Forget Everything Else. What Matters Is That Neoliberalism Failed

Seven months after the election people are still debating why Trump beat Hillary.
While there are plenty of factors involved, the primary reason why Hillary lost was an event that happened nine years ago - the failure of the global neoliberal economic system.

Trump didn’t win the election because of a Republican insurgency; he won because of a Democratic collapse. He won because neoliberalism failed.

OK, sure. There are other reasons, but the one reason above all the others a failure of the economic system, and voters that had enough with the failed status quo that Hillary represented.

The options were “has the right experience,” “has good judgment,” “cares about people like me,” and “can bring needed change.” Fifty-six percent of voters picked one of the first three categories, and Clinton won these voters handily. But 39 percent of voters picked the fourth quality—“can bring needed change”—and Trump got 83 percent of those votes. The “change” factor overrode everything else.

Before I go any further I need to defend my claim that the neoliberal system failed.
After all, the unemployment rate is down, stock and bond prices are at record highs, even housing has rebounded. Everyone agrees that the economic crisis is long since over.

Well, not everyone.
Two groups still believe the crisis never ended, and those two groups just happen to be the most important groups in the world.

One group is the voters, 40% of whom are hanging on by their fingernails and no longer believe the propaganda.

The other group is even more important - the global central bankers.

Central banks around the world are now spending $200 billion a month on emergency economic stimulus measures, pumping this money into their economies by buying bonds. The current pace of purchases is higher than ever before, even during the depths of the financial crisis in 2009.

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The global central banks wouldn't be still be in emergency mode if there wasn't an ongoing financial emergency.
This is mind-blowing in a way. Here we are, eight years after we were told the crisis ended, and yet the people that are most clued in on the true situation are acting like the building is still on fire.
So maybe, just maybe, the building is still on fire!
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What's more, the central bank manipulation of the financial markets is reaching its limits.
In Japan, the bond market goes days at a time without a single trade because the BoJ has gone from propping up the market to being the market.
A market that doesn't trade is a broken market by definition.
It's happening all over the world. Globally, central banks own roughly $18 Trillion in bonds - over 1/3rd of all the bonds on the planet.
People are realizing that central banks are increasingly impotent.

Even the IMF says that “Neoliberalism: Oversold?” That's like the Pope asking if the Virgin Mary was fooling around.
The reasons for the collapse of neoliberalism are myriad and systemic.

Earned income has been supplanted by unearned income.
Neoliberal policies are everywhere beset by market failures. Not only are the banks too big to fail, but so are the corporations now charged with delivering public services. As Tony Judt pointed out in Ill Fares the Land, Hayek forgot that vital national services cannot be allowed to collapse, which means that competition cannot run its course. Business takes the profits, the state keeps the risk.
The greater the failure, the more extreme the ideology becomes. Governments use neoliberal crises as both excuse and opportunity to cut taxes, privatise remaining public services, rip holes in the social safety net, deregulate corporations and re-regulate citizens. The self-hating state now sinks its teeth into every organ of the public sector.

Maybe trillion upon trillions of dollars of QE, and never before seen low interest rates have managed to paper-over the worst of the crisis without fixing a hopelessly broken economic system.
It's sort of like Rome after getting sacked by the Visigoths. The Roman army then went out and defeated the Huns (sort of). So the crisis was over. Everything could go back to normal.
Besides, Rome had been around for so long no one could possibly imagine a different sort of world.

After almost nine years, we are finally beginning to reap the political whirlwind of the financial crisis. But how did neoliberalism manage to survive virtually unscathed for so long? Although it failed the test of the real world, bequeathing the worst economic disaster for seven decades, politically and intellectually it remained the only show in town. Parties of the right, centre and left had all bought into its philosophy, New Labour a classic in point. They knew no other way of thinking or doing: it had become the common sense. It was, as Antonio Gramsci put it, hegemonic. But that hegemony cannot and will not survive the test of the real world.

This is a concept that most people, even the pessimists who believe the rulers will never allow change, are slow to grasp:
The system is broken and it can never, ever go back to the way it was. Not only is change coming, it cannot be stopped.

Oh, sure. They can try. Just look at the housing rebound. Prices are now higher than they were at the peak of the first housing bubble. Success!
house-price-index.png

But it's a Potemkin village, because home ownership rates are at a 62-year low. Fail!
homeown.png

The establishment left has no clear alternative. Everyone with a non-neoliberal vision of the world has been either marginalized or silenced.

For those who bemoan the rise of the populist right, the challenge is clear: you can’t beat something with nothing and if the left can’t come up with more viable and attractive solutions to contemporary problems than those offered by its competitors it can expect to continue its slide into the dustheap of history.

