Neoliberalism or free-market fundamentalism

The central dogma of neoliberalism is economic growth, achieved by:

# Increasing competition through deregulation (watering-down of social, welfare, health, labour and environmental laws), and opening domestic markets to foreign competition, and

# Severely limiting the role of the State by privatization of state assets and liberalization of economic policies, simultaneously increasing corporate influence and involvement in governance.

This agenda of economic growth has become the focus of economic thinking and is institutionalized in countries across the globe with impetus imparted by the economic clout of IMF-WB-WTO. The reason that this was accepted by countries across the globe is that it admirably suited the elite politician-corporate nexus which governs all countries, including democracies.

Neoliberalism is personal (corporations are legal persons) profit-at-any-cost from capital-intensive economic growth, reckoned using economic parameters like GDP growth and per capita consumption. This model of economic development promotes debt, global trade and consumerism, subordinating or negating democracy, equity, social justice and freedom. Indeed, Kofi Annan, UN Secretary General, speaking at the World Summit on Sustainable Development in Johannesburg (2002), said: “Let us face an uncomfortable truth. The model of development that we are accustomed to has been fruitful for a few and flawed for many. A path to prosperity that ravages the environment and leaves a majority of humankind behind in squalor will soon prove to be a dead-end road for everyone”.

But IMF-WB continues to advocate neoliberal economics, which is “maximum market freedom and minimum state intervention”. In effect, government “maintains the interests of the ultra-rich”, who control government to confine itself “to creating and defending markets, protecting private property and defending the realm”. Thus government functions are gradually taken over by private enterprise “which is prompted by the profit motive to supply essential services”, with the aim of achieving “corporate freedom from democracy”. [Ref.1].

India’s New Economic Policy

Over the decades IMF-WB, as the world’s foremost lending agencies and purveyors of knowledge, have heavily influenced Third World governments. Beginning in the 1970s, WB’s global training and outreach programs targeted opinion-makers and decision-makers like central and state legislators, bureaucrats, technical specialists, journalists, teachers and civil society leaders. They were trained in WB Institutes and partner institutions including reputed western universities, in subjects related to economic development. [Ref.2].

WB thus trained influential persons to generate debt and manage it through IMF-recommended structural adjustment, because “debt is an efficient tool [which] ensures access to other people’s raw materials and infrastructure on the cheapest possible terms”. [Ref.3].

Democratic processes were bypassed and governments influenced at various levels, and public opinion moulded towards a radical change in beliefs and perceptions about the nature of public goods and the balance between government responsibility and private-sector opportunity. All this constituted coercive introduction of neoliberal policies.

India’s New Economic Policy formulated by Dr.Manmohan Singh as union finance minister in 1991, was specifically about IMF-WB-orchestrated economic reform including structural adjustment effected by a slew of measures like currency devaluation, liberalizing the economy, removing subsidies, privatizing public assets, relaxing environmental and labour laws, and deregulating and lowering standards to encourage foreign investment. NEP-1991 was effectively furthered by the thousands of WB-trained opinion-, decision- and policy-makers in governments and educational institutions.

NEP-1991 was pursued with dedication by successive Indian governments over nearly three decades under PMs P.V.Narasimha Rao, A.B.Vajpayee and Manmohan Singh. Currently, PM Modi’s government is aggressively accelerating the same economic policy and widening the economic gap, with unpredictable social consequences.

Opposition to neoliberalism

The effects of neoliberal policies led by IMF-WB-GATT were debt crises, severe environmental degradation and crashing Third World economies. More specifically, it caused reduced public spending on health and education, currency collapse, rising unemployment, rising food and fuel prices, and falling wages. Spontaneous worldwide people’s campaigns opposed the displacement of populations due to mega-projects and consequent environmental degradation. In India, the hundreds of large, medium and small dams in the Narmada river valley constructed with WB loans were questioned by the Narmada Bachao Andolan.

Besides these grassroots movements on all continents, intellectuals also consistently critiqued neoliberal policies, but were rarely if ever given half-decent coverage in the corporate-owned mainstream media. Chile was an extreme case, where opponents of neoliberalism were liquidated in their thousands. [Ref.1].

Neo-liberalism in India

Successive Indian governments over nearly two decades under PMs Vajpayee, Manmohan Singh and now Modi, have moved towards a closer political relationship with USA under successive Presidents Clinton, Bush and Obama. Politics between and within countries is increasingly driven by economic considerations, and the cutting edge of the strategic India-US relationship, declared as civilian nuclear and defence cooperation, is finally based upon congruence of economic policy.

