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Reviews

Opinions 2016 05 30

Jón Baldvin Hannibalsson. Neo-liberalism: Neither new nor liberal

Or how do you define the main characteristics of the neo-liberal creed?

The first thing to be said about it is that despite its name, neo-liberalism is neither new nor liberal. It is in fact the reincarnation of the 19th century laisser-faire economic theory. The essence of this creed is a naïve belief in the infallibility of markets and their innate ability to correct themselves. Both propositions have been proven false. After the systemic failure of laisser-faire capitalism and the subsequent Great Depression during the thirties of the last century, this ideology was thoroughly discredited.

It took a whole decade of state intervention (the New Deal in the US and the Nordic model in Scandinavia) and a World War to get capitalism functioning again. The post-war era (1950s – 1970s)  is the Golden Age of the social-democratic welfare state. Its success is undisputed.  It was a period of rapid economic growth and fair distribution of the economic gains. A period of progress and prosperity. This success was based on rejecting the basic tenets of laisser-faire economics. And accepting instead the vital role of the democratic state in managing the economy and securing increasing equality of income and wealth.

The noe-liberal era started in the eighties as a revolt against the welfare state –  a reassertion of the fundamentalist belief in market infallibility. It turned out to be a repeat version of history. The bankruptcy of Lehmans´ Brothers in 2008 signified the end of era. Again this version of unregulated capitalism crashed. It ended in the biggest rescue operation by the state in history. Stimulus packages by the state and quantitative easing (money printing) by central banks on a massive scale rescued us from a new Great Depression.

Instead we are now experiencing the „Great Recession“. What is the difference? A massive bail-out of the financial system by tax-payers – the state. Once again, capitalism had to be saved from the capitalists – by the state. This has revealed neo-liberalism to be what it is: pseudo-science in the service of the super-rich. Just like Soviet-communism it is a fundamentalist dogma, far removed from reality. It has nothing to do with science. And in so far as it is in the service of privileged elites and rejects the role of the democratic state, it is far removed from classical liberalism.

Mr Jón Baldvin Hannibalsson was leader of the Icelandic Social-democratic party (SDP) 1984-96.He has been Minister of Finance and Foreign Affairs and External Trade of Iceland (1987-95). He is an honorary citizen of Vilnius and an honorary doctor of the University of Vilnius.

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