The neoliberal centrists, such as the Clintons and Blairites (and countless wealthy backers) have spent decades gutting and destroying left-wing voices and ideas, while the right-wing rampaged.
Now that they are gone and all they have built lies in ruins, there is no leftist infrastructure to create an alternative reality. It has to all be created from scratch. All the left has to work with are shattered pieces of dated history, and pointless, feel-good, identity politics.
This leaves neoliberalism in place, staggering along in zombie form. Not alive, but still consuming the living.

Like Rome after the Visigoths, zombie neoliberalism can stagger along for decades, but that doesn't make it any less dead.
Almost no one believes the Reagan/Thatcher promise of "rising tides lifting all boats" anymore.
Wealth "trickling down" has become a joke's punchline to everyone not part of the anarcho-capitalist cult.
Outside of increasingly isolated, free-market crazies, the defenders of neoliberalism no longer promise a capitalist utopia.
Instead their promises of wealth are limited to 'just us smart people' (wink,wink).

It's going to be increasingly hard for the working-class capitalist faithful.
They are already struggling, and a recession is virtually guaranteed in the next year or two.
If Republican/Trump policies get passed, it'll only make things worse for the working class.
That's when both crisis and opportunity strike.

The future will belong to those that can visualize and communicate a different global system. It may be one based on hope, solidarity and socialism. Or it may be one of debt-based, corporate neofeudalism. Or it may be something entirely new.
One thing is for certain, the next barbarian hoard will be coming for Rome soon if we can't imagine a different, better world.

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Phoebe Loosinhouse's picture

To me, something happened that had even greater import in the last nine years.

We've had cyclic recessions and depressions and booms and busts before and weathered it. But this time it was different, because this time we learned that not only did the economy fail, the basic underpinnings of society failed - i.e. the system of justice and the Rule of Law.

Americans thought Barack Obama was the new sheriff in town and that he and Holder would seek out and punish the miscreants who blew up the economy and took America's houses and jobs and they did the opposite - they provided cover and stood between them and the pitchforks. No one punished, no one went to jail, no one got their house or retirement or job back. There were no good guys and there was no cavalry.

This is why so many are now cynical and despairing and hopeless. Barack Obama and the Democrats made fools of us by offering Hope and Change and then snatching it back and laughing at our gullibility. This was a cosmic psychic bruising with enormous consequences that are still playing out.

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

@Phoebe Loosinhouse
Did the political system fail first? Or did the economic system fail first?
I tend to go with the idea that the two are inseparable.
Which is why the failure is everywhere.

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CB's picture

@gjohnsit
along with the US military under the auspices of what was known as the Washington Consensus. To make any effective changes, you will have to face all three of these arms.

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@Phoebe Loosinhouse 1st reply perfectly supplements the otherwise perfect essay.

One additional supplement. The Hillary campaign, and the Obama Administration, notably in their preparations for lame duck passage of the Trans Pacific Partnership, along with their Panglossian attitude towards Obamacare, didn't even have the imagination to credibly fake appreciation of the fact that so many eligible voters had unprecedentedly low levels of confidence in prospects for being treated well or fairly by the financialized economy.

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Raggedy Ann's picture

@Phoebe Loosinhouse
Herr Drumpf didn't wake us up - Obama's failure to walk his talk woke us up.

This is why so many are now cynical and despairing and hopeless. Barack Obama and the Democrats made fools of us by offering Hope and Change and then snatching it back and laughing at our gullibility. This was a cosmic psychic bruising with enormous consequences that are still playing out.

Herr Drumpf has only driven it home that we are "surplus population" and continues to shine the light on the oligarchy within which we reside.

Change will come. I find it imperative that we empower ourselves to help shape that change to one in which humanity is the winner.

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"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

snoopydawg's picture

@Phoebe Loosinhouse
After this happened,

Barack Obama and the Democrats made fools of us by offering Hope and Change and then snatching it back and laughing at our gullibility.

There are too many people that don't see this and they wish that Barack was still the president and if he couldn't be, then they wanted Hillary to continue his policies.

It is so obvious that Barry went back on almost every one of his "yes we can" or his 'hope and change' bullsh*t campaign promises.
It is possible that they are the ones who did see their fortunes change during his tenure, but their refusal to listen to those of us who saw our fortunes get worse are told to STFU and sit down.

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It is not until the tide goes out that you discover who has been swimming naked.

Phoebe Loosinhouse's picture

@snoopydawg

as the salve for getting rid of the rash the " Act Like I Care" hairshirt gave him.

