The problem is not neo-liberalism, it is neo-feudalism

Former RBA boss and blood-sucking banker, Bernie Fraser, is having a whinge today:

Neoliberalism has caused “misery and social polarisation” yet remains in vogue with the Coalition government, according to the economist Bernie Fraser.

The former Treasury secretary and Reserve Bank governor has made the comments in a presentation circulated to participants of the Australia Institute’s revenue summit to be held in Canberra on Wednesday.

In the background notes for Fraser’s speech, seen by Guardian Australia, he says that Australia’s 27 consecutive years of economic growth is a “standout”, “Winx-like” performance.

But the record deserves only “qualified applause” because “too many Australians remain unemployed, under-employed, underskilled, underpaid and lack job security”.

Fraser warns that society has become “less fair, less compassionate and more divided” and “more devoid of trust in almost every field of human activity” in the past 20 years.

“As a disinterested player in climate change negotiations and a miserable foreign aid donor, we have slipped well down the list of good global citizens.”

Political ideologies appear to have contributed to inequality and disadvantage in Australia in that time, he argues.

Fraser in large part blames neoliberalism and its influence on policymaking for the “disconnect between Australia’s impressive economic growth story and its failure on so many markers to show progress towards a better, fairer society”.

“Favouring the market system ahead of the state system, and individual interests ahead of community interests, can lead to profoundly unfair social outcomes.

This is true in some respects. Privatisation has gone too far. Individual interests are overly favoured as well in some circles. Taxes are too low for some corporations.

But the problem is not so simple as a swing back to the state. We have already seen a lot of that. Australia’s economy today is basically a centrally-planned housing bubble, supported by policy at every turn.

That is not the fault of neo-liberalism. It is the fault of ad hoc government interventions that have turned the neo-liberal system into a neo-feudal one. We have gotten horribly confused about where the boundaries between government and markets should be and in that confusion oligarchy is thriving.

There are examples everywhere:

  • the GFC bank bailout has delivered the staggering hubris of the royal commission findings;
  • the RSPT debacle has prevented the appropriate taxation of resource rents;
  • the power of the gas cartel has rorted the entire east coast economy and shattered decarbonisation;
  • every sector is over-concentrated and rife with rent-seekers;
  • mass immigration serves a corporate elite while killing living standards for the 99%;
  • public servants now serve with the only goal being to get a fat private sector sinecure.

These are, in part, failures of neo-liberalism. But they are equally the failures of intellectually and morally weak government. Most of all, these failures represent the rise of something new that is neither. Read the AFR day-to-day and you will know what I am talking about. I have variously called it oligarchy, the business “identity state”, it could be called libertarianism or, in reality today, neo-feudalism. It is the rise of a self-sustaining business elite that consciously perverts all policy in its favour, systematically disenchfranshises working classes and youth, sees its own profits as a virtue in of themselves and, most importantly, has no idea what markets are supposed to look like nor how competition should operate.

Perhaps it can be argued that neo-liberalsim inevitably gives rise to such a class as consolidation is the logical end point of unfettered capitalism. But I’m not so sure. These issues have long been discussed within neo-liberalism itself. From The Great Crash of 2008:

An economist with the International Monetary Fund, Fred Hirsch, introduced a subtle treatment of these issues into modern economic literature in the 1970s. In Social Limits to Growth, Hirsch argued that the modern market economy is successful only to the extent that it stands on the shoulders of a pre-capitalist ideology. He was concerned that the growth and maturation of the market economy undermined the moral and ideological foundations upon which it depended. The market economy depends on respect for rules that cannot be enforced by law alone. It depends on the owners of business being permitted to maximise their own wealth and incomes in certain defined ways, and on others in society foregoing the opportunity to take advantage of their own positions to do likewise. Hirsch presented a pessimistic prognosis for capitalism and the market economy that resonated through the Great Crash of 2008. ‘As the foundations weaken’, he concluded, ‘the structure rises ever higher’.

There is a ‘libertarian’ rather than a ‘liberal’ or ‘neoliberal’ view of society that says that individuals can be left to pursue their own interests independently of social constraints. This view is associated with the writings of Ayn Rand, among others. The major figure in public policy who acknowledged the strong influence of such views was Alan Greenspan.

Greenspan said that he believed that the owners of capital—the shareholders of firms—could be relied upon to avoid taking decisions that placed the firms at risk. This view freed regulators from concern about rules or regulations. They needed only to wind themselves back and the market would allocate available capital in the most productive manner possible.

After the Great Crash, in October 2008, Greenspan repudiated this approach in a mea culpa before Congress. ‘Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included,’ he said, ‘are in a state of shocked disbelief’.

