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