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

ggersh's picture

@Phoebe Loosinhouse and yep this time is was different.

But this time it was different, because this time we learned that not only did the economy fail, the basic underpinnings of society failed - i.e. the system of justice and the Rule of Law.

Neoliberalism is a failed ism but it's still chugging along on fumes.

and a great essay gjohnsit!

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Yes the DHS’s Ministry of Truth is headed by a weird ridiculous person. Please don’t let that distract from the vastly more significant fact that the DHS has a Ministry of Truth.

Caitlin

@Phoebe Loosinhouse

People, not me, believed in him. They busted their behinds for him. They didn't want Hillary then, and after liar Obama, they certainly didn't want her now.

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"Religion is what keeps the poor from murdering the rich."--Napoleon

Arrow's picture

I especially liked this line...

The system is broken and it can never, ever go back to the way it was. Not only is change coming, it cannot be stopped.

Neoliberalism is dead.

Everyone here should know I read alot of what Umair Haque has to say. His essay from yesterday is very to the point. (He's been writing about the need for neoliberalism to die for some time now.) The essay is 'Anglomania' https://medium.com/bad-words/anglomania-77e1f4c7f2e0
Her's a quote:

But in the Anglo world, over the last few decades, politics has boiled down to a choice between neoliberalism and neoconservatism. Here is the thing. There is no real difference between them.

Both neoliberalism and neoconservatism do not believe in public goods — healthcare, education, transport, and so on. They do not believe in social safety nets, in social equity. They both believe in a Niezschean view of human potential: that the ubermen deserve the spoils, all of the them, and the undermen deserve to suffer, because they are weak, and therefore a liability upon the body social. Thus, they both believe that markets should replace the government in totality. In that respect, they are both totalitarian ideologies.

As they say...It's the economy stupid.

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I want a Pony!

@Arrow

They both believe in a Niezschean view of human potential: that the ubermen deserve the spoils, all of the them, and the undermen deserve to suffer, because they are weak, and therefore a liability upon the body social. Thus, they both believe that markets should replace the government in totality. In that respect, they are both totalitarian ideologies.

Totalitarian rule by capital.
It occurred to me recently that a failed state ruled by large, landholding warlords, like Afghanistan or Somalia in the mid-90's, is the capitalist utopia that libertarians dream of.
They just don't realize that this is what they wish for, because no one is going to respect your property rights in that kind of society.

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Arrow's picture

@gjohnsit One final little quote. It's a good read.

The point of an economy isn’t profit. It’s human potential. To optimize a social contract for profit isn’t just extremism — it is folly.

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I want a Pony!

detroitmechworks's picture

@gjohnsit but lords of a big estate where the adoring peasants work hard and love their masters.

Of course nobody actually has ever acted like that in all of human history. The rich have always had to pay bodyguards in one way or another. Asking peasants to pay for them exclusively, is just fucking rude.

And dammit autocorrect I have never used the word ducking in my life.

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I do not pretend I know what I do not know.

flowerfarmer's picture

@detroitmechworks
How many minimum wage poolboys and nannies can one neoliberal be expected to own?

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thanatokephaloides's picture

@gjohnsit

One small quibble: The neoliberal/neoconservative (yes, they are the same, two facets of evil!) totalitarian rule by capital dicks are not anarchists of any sort or kind. Anarchists want the elimination of all bosses; the neoliberals and neoconservatives want to be the bosses.

If one advocates the boss-ship of any human beings over humanity -- or over any other humans at all -- one's not an anarcho-anything.

Indeed, actual anarcho-socialism (also known as mutualist or mutual aid anarchism) certainly appears to be the medicine to cure the neoliberal/neoconservative disease!

source

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"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

Alligator Ed's picture

@thanatokephaloides

The neoliberal/neoconservative (yes, they are the same, two facets of evil!) totalitarian rule by capital dicks are not anarchists of any sort or kind. Anarchists want the elimination of all bosses; the neoliberals and neoconservatives want to be the bosses.

The elites are building their underground castles, in the vain hope that the wars and revolutions will not affect them also. If armed conflict, internal or external does not occur, then the bosses will rule individual fiefdoms, swearing allegiance only to the more powerful, leaving the peasants to a brutish existence. The coming catastrophic economic collapse which can no longer be stopped by central banks will depopulate the world more surely than the Black Plague.

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CB's picture

it has been immensely successful. Neoliberal financial policies have created the conditions for the greatest transfer of the world's wealth into the hands of a relative few never before seen in the history of the world.

After all, nothing spells success like wealth!

