What is neoliberalism? a look into Neoliberal economic reforms in New Zealand.
Margaret Tatcher and David Lange. April 1985. LONDON PICTURE SERVICE.
“Imagine if the people of the Soviet Union had never heard of communism. The ideology that dominates our lives has, for most of us, no name. Mention it in conversation and you’ll be rewarded with a shrug. Even if your listeners have heard the term before, they will struggle to define it. Neoliberalism: do you know what it is?”
George Monbiot.
Misconceptions on neoliberalism.
Neoliberalism is often misunderstood, with common definitions suggesting it's all about unregulated markets and minimal state involvement. However, a deeper exploration reveals that such perceptions are far from accurate. To understand how neoliberalism works in practice, we will take New Zealand as a case study. In a nutshell, this post aims to critically define neoliberalism and analyze New Zealand's adoption of neoliberal measures in the past and the present
What is liberalism? A quick historical backdrop of neoliberalism.
Originating in 17th century England, liberalism gained prominence through key events like the 1789 French Revolution, the 1776 American Revolution, and the 19th-century Latin American independence movements. This form of liberalism embraced human freedom, political equality, and material progress, with economic liberalism advocating for limited state involvement in commerce and industry, allowing economic relationships to evolve organically among various classes and individuals.
Neoliberalism and its historical contex. Who were the first voices of neoliberalism?
Contrary to popular belief, neoliberalism isn't solely fixated on minimal state intervention and self-regulated markets. Rather than seeking to eradicate the state's role, neoliberalism reevaluates economic liberalism, recognizing the state as a pivotal tool for sustaining thriving capital markets.
Neoliberalism, far from avoiding state involvement, strategically deploys the state's influence to ensure market vitality. This ideology indeed supports the privatization of public services and aims to diminish the strength of trade unions and similar entities that could potentially challenge the growth of expansive capital markets.
Under neoliberalism, politics is understood as a technical matter best handled by experts through bipartisan alternation of power. This perspective grants the state a monopoly on violence, enabling the imposition of strong repressive measures to freely apply neoliberal policies. In simple words, neoliberalism is characterized by a 'free economy, strong state,' as described by Andrew Gamble.
The pillars of neoliberalism are embodied by Friedrich A. Hayek's influential work "The Road to Serfdom” (1944), and Milton Friedman's famous tome "Capitalism and Freedom” (1962). Hayek’s ideas were presented after the World War II where totalitarian States where ruling the World. On the other hand Friedman’s book was a respons of the Keynesian economic model.
According to Milton Friedman: "Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around”. This is the ackwoldgment that neoliberalism economic policies are extremely difficult to apply in a strong democratic society. “Freedom from regulation means the freedom to poison rivers, endanger workers, charge iniquitous rates of interest and design exotic financial instruments. Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty.” says George Monbiot to the TheGuardian.
Naomi Klein meticulously detailed the global implementation of neoliberalism in the 1980s through her work "The Shock Doctrine”. (2007). Klein shows how for states willing to implement a neoliberal program, they needed to devise methods to shock and weaken the population. This was crucial in order to facilitate the implementation of rigorous economic policies, minimizing resistance from the people.
The Neoliberal Agenda in the 80’s: Ronald Reagan, Margaret Thatcher, and Roger Douglas.
The neoliberal agenda was specially pursued by Ronald Reagan in the United States and Margaret Thatcher in Great Britain. However, their implementation of these ideas involved what can be seen as a questionable experiment, as they were not hesitant to support military interventions and oppressive dictatorships in South America to further their goals.
Meanwhile, New Zealand also became a testing ground for these concepts, albeit with a less aggressive approach. Here, narratives of fear, like concerns over inflation, and promises of a brighter future were crafted to manipulate public sentiment. Neoliberalism was introduced in New Zealand by Roger Douglas of the Labour Party in the 1980s. The economic measures enforced during 1984-1988 are known as 'Rogernomics.
Economic measures applied in New Zealand during the 80’s:
Economic Deregulation: Removal of controls on prices and foreign exchange, causing a crash on local economy.
