions have now usurped the nation state as the “sites of successful economic organisation” (Scott and Storper’s words) because supply chains (in the post Fordist era) have become more specialised and flexible given the need to deal with uncertain demand conditions.
While many criticisms can be levelled at New Regionalism, its major weakness is that it perpetuates the notion that regions can entirely escape the vicissitudes of the national business cycle through reliance on a combination of foreign direct investment and export revenue.
It is a different spin (a variation) on the “business cycle is dead” notion and amounts to a denial that macroeconomic policy – that is, at the national level – can be an effective response to global trends that penetrate via the supply chains into the local region.
New Regionalism thus supports neo-liberal claims that fiscal and monetary policy is impotent and, in turn, it constructs mass unemployment as an individual phenomenon.
Please read my blog – Davos – an exercise in denial not solutions (January 26, 2012) – for more discussion on this point.
There have been other strands in this evolving neoliberal narrative:
1. Corporate Social Responsibility (CSR) – whereby firms do untold damage to the environment, communities, etc and then apparently achieve salvation by sponsoring some local event or similar.
2. Volunteerism – the eulogising of people doing tasks for free when in the past the tasks were paid work and often help to generate private profit for capitalist ventures.
In other words, we now con people into feeling good about providing free labour to capital. The ultimate wage cut!
All that these approaches have really created is a new breed of grifters, feeding off any government support they can get and pocketing the profits.
Increased incidences of corruption and incompetence have been revealed.
It has become a clusterF*@D!
More recently, progressives have fallen into the ‘de-risking’ trap.
I discussed this problem in my recent – Letter from The Cape Podcast – Episode 16 (October 13, 2023).
I used the example of the Australian government’s recent re-creation of a National Housing Supply and Affordability Council, to address the growing housing crisis in this country.
A previous incarnation of that body was scrapped by the conservative government in 2013 after only five years of operation because its published research became an embarassment to government.
It was established with the purpose of monitoring ‘housing demand, supply and affordability in Australia, and to highlight current and potential gaps between housing supply and demand’ (Source).
While it was functioning, it regularly published ‘estimates, projections, analysis and policy advice in relation to housing supply and demand.’
It’s annual ‘State of Supply Report’ told of growing shortages in housing supply, declining housing affordability, and low-income families being trapped in the private rental market because they were unable to access adequate social housing.
The Report disclosed the growing gap between the demand for social housing, that is, accommodation that is within the financial reach of low-income families, and the supply.
By 2011, the Council reported that the shortfall in housing, which was ‘both affordable and available to the lowest income
households’ had reached 539,000 units’ (Source).
The Government was squarely in its sights because for more than a decade or two, state and federal governments had abandoned their role in providing housing and had instead claimed that the ‘market’ would solve the problem.
The government scrapped that body.
When the new Labor government was elected in May 2022 one of its fanfares was about how it would reintroduce the Council as a commitment to dealing with the now shocking housing crisis – where people were living in tents, cardboard boxes and under bridges.
Yes, we are one of the wealthiest nations and homelessness is increasing.
So we all thought – finally, the government is resuming its responsibilities.
We were wrong.
As ‘Interim National Housing Supply and Affordability Council’ was established as a transition phase and it published its first report in July 2023 – Barriers to Institutional Investment, Finance and Innovation in Housing.
The change in narrative from those original reports in 2009 to now is stark.
It still identifies that:
Unfortunately, Australia is currently facing a significant rental housing supply and affordability challenge … Finding rental accommodation is increasingly difficult; vacancy rates are at or near record lows in most cities and regions, the number of people who are experiencing homelessness is increasing, and the rate of insecure housing is growing.
It should have replaced “currently” with still.
The current narrative is replete with analysis of the role of government as an agency to provide ‘de-risking’ for the market.
A key recommendation is “De-risking the development and ownership of projects of institutional housing assets” should become the focus of government.
What does that mean?
De-risking is everywhere now.
It refers to the process by which governments give handouts or guarantees or other inducements to reduce or eliminate the risk of private corporations investing in large-scale infrastructure projects.
So the private investor knows they will profit under all circumstances and the risk remains with the public sector.
Last Monday, the Shadow Chancellor in Britain, who in all likelihood will become the next Chancellor – which in Australian terminology is the Treasury Minister, outlined what she claims is a ‘bold’ plan to revitalise Britain’s failing and degraded public infrastructure and she said the central responsibility of government was to create a ‘de-risked’ environment for private investment.
Years of neoliberal neglect, justified on the basis that the government did not have enough money, has seen vital public assets such as water, transport, power and more privatised and become vehicles for private, profit-seeking corporations to bleed dry – short-terminism exemplified.
Other assets, that remained in the public sector have been run-down.
Now, the solution apparently is more of the same.
The same applies in most nations given the global reach of the neoliberal ideology.
Leading the ‘de-risking’ charge has been the so-called Bidenomics in the US, with its central theme of promoting infrastructure development by reducing the risk for private investors.
His administration announced billions in extra funding to build new and revitalised public infrastructure after years of neglect.
But the funds are being allocated to ensure there is a secure revenue stream for private investors.
Ever heard the term ‘corporate welfare’!
De-risking means that the government, which claims it cannot build an adequate supply of houses or other essential public infrasturcture because it doesn’t have the cash, commits to providing all sorts of guarantees, subsidies, grants, and straight out handouts to corporations.
The de-risking agenda also promotes further deregulation – the so-called euphemistic ‘Regulatory Streamlining’ – which reduces accountability and oversight, with the inevitable result that standards slip as even more shonky operators enter the construction sector.
And, of course, the Public-Private Partnerships are touted as ways in which the government can shift the risk of large projects onto the ‘market’ – except in the case of essential infrastructure such as hospitals, transport, utilities etc – the risk can never shift.
The government is always ultimately responsible for the supply of the services in these areas.
So all that happens is that there is a massive transfer of public money to private profiteering corporations, usually with a diminished quality and scope of service as cost cutting becomes the norm.
The problem is that national infrastructure planning becomes subjugated to what private corporations consider is profitable rather than what the nation actually needs.
We are going to see a lot of this in the policy development seeking to address climate change.
And given the massive housing shortage, particularly for lower income families, the ‘market’ is poised to reap dramatic profits from government handouts and in return Australia will get poorly built, energy inefficient fields of roofs and concrete.
It is no surprise that the Australian Labor Government appointed the CEO of a major construction company as the chair of the Interim National Housing and Affordability Council.
The starting point in responding to this neoliberal narrative lies in rejecting the fiction that the government cannot afford to fund the construction of public infrastructure and public housing.
The housing shortage is because there are not enough houses.
In the 1950s and beyond that is the way the nation was built and it provided first-class public infrastructure and adequate housing for those in need.
We now have a shortage of some 800,000 social housing units in Australia because of government neglect, justified by the fiction they didn’t have the cash.
The federal government has all the cash it needs to build those houses and the only issue is the availability of productive resources.
But, given it plans to ‘de-risk’ the ‘market’ to build more houses, then the resources will be there.
Why should private corporations reap massive profits from government handouts when the same outcome – more houses – can be built at resource cost, without the leakage to the top-end-of-town?
That is enough for today!
(c) Copyright 2023 William Mitchell. All Rights Reserved.