Peter Klein at Organisations and Markets has listed some nice pictures to demonstrate the absurdity of the claim that we have lived through some decades of deregualtion, the retreat of the State, neoliberalism, yadda yadda.
One of the established memes about the financial crisis is that it demonstrates the failure of unfettered capitalism, the dog-eat-dog, laissez-faire environment that prevailed in the West over the last few decades, all driven by the ideology of “free-market fundamentalism.” This seems to be a truism among most of the Commentariat. Of course, as pointed out repeatedly on this blog, the truth is virtually the opposite: there was never any “deregulation,” the Bush Administration spent public money like a drunken sailor, and government continued to expand as it always does. But a picture is worth a thousand words, so try these on for size. (US data; click charts for sources.)
The funniest example of historiographical fantasy on the “GFC” came, of course, from our own Kevin Rudd.
C.L.
2 Feb 10 at 2:40 pm
Good call CL! Serious historians will not be kind to Mr Rudd, nor to the partisans in the press and media who shamelessly barrack for the ALP.
Imagine the storm that would be aroused by a non-left commentator who indulged in something like this performance from Mike Carlton http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/never_mind_the_argument/
Rafe
2 Feb 10 at 3:18 pm
Yeah, I liked the bit where Big Brave Mike scampered when Bolt told him to bugger off.
C.L.
2 Feb 10 at 3:22 pm
there was never any “deregulation,”
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So Reagan never cut taxes for the upper echelon, Thatcher never sold public assets and neither did Hawkeating? Clinton never repealed the Glass-Steagall Act? Oh okay.
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the Bush Administration spent public money like a drunken sailor
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On welfare or infrastructure? These charts don’t specify exactly what was regulated or exactly what federal programmes were introduced. It’s a silly bunch of data that in no way backs up the absurd assertion that neoliebralism was a fiction.
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Good thing no-one controls the past ‘ey?
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Of course the idea that neoliberalism was some kind of return to small government was fiction. But the money got spent on toys for the boys hence the US’s crippling debt situation. Thank Reagan and Bush II.
Adrien
2 Feb 10 at 7:26 pm
Adrien’s correct here. The better leftist writers on neoliberals (such as David Harvey) recognise perfectly well the gulf between the laissez-faire theory and the interventionist practice.
The best example of neoliberalism in Australi’as recent history was Workchoices, and it illustrates this gap between theory and practice. In theory, it was intended to promote labour ‘flexibility’, and it was deregulatory insofar as workers were concerned, in that it stripped various rights from them. It wasn’t deregulatory overall, in that it centralised power, added enormously to legislation and policy, and basically was a bit of activism designed to tilt the balance in favour of employers. IIRC, the HR Nicholls folk described it as ‘Stalinist’.
Viewed in that light, the Bush regime was neoliberal. Tax cuts, privatisations, the outsourcing of war, etc. It’s surely no coincidence that, just like neoliberal economies everywhere, this pro-corporate agenda was accompanied by a crackdown of civil liberties in the US.
THR
2 Feb 10 at 7:37 pm
this pro-corporate agenda
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Exactly. The rhetoric is all about freedom but the execution is pure ‘good ol’ boys’ in a hotel room drunk on gimlets and workin’ out how to divvy up the public dollar amongst ‘emselves.
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Forget the rhetoric. The real agenda is illustrated well by >a href=”http://news.bbc.co.uk/2/hi/americas/1336960.stm”>the National Energy Policy Development Group one of the first things that Bush did in office. People who support actual economic liberalism should be jumping up and down and all red-faced but no…
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Why is that?
Adrien
2 Feb 10 at 7:48 pm
Sorry – link.
Adrien
2 Feb 10 at 7:49 pm
Thatcher and Reagan at least held the line against the growth of government and Clinton did not do too badly. But they did not reverse the trend towards inreased central control (Thatcher in particular) and the record over the last decade indicates growth of government and especially proliferation of regulation, even in the banking system. Tyler Cowen documented the growth of bank US regulations in terms of thousands of pages but of course that amount of regulation is too cumbersome and complicated for anyone to understand.
