Impact of neoliberalism

Last Updated : 12 July 2016, 18:42 IST

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Neoliberalism is a policy model of social studies and economics that transfers control of economic factors to the private sector from the public sector. Its central dogma is economic growth through increasing competition by deregulation of social, welfare, health, labour and environmental laws, opening domestic markets to foreign competition, limiting the role of the state by privatisation of state assets and liberalisation of economic policies, and increasing corporate influence and involvement in governance.

This agenda of economic reform was institutionalised by the International Mo-netary Fund (IMF) starting in the 1980s, and accepted worldwide because it adm-irably profited the governing elite politician-corporate nexus in all countries.

Development through neoliberalism is based upon personal profit-at-any-cost (industrial and business corporations are persons) from capital and energy-intensive industrialisation. Through economic reform, governments maintain the interests of the ultra-rich, who gradually take over public assets by restricting governance to creating and defending markets and protecting private property. Neoliberal economic growth promotes global trade, consumerism and debt. It thus subordinates democracy, equity, social justice and freedom, and wreaks economic violence upon the majority poor.

Neoliberalism also nurtures inequality. Today, the wealthiest 62 people on earth own as much wealth as the bottom half 3.5 billion, and the top 1% are more wealthy than the remaining 99%. Over decades, the Third World governments were influenced to introduce neoliberal economic reform. This was done throu-gh global training and outreach prog-rammes in World Bank institutes and reputed western universities, of thous-ands of Central and state legislators, bur-eaucrats, technical specialists, journalists, teachers and civil society leaders, in subjects related to economic development.

India’s New Economic Policy formulated in 1991 by then finance minister Manmohan Singh was IMF-WB-orchestrated economic reform including structural adjustment, to encourage foreign investment. Economic reform was pursued with dedication by successive governments under prime ministers P V Narasimha Rao, A B Vajpayee and Manmohan Singh. Currently, Prime Minister Narendra Modi’s government is aggressively accelerating these reforms.

Noting that Manmohan Singh was a WB employee before he became the finance minister and later prime minister for two terms, he appointed Montek Ah-luwalia (then in IMF) as deputy chairman, Planning Commission. RBI Governor Raghuram Rajan, was chief economist at IMF. Without questioning their patriotism, this is how the neoliberal agenda has been effectively imposed on India.

The Niira Radia tapes, and now the on-going Essar/Ambani tapes episode, which alleges corporate collusion with the executive, legislative and judiciary to bypass constitutional processes, spans a period of about 15 years, to include PMOs beginning with Vajpayee’s period. It is evident that regardless of the party in power, corporates influence governments in their own interest, making the public or national interest secondary.

An important reason for BJP’s 2014 general election victory was the promise of stopping the humongous corruption of UPA-1 & UPA-2 rule. But two years down the road, there is little real evidence of recovering the stolen billions. Rather, following the UPA, public funds continue to vanish as corporate debts (NPAs) are written off, and public revenues from corporate taxes continue to be foregone in two successive NDA-2 budgets. Thus, neoliberalism has transformed corrupt regimes into “looting machines”, as elites manoeuvre to steal state revenues and acquire public assets.

The effects of neoliberal policies were debt crises, severe environmental degradation and crashing economies, currency collapse, rising unemployment, rising food and fuel prices, and falling wages. The social ill-effects were exacerbated by imposition of “austerity measures” of cutting subsidies for the poor and reducing public spending on health, welfare and education. Worldwide, spontaneous people’s grassroots movements opposed displacement of populations due to mega projects and environmental degradation. Governments viciously suppressed these. Chile was an extreme case where thousands of opponents of neoliberalism were liquidated.

People’s movements
There are hundreds of on-going people’s movements all over India, protesting the proposed, on-going or completed infrastructure projects, or state and central governments’ policies and laws which violate, deny or dilute people’s constitutional rights and freedoms, in favour of corporate interests. Over the years, intellectuals who consistently critiqued neoliberal policies were ignored, defamed, branded as communists, suppressed or eliminated.

Neoliberal reform over decades has heightened inequality in European countries, leading to economic near-collapse of PIGS (Portugal-Italy-Greece-Spain). The consequent EU-wide political instability is greatly heightened by the flood of immigrants from countries hit by armed conflict triggered due to neoliberal exploitation. The UK voting 52% to leave EU is the most recent reaction to neoliberalism’s negative impact.

In a June 1, 2016 report titled “Neoliberalism Oversold?”, a study group reported that IMF’s decades-long advocacy of neoliberal economics has serious failings, not having delivered on three aspects: benefits in terms of growth are difficult to establish; the costs of increased inequality are prominent; and increased inequality hurts the sustainability of growth (which is central to the neoliberal dogma).

Even though the report admits to failings of neoliberalism, the failings are so central to neoliberalism that it is tantamount to admission of failure. To counter strong internal opposition to the report, and maintain their credibility within IMF, the authors claim benefits of the neoliberal agenda: “…there is much to cheer in the neoliberal agenda.” The authors deserve credit for their courageous critique of IMF policy from within the establishment.

The publication of the report from the very temple of neoliberalism may indicate the terminal decline of neoliberalism, giving hope to those who believe that social equity and justice, and democracy and freedom, are vital for a sustainable future. But that is no consolation for the many millions who have died, suffered and continue to suffer its irrever-sible ill-effects of inequality and inequity.

(The writer, a retired Major General, is with People’s Union for Civil Liberties)

Published 12 July 2016, 18:42 IST

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