The 85 Richest People In The World Have As Much Wealth As The 3.5 Billion Poorest
As the World Economic Forum begins in Davos, Switzerland, Oxfam International has released a new report called, "Working for the Few," that contains some startling statistics on what it calls the "growing tide of inequality."

The report states:

  • Almost half of the world’s wealth is now owned by just one percent of the population.
  • The wealth of the one percent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half of the world’s population.
  • The bottom half of the world’s population owns the same as the richest 85 people in the world.
  • Seven out of ten people live in countries where economic inequality has increased in the last 30 years.
  • The richest one percent increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012.
  • In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.
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detroitmechworks's picture

@CB always seems to start with, "if you could save billions of lives by killing only a few people..."

Of course I understand that the rich think ethics is what you do until you have money.

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I do not pretend I know what I do not know.

CB's picture

@detroitmechworks
In their religion, ethics is morally wrong. It's bottom line all the way to the top.

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@CB

Until it flatlines, as it ultimately will.

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

thanatokephaloides's picture

@CB

I would argue that the extremely rich never do "ethics"
In their religion, ethics is morally wrong. It's bottom line all the way to the top.

Or to TOP, as the case may be. [ducking!]

Wink

n.b. "TOP" == Daily Kos (WARNING: Links to Daily Kos!)

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"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

CB's picture

The investment banks, merchant bankers, non-banking finance companies, insurance companies and other players in the financial sector have hedged themselves in the derivative markets. In fact, if there was a collapse, these players would stand to reap fortunes. As the derivative markets stands at over $1.5 quadrillion, we could see the world's wealth increase by 2000% in under a week.

Excuse me. I have to run. I've got to finish equipping and supplying my secret bug-out location. BTW, do you realize how much 50,000 rounds of ammunition weighs?

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River Rover's picture

Great diary
TOP's loss is
C-99's gain

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Rivers are horses - and kayaks are their saddles

Big Al's picture

Neoliberalism - free trade, privatization, minimal government intervention in business, reduced public expenditure on social services, etc.

That's both parties, that's the oligarchy that rules over us. Neoliberalism was never intended to succeed for the peasants, just the opposite. It's like saying the war in Iraq was a failure or the war in Afghanistan is a failure. They're only failures when looked at from a rational standpoint. But this is 1984, reality is different.

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boriscleto's picture

People will be clamoring to become corporate serfs, wearing corporate livery & spending their "wages" at corporate stores.

And remember, Tuesday is Soylent Green day.

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" In the beginning, the universe was created. This has made a lot of people very angry, and is generally considered to have been a bad move. -- Douglas Adams, The Hitch Hiker's Guide to the Galaxy "

CB's picture

@boriscleto

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ericinsantarosa's picture

great job laying out thanks

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"If you're on fire, and running down the street, people will get out of your way." Davey- Cordovan Athabascan Native

Strife Delivery's picture

I enjoy your essays gjohnsit. They are always a pleasure to read.

I guess I want to ask the community here a question that I've somewhat had some difficulty answering.

I understand the concept of a bubble and somewhat what it means when they "pop". Overall, guess my question is WHAT causes the pop? Reading through some history, we see bubbles and then the pop, I'm just curious on the actual pop itself and the mechanisms behind that.

So overall, a bubble essay would be nice for those versed a bit more in economics than myself.

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gulfgal98's picture

@Strife Delivery and one that would be very enlightening for all of us if it was addressed.

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Do I hear the sound of guillotines being constructed?

“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy

gulfgal98's picture

this is a wonderful and well sourced essay. I truly believe that the peasants have realized that neoliberalism is a failed ideology. They may not know it by name, but they know it by how it has destroyed their lives and the lives of friends and family. I do think that Bernie Sanders' great gift of the campaign was his education of the people that a better life was very possible for them.

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Do I hear the sound of guillotines being constructed?

“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy

But that doesn't mean it won't cling to power when dressed as the lesser of the two evils in 2020. The neoliberals haven't lost their grip on the Democratic Party. Just look at California.

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If the bond market put money into the pockets of the 99% so that they could actually afford to buy what they needed, including some comforts, economies could recover with a bound. But what's needed for stable economies around the globe are things like universal living wages, adequate social safety nets and healthcare. That, and no corporate management and no invasions/military for-profit muggings referred to as 'wars of choice'.

But pumping money into bonds, speculation and other financial market boosters signally fails to reach the real, ground-level economy to create the universal ability to purchase goods and services that keeps the financial world going around. The Golden Goose is gasping its last and they just keep squeezing us all harder all the time...

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

Sandino's picture

This one seems particularly appropriate:

The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.

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