Monday, June 27, 2016

Neoliberalism and Brexit

I'm trying to be cautious about making assumptions on the relationship between economic conditions and the rising xenophobia and nationalism we're seeing in European politics. And US politics, unfortunately.

This is why studies like the classic studies organized by Frankfurt School exiles in the US, The Authoritarian Peronality (1950), are so valuable in reminding us of the complexity of the interaction between social conditions, family structure and other dynamics.

The economic and political theories have been dominant in the North Atlantic world and beyond for decades. It first became dominant during the Reagan Administration in the US and the Thatcher government in Britain. The Maastricht Treaty on European Union of 1993 represents a key turning point for the ascendance of neoliberalism in Europe. A key aspect of neoliberal hegemony in both the US and Europe has been the adoption of that outlook by the dominant center-left parties, social-democratic in Europe and the Democrats in the United States.

The neoliberalism of the 1990s up until today didn't create nationalism, xenophobia or racism, obviously. But in politics, quantity and intensity matter. A lot. And there are distinct social changes that have affected economies from Germany to Britain to the United States as a result of the dominance of such policies and theories of government.

Servaas Storm takes a shot at framing the problem in How the Brexit Tragedy Challenges Economics New Economic Thinking 06/26/2016:

It would be a tragic mistake to read this resentment against the E.U. as only anti-migrant, racist or bigoted, because the racism and bigotry have grown in conditions of economic austerity, artificial job scarcity and crisis, rising unemployment, rising job insecurity, and exploding inequalities as social protection for workers, pensioners and families have been scaled down in favour of an expanded social safety net for TBTF [too big to fail] banks and corporations. Almost everywhere in the E.U. — as in Britain — there is a polarization of the income distribution into a large number of low-income households and a much smaller number of very rich, while the middle classes have shrunk. There is a segmentation of employment into low-wage, unprotected and precarious jobs, mostly in low-tech services, and high-wage and protected jobs in high-tech manufacturing, finance, legal services and government.

Labour market reforms are turning European countries into “dual economies” — a trend fuelled by robotization and technological progress. The real message therefore is one of utter macroeconomic mismanagement in response to the global crisis and on-going rapid technological change, which – unfortunately not for the first time in recent history – has created the conditions for political instability, upheaval and social chaos. The massive social protests in France against the modernization of labour laws — newspeak for a reduction in the strength of French job-protection laws and social security in general — by the “socialist” Hollande government illustrate the point: The systemic dismantling of worker protection in the name of cutting wage costs and improving unit-labour cost competitiveness will certainly increase job insecurity, employment precariousness, and inequality without any further macroeconomic benefits. Despite uncountable attempts to do so, no robust relationship has been found between job-protection, on the one hand, and unemployment, economic performance and productivity growth on the other hand. [my emphasis]

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