Financial Market Reforms: Liberalization of the financial system.
Trade Liberalization: Reduction of trade barriers and tariffs. Less local producers and more import products.
Privatization: Sale of state-owned enterprises to private investors.
Fiscal Policy Changes: Government spending reduction and inflation control.
Labor Market Reforms: Promotion of flexible labor markets and union’s eradication.
Tragically, New Zealand's adoption of these neoliberal strategies led to a significant economic crisis in the 1980s, a result of adhering to the directives imposed by the International Monetary Fund (IMF). The rogernomic period contributed to increased unemployment, and income inequality widened as the benefits of economic growth were unevenly distributed. Also, reductions in government spending on social services and welfare particularly impacted a big part of the population.
Neoliberalism in the 2000s.
As the 2000s unfolded, neoliberal concepts continued to evolve around the world, adopting a more subtle narrative. These ideas reached their zenith during the 2008 economic crisis, where private banks were bailed out by public funds across Europe and the US. This phenomenon underscores a continuing reality — the vital role of the state in the market. Just four months ago, another example of this truth emerged when cash-strapped banks borrowed a staggering $300 billion from the US Federal Reserve. This action serves as compelling evidence that the state remains an indispensable pillar of the market, as billions of dollars originating from state resources were channeled to rescue private funds.
When "dysregulation" means regulation in favour of the market.
An intriguing perspective emerges when examining so-called "dysregulation" within the context of big corporations. Dysregulation often thrives when there exists legislation or written laws that, intentionally or not, facilitate these practices.
In some cases, corporate lobbying and influence on policymakers may result in regulatory frameworks that lack the necessary teeth to curb unethical behavior. Regulation in favour of the big financial corporations lead to a culture of lax enforcement and impunity. This dynamic not only poses a threat to fair competition but also raises questions about the ethical standards upheld within the financial economic world. As society struggles with the so called “dysregulation”, it becomes imperative to critically examine and reform the regulatory systems to ensure they align with the broader interests of the public and the ethical foundations of a just and sustainable economy.
Neoliberalism in the current housing crisis in New Zealand.
Take the current housing crisis as an example. Platforms like Airbnb operate within legal frameworks and are able to win every legal battle that have been presented. The Environment Court has become the institution that opens up a space in New Zealand for Airbnb to do as it please. The short term rental platform needs the State to be in its favor, changing and making laws that “protect” its freedom.
Another aspect contributing to the rental shortage in New Zealand is the number of empty homes that sit empty for extended periods, either awaiting use as holiday homes for only a few months per year or serving as a future asset through the unethical practice of land banking. Following the same neoliberal path, members of both the National and Labour Parties have created a narrative of “fear of Discouragement Investment” in response to the proposal of an Empty Homes Tax.
Tourism from a neoliberal perspective.
New Zealand is also in a critical phase regarding how its tourism policy will affect local economy and could have an even more negative effect in the housing crisis. While we acknowledge and support the importance of tourism, our primary concern centers on the potential negative consequences arising from unregulated tourist accommodations. This issue poses a significant threat to both our housing market and the overall well-being of our citizens. Unchecked growth in tourist accommodations can lead to a surge in demand for housing, driving up prices and contributing to a shortage of affordable options for residents. Additionally, the influx of short-term rentals may disrupt the sense of community in residential areas and put a strain on local resources. National’s tourism policy have a strong neoliberal approach that takes marketing as the priority rather than truly attack the roots of the housing crisis in New Zealand.
How to fight neoliberalism? Constructing a stronger “us”.
In the face of the current rental crisis, rising living costs, and other socio-economic challenges, there is a critical need to redefine our collective identity. Chantal Mouffe's concept of a "chain of equivalence" provides a valuable framework. Instead of homogenizing diverse political demands, it articulates a spectrum of struggles, allowing unity to emerge amidst differences. This approach establishes a common ground under a "hegemonic signifier," fostering equivalence in political demands against a shared adversary. Additionally, active engagement with existing political institutions is crucial, aiming to transform them democratically to instigate positive change within the system and to fit the real adversary: neoliberalism.
