There is an awful similarity between religion and neoclassical economics. Whereby in religious studies, you learn the mysticism of spirituality. In neoclassical economics, you learn the inefficiency of a controlled market and the magical nature of the natural rate of unemployment. They are similar because of how convinced they are with their arguments. Yet, both are built on the foundation of faith. During this writing, I’ll dive into the fallacies of this new religion, ‘neoliberalism’.
Neoliberalism is a political and economical approach that favours free-market capitalism, deregulation, and government spending reduction. They reward personal responsibility and entrepreneurial initiative and undermine the bureaucratic nature of the state. These ideals have been preached by organisations such as the IMF and World Trade Organisation that follow the Washington consensus. They tend to use methods such as financial pressures and force to spread their values. They claim that government interventions hinder economic growth but does it?
18th century England, Europe’s most developmental economical country. According to British historian John Brewer, didn’t achieve that through laissez-faire market but rather through radical increases in taxation and efficient administration to organise the state’s fiscal and military activities, labelling the government “the largest single actor in the economy”. After 150 years of massive protectionist policies, allowing it to reach ahead of its competitors, England liberalised trade –1846-. Looking at USA, British steel was kept from US markets by very high tariffs that enabled the United States to develop its own steel industry. In the 1920s, the US followed the UK and liberalised trade. However only after 150 years of protectionism policies and violence; after it became by far the richest and most powerful country in the world. Furthermore, when times get tough, the same policies comes right back on. Such as the Clinton quota imposition, leading to the collapse of Kenya’s textile industry in 1994, and recent example are apparent everywhere. Of course, they justify their actions with words such as dumping and unfair competition to cover up their inefficiency.
Furthermore, according to Foreign Affairs, without extreme government interference measures, it is doubtful that the steel, automotive, machine tool, or semiconductor industries would have survived Japanese competition or forge ahead in emerging technologies. A study of transnational corporations (TNCs) by Winfried Ruigrock and Rob van Tulder found that government intervention has played a significant role in developing and innovating many fields such as aerospace, electronics, modern agriculture, materials technologies, energy, and transportation technology. A recent example is the creation of the internet.
These findings are logical because let’s take a modern case, Covid-19. The majority of top pharmaceutical companies were reluctant to start research because of the unprofitability of vaccination. Furthermore, SARS was first spotted in 2002, and corporations could’ve developed vaccines to combat potential variants just like the flu, but they didn’t; why? Because they rather sell face creams that make billions. It is unprofitable for corporations to proceed with farfetched technological advancement; thus, their research and development usually leads to processes innovation or product innovation rather than paradigm innovations.
Neoliberalism and neoclassical economics have been proven repeatedly to have no historical and empirical basis by books such as the bad Smartian. It is an ideology pushed in the faces of defenceless countries by government and organisation such as the world trade organisation and the IMF to benefit the few. In addition, as we see in countries like the UK and the USA, the free market they preach doesn’t even increase the standard of living of their people but rather just makes the rich richer. East Asia economic miracle is a prime example of what protectionism and an efficient regulated market lead to. With its magical forces, this divine market is an ideology just like many used and moulded in order to justify the actions and benefit the few.
