krugman on 'neoliberalism'

At the invite of one my sociology friends, I went over to the American Sociological Association (ASA) conference in downtown SF to see their closing plenary. The speakers were Paul Krugman, Princeton Economics professor and New York Times columnist, and Fernando Henrique Cardoso, sociology professor and former two-term president of Brazil. The topic of the day was "The Future of Neoliberalism," in reference to the plans for the economic development of third-world nations that began in the mid-70's and today is embodied by agencies suchs as the World Bank and International Monetary Fund (IMF). This is certainly out of my own area of expertise, so it was a great learning experience in addition to a wonderful opportunity to hear from two highly qualified high profile speakers.

My notes from the talks, which concerned economic policy, social development, and sustainability, are in the extended entry.

President Cardoso, the first speaker, was imminitely likable, a very charismatic man who would switch between an infectious demagoguery (of his own admission) and a more rambling reading of academic material. Cardoso's notes concerned not the future of neoliberalism (he claimed it has no future), but supposedly it's past. In fact, we got a retelling of the economic policies and endeavors of Brazil, which Cardoso claims was not guided by neoliberal doctrine. His most important message was his belief in open and democratic processes as the key to future success. Though I enjoyed much of his talk, he did tend to draw things out, often spiraling into anecdote and digression, which combined with the accent at times made things hard to follow. How does "brevity is the soul of wit" translate into Portuguese?

Still, this whole time I didn't quite understand what the tenets of this so-called "neoliberalism" was. I'm still shell-shocked by neoconservatism. So I was very appreciative when Paul Krugman began his talk by deconstructing neoliberal doctrine into what he saw as four independent, but often conflated, strains. Prof. Krugman identified which of these strains he personally supports and those with which he has qualms.

The first strain, and the one which Krugman endorsed, is free trade, or reduced or non-existent tariffs between nations. In 1975, Krugman said, development economics looked bleak - the club of developed, advanced nations appeared closed. Then the "Gang of Four" - South Korea, Taiwan, Hong Kong, and Singapore made rapid gains in economic output and standard of living through an export led growth. Krugman claims these nations as success stories for free trade. However, he was careful to point out that he believes additional, as of yet undetermined factors, in combination with free trade, made this growth possible. He offered the impressive educational level of these nations, despite their previously economically depressed state, as one candidate factor.

The other strains of neoliberalism Krugman viewed with many qualms. One strain, the rejection of Keynesian economics, or the dilution of the role of the government in the economy, he targeted as disastrous. He cited the Argentine financial crisis, caused by the Argentine peso being tied to the U.S. dollar disallowing the necessary flexibility of the government to inflate or deflate their currency. Another strain, financial liberation, or the free movement of captial, Krugman derided as not being well grounded in theory. While the final strain, privatization (for example, the running of public utilities by private companies, as tried in Bolivia and now being carried out in some U.S. cities, including my adopted hometown of Stockton, CA), Krugman claimed was being practiced ahead of our knowledge of its effects and in contradiction to economic knowledge that we do have. (btw, see the documentary Thirst for more about utility privatization). In particular, market power is real and its effects here can severely impact people's basic conditions of life, and furthermore monopolies are real and dangerous (and not just invented by leftists, he joked).

So in the end, Krugman stated that we have reasons to be chastened about neoliberalism. The "Asian tigers" provide examples of success, but many failures abound. No "Latin jaguars" have yet arisen to the levels of their Asian counterparts, and inequalities abound. So what to do? We hold less confidence that we have the answers - acknowledge our uncertainty. However, in no way should we roll back completely, the recent past is more dismal than the present. But we must also recognize that economic growth and improved social indicators do not go hand in hand, and must be jointly promoted.

The question section afterwards brought up the topic of environmental concerns. Clearly more economies that followed the U.S. model will simply not scale ecologically, the Earth's limited resources would be exhuasted. Krugman hopes/believes that economic forces will come to buoy environmental issues - costs associated with the environment will become more dominant and thus play a larger role in economic planning. Krugman envisioned regulatory solutions such as corporations bidding for pollution licenses from the government.

Finally, I'll end this somewhat incoherent retelling with the joke Krugman opened his talk with, credited to his former professor. When it comes to the transmigration of souls, a good economist is reincarnated as a physicist. A bad economist, however, returns as a sociologist. Way to play your audience.