The causes of the financial crisis have been fairly well explained by the likes of Thomas E Woods (Meltdown) and they essentially add up to government failure.
Rafe
2 Feb 10 at 10:40 pm
Adrien, you’re mistaking anecdotes for systematic evidence. Yes, Reagan made modest cuts to the highest marginal tax rates, but the overall tax burden (if measured correctly) increased during his term. Yes, Thatcher sold some government-owned enterprises, but there was hardly any systematic trend toward deregulation in Britain or the US. (In the US, the most important cases of deregulation took place in the 1970s, under Democrat Jimmy Carter, e.g. airlines and interstate trucking.) Clinton hardly “repealed Glass-Steagall.” Restrictions on universal banking were chipped away gradually, over several decades, but replaced by enormous new sets of financial-services regulation.
Naturally, the charts linked by Rafe do not “prove” anything. They are meant merely to make you think, and to suggest that systematic, quantitative evidence on the size and scope of government intervention in the economy is needed. A few breezy slogans won’t do.
Peter G. Klein
3 Feb 10 at 2:33 am
Check out Appendix A of Steven Horwitz and Peter Boettke’s The House that Uncle Sam Built which shows that from 1980 to 2009, there were 4 regulatory policies for every 1 deregulatory policy.
Capitalist Piggy
3 Feb 10 at 9:19 am
Rafe/Peter – But they did not reverse the trend towards inreased central control
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Please read the last paragraph of my original comment again.
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Adrien, you’re mistaking anecdotes for systematic evidence.
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No. I merely served up anecdotes as an illustration that this deregulation which s’posedly never happened did actually happen. What actually happened versus what the rhetoriticians actually said happened? Another matter.
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Naturally, the charts linked by Rafe do not “prove” anything. They are meant merely to make you think
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They’re poor for that. It is in the nature of states, as in any other organisation that wields power, to hold onto that power and to acquire more of it. There was a gap between what was said and what was done under neoliberalism.
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When statements like “there was never any deregulation” are made it appears we are confronted with an attempt to rewrite history. There was a long wave of economic policy associated with the repeal of regulations instituted since the Great Slump. That this did not actually lead to less actual statutes is interesting; that the Reagan presidency may have cut taxes for the highest echelon whilst raising everyone else’s is also interesting; that Clinton repeals the Glass-Seagull Act and within a decade an event occurs that this act was designed to prevent is, to me, very interesting.
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One weakness in those advocating economic liberalism that’s become apparent to me is a scant familiarity with actual economic history. I don’t pretent to be well versed in this field by any means, but even I can see glaring ommissions convenient to a view which holds one side of the economics debate perpetually in the right and the other always wrong.
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Perchance could they both be wrong?
Adrien
3 Feb 10 at 7:46 pm
“One weakness in those advocating economic liberalism that’s become apparent to me is a scant familiarity with actual economic history.”
Please give some seminal examples.
Semi Regular Libertarian
3 Feb 10 at 7:50 pm
Please give some seminal examples.
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I had this out with a bunch here before. Here’s the proposition: The Industrial Revolution was sparked by centuries of Industry Policy by the British government – Yes/No?
Adrien
3 Feb 10 at 7:58 pm
I think it was the culmination of the progression of enlightenment science, increased trade with colonies, stable, limited Government, good weather and the adoption of and understanding of 1st generation economics – on top of some laissez faire policy.
The previous industrial policy might have had something to do with it. What exactly, and how did it contribute? I’m open to this, but I don’t know why it would work. Before you’ve mentioned something about wool and dye trading, but Scotland got rich off this before the industrial revolution in the main started. part of this can be attributed to political stability in Scotland. “The progression of enlightenment science” can go back to the black plague or the reformation if you view that as the result of the renaissance and early modern Europe.
I’m open to it, as an addition to the rest of the theory, but that is only one/maybe two examples thus far. Unless you’re going to characterise colonisation of America which increased trade as “industry policy”. Because the monarchy chose patent monopolies/Crown monopolies rather than homesteading isn’t really a validation of industry policy.