Greenspan’s apostasy is the end for the time being of explicit libertarianism close to the levers of power in major countries. It also needs to be the beginning of a new search for a sustainable, productive balance between constraints on and freedom for private maximising behaviour in a modern market economy. The new balance will include tighter and more effective regulation of the financial sector. It will include rigorous regulation or corrective fiscal measures whenever there are large external costs resulting from decisions by private entities that can be corrected at a lower cost than is imposed by the market imperfection itself.

But it will eschew government intervention in markets where this is not justified by clearly identified failures, and by rigorous analysis of the costs of correcting the market distortions. Otherwise there is a risk that the undisciplined expansion of government interventions will increase the use of government power to support private rather than national interests.

We got the response horribly, monstrously wrong.

Houses and Holes
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  1. Mostly correct, except that the “feudalism” has not happened by a chance or ineptitude, but rather as the necessary transition step in the devolution to the NeoCons’ ultimate idyll – slavery.

  2. So – we have a housing bubble, specially the result of deregulation, allowing foreigners to buy our houses, removing taxation, building regulations and banking regulations – and this is an example of government intervention – not neo-liberalism ??????????

    Jesus – are you kidding with that ?

    WTF ?

    Feudalism – IS neo-liberalism. The opposite is socialism mate.

    Telecom Australia.

    Gas and Fuel Corporation

    Commonwealth Bank / State Bank etc

    State / Public Housing

    The list is endless. Your point is merely whether we want to be spit roasted being skewered orally or anally – instead of whether we should be spit roasted at all.


  3. That is not the fault of neo-liberalism. It is the fault of ad hoc government interventions that have turned the neo-liberal system into a neo-feudal one. We have gotten horribly confused about where the boundaries between government and markets should be and in that confusion oligarchy is thriving.

    This is a feature, not a bug.

    It IS the fault of neoliberalism.

      • Definitely.

        The Great Depression followed (was caused by) a “triumphant” period of liberalism. The Golden Age of Capitalism following WW2 was characterised by highly regulated capitalism with a strong role for the state (Ordoliberalism). It was only possible because old-guard liberals had their butts, power and assets wrecked in the war and the awakened common man demanded “never again”. In time the awakening would fade and the old-guard liberals, who despised regulated capitalism, would regroup to define “neoliberalism” and return to their desired regime of lassez-faire economics.

        These are the same sorts who would have you believe that western democratic states were birthed with the Magna Carta, a popular myth encouraged by the Lords, only for whom liberty was granted ( As with the Magna Carta, neoliberalism’s benefits apply only to, (and were only ever expected to apply to), the gilded few.

        The outcome of new lassez-faire is turning out to be exactly the same as the outcome of old lassez-faire. Speculative excesses, rising inequality, and social unrest leading to populism that will ultimately end in war. As the control and wealth of neoliberalism’s beneficiaries is challenged by an awakening mass of dispossessed, the true nature of neoliberalism is revealed. Just like the Magna Carta, liberty only really applies to the Lords and the Commoners get a boot to the face as soon as they step out of line.

        Libertarianism for the wealthy, screw the rest. As it always was.

  4. Great growth story…what a joke. These idiots have gutted much of the productive part of the economy and created a ‘rent seekers’ paradise. A paradise for landlords, bankers, large corporations, etc. When the parasitic ‘Property Industrial Complex’ goes then the illusion of ‘reform’ and ‘growth’ will be exposed as a sham.

  5. From current pre-burst perspective it just appears to be feudalists (land owners) who are winning but once bubble bursts it will become clear that it’s only financial sector that wins at the end with most of land owners ending up being the biggest losers.
    So this is made by neoliberals to look like neo-feudalism and because of that property bubbles did quite well in countries where feudalist culture is still strong (anglo sphere countries, spain, etc)

  6. Call it what you like. Whats the solution? Where’s the MB Party?

    Start with removing the power of the creation of money from private banks with a shift in emphasis to Govt spending as primary generator of new money.

    Set a sustainable population level according to natural resources.

    Tax reform by removing the regressives like GST, income, company tax & stamp duty to be replaced with land-tax and other
    less regressive imposts to keep the flow going.

    Savings bond backed mortgages via community banks.

    Instill strategic thought as the first principle of policy so we’re not left with two weeks worth of avgas and diesel on reserve and can feed, water and clothe our population.

    Fifteen years ago I saw blokes leaving good jobs (at least one MD) to take up real estate sales, someone tipped them off to the free lunch. The feast was poisoned and it will take them a long time to recover.

    But at least people are starting to wake up.

  7. Jimmy Dore had a good interview with Chris Hedges the other day in which Chris made some great comments about neoliberalism:

    Part 1:
    Part 2:
    Part 3:

    He says that all movements present a utopian ideology, one that is often drastically at odds with the real actions of the movement. In his view neoliberalism is the name for the utopian ideology presented by corporate capitalists. He views academic, ivory tower neoliberals as useful idiots who act in society as gatekeepers, shielding corporate capitalists from criticism.

    Many of us refer to his “corporate capitalism” as neofeudalism.