Semi Regular Libertarian
3 Feb 10 at 8:08 pm
From the Tudors forward there was a concerted industry policy to build local textiles manufacture in Britain. This involved tariffs, trade embargos and government directed cultivation of textile manufacturing techniques.
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It also involved many of the other things you mention including laissez-faire in certain places. As in government direction here, and government hands-off there.
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All modern developed economies including the United States went thru such a period.
Adrien
3 Feb 10 at 8:17 pm
So how did favouring textile manufacture actually spur on the agricultural revolution which in turn led to the industrial revolution?
Simply favouring an industry doesn’t mean that it will actually result in the betterment of that industry. Look at the out of date and overpriced NBN for example.
Semi Regular Libertarian
3 Feb 10 at 8:20 pm
Adrien
Maybe I’m not reading you fairly, but your argument appears to conflate deregulation and change. Thus, before the dreaded ‘neoliberals’ landed, the western world was an autarky paradise regulated just-so. Then along the ‘neoliberals’ who took away all our wonderful just-so regulations, and now we have none left. Bwwwwwaaaahhhhh!
Oops, except for millions of pages of statute and case law devoted to the buying and selling of financial securities, property, labour, truffles, airline tickets, and on and on and on, not only in every western/market society, but every society on earth.
And the number has grown exponentially since the 1970s, not lessened.
Peter Patton
3 Feb 10 at 8:35 pm
So how did favouring textile manufacture actually spur on the agricultural revolution which in turn led to the industrial revolution?
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I didn’t say it did. I’m not exlcuding science. But if it wasn’t for Britain’s powers as a manufacturing nation, its colonies and the mercantilist policies guaranteeing exports I doubt there’d be all that much science.
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Simply favouring an industry doesn’t mean that it will actually result in the betterment of that industry.
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No usually it means that industry is a bunch of lazy slobs on the public tit. The British government created an industry by controlling imports from Flanders and exports to it, selectively, over a long period of time.
Adrien
3 Feb 10 at 8:38 pm
Thus, before the dreaded ‘neoliberals’ landed, the western world was an autarky paradise regulated just-so.
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I didn’t say that. The tendency to over-regulation brought, for example, Britain to a halt. Even communists like Hobsbawm have said has much.
Adrien
3 Feb 10 at 8:39 pm
Maybe certain policy directions have a tendency to go too far and maybe human beings refuse to recognize the danger until it’s gone to far.
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When Kevvie gave his anti-Hayek rave he may have had a point about ideology run rampant, but then he proceeds to run rampant with his own ideology. It’s like Jehovah’s Witnesses at the door telling you all the iniquities of the other Christian churches: they’re all bad so we must be good.
Adrien
3 Feb 10 at 8:42 pm
“I didn’t say it did. I’m not exlcuding science. But if it wasn’t for Britain’s powers as a manufacturing nation, its colonies and the mercantilist policies guaranteeing exports I doubt there’d be all that much science.”
Just like how colonialism led to the Spanish golden age, Britain benefited immensely from colonial trade. However, it is not the sole reason for growth. Trade can be an engine for growth but exports can be a vent for surpluses as well.
“The British government created an industry by controlling imports from Flanders and exports to it, selectively, over a long period of time.”
I wish to know more. Can you show me anything that is particularly instructive?
Semi Regular Libertarian
3 Feb 10 at 8:45 pm
Adrien
It’s impossible to know what Rudd was smoking or who he got to write those articles, but they were just drivel. There is no way he has ever read Keynes, Hayek, Friedman, or even looked inside an economics textbook. His crass analysis of post-WWII history, and even the history of the past 40 years, was just shameful for a political leader.
But our intellectual class gave him a pass. Probably for no other reason than he wasn’t John Winston Howard.
Peter Patton
3 Feb 10 at 8:54 pm
It’s hard to read when you grow up in a car
tal
3 Feb 10 at 9:11 pm
Rudd at the Bathurst 1000:
“As a young boy, I dreamed of being a car”
Semi Regular Libertarian
3 Feb 10 at 9:13 pm
Aye SRL
tal
3 Feb 10 at 9:17 pm