This policy remains firmly founded upon economic reform advocated and subtly enforced by the IMF-WB-GATT trinity, as built into India’s NEP-1991. It also led to India joining WTO in 1995 without discussion in Parliament. Thus, India’s economic policy position is currently dictated by the IMF-WB-WTO combine, which is largely under USA’s control.

Corporate control of government functions in USA has for long been blatantly obvious. In India, beginning with the introduction of NEP-1991, the effects of neoliberal policies have become starkly obvious in the last decade. Neoliberal economics has enlarged the economic gap between growing numbers of Indian dollar-billionaires and the less-than-Rs.20-per-day vast majority.

Neoliberalism is alive and well

In India, neoliberalism has grown strong roots, and Big Money has entered governance, beginning with influencing the election process itself and into all democratic processes, to influence the executive, legislative and even the judicial functions of the State.

The Radia tapes scandal and the on-going Essar/Ambani tapes episode, which alleges corporate collusion with the executive, the legislative and the judiciary to bypass constitutional processes, are very scary to say the least. Since it spans a period of about 15 years including PMOs beginning with PM A.B.Vajpayee’s period, it is evidence that regardless of the party in power, corporates influence governments in their own interest, and the public or national interest in governance remain a poor second.

Umpteen evidences of neoliberal policies can be provided, but three examples are quoted here.

One. Budget. In the budget 2015-16, Rs.5.49 lakh-crores was written off as “revenue foregone” by government against corporate income tax, excise duty and customs duty. If that is what the present NDA-2 government did, in the period 2005-06 to 2014-15 of UPA rule, the total revenue foregone was Rs.42 lakh-crores, of which customs duty revenue foregone on gold, diamonds & jewelery alone was Rs.4.38 lakh-crores. At the same time, merely Rs.34,700 crores was allocated for MNREGA, and many poor people who had managed to get the guaranteed employment have not been paid their miserable wages for months-long periods.

Two. Finance. Vijay Mallya was elected to the Rajya Sabha in 2002 with the support of the Congress & JD(S), and for a second term in 2010 with BJP-backing. His debts are estimated to exceed Rs.4,000 crores with public sector banks, which have kindly assisted him by “restructuring” his loans, providing fresh loans of public money to pay the interest on earlier loans on which he had defaulted. And he is among the smallest of several corporate captains who are defaulters, together forming the bulk of the growing NPAs of public sector banks. This is evidence of the politician-corporate nexus across political parties. However, the same public sector banks frequently announce auction-sale of properties of persons who have defaulted on loans of one or two lakhs.

Three. Transportation. On 16 June 2016, as part of economic reform, the NDA-2 government approved the National Civil Aviation Policy to increase air connectivity, make it easy for new airlines to operate abroad, permit European and SAARC country airlines to operate in India, and plan new airports. It also made air travel cheaper in India. When air travel is the least fuel-efficient transportation mode, and even “cheap” air travel is possible only for those who are already well-off, investment in this sector clearly favours the wealthy. Cheaper and more fuel-efficient transportation modes to serve the majority receive less investment and attention. In the railways, heavy investment is planned for high-fare bullet trains, when ordinary trains for ordinary people remain wholly inadequate. In UPA times (2013), Government announced that bulk diesel consumers like railways and state transport corporations would have to purchase diesel at market-determined rates, while diesel purchased at fuel outlets (for private car owners) would continue to receive subsidy, displaying the tilt away from greater public good while keeping the wealthy happy.

Over at least the past two decades, there are literally hundreds of on-going people’s movements all over India, protesting against one or other proposed, on-going or completed infrastructure project, or against state and central governments’ policies and laws which actively violate, deny or dilute people’s constitutional rights and freedoms in favour of corporate interests. The foregoing examples are barely representative.

It is noteworthy that Dr.Manmohan Singh was a World Bank employee before he became Union Finance minister and later Prime Minister for two full terms. Also, when he first assumed office as PM, he immediately nominated Montek Ahluwalia who joined him from IMF as his Deputy Chairman of the Planning Commission. The present RBI Governor, Raghuram Rajan, was Chief Economist in IMF. This is adequate demonstration how the neoliberal agenda has been very effectively imposed on India.

However, even though neoliberalism is alive and well in India and apparently in the rest of the world too, clouds appear to be gathering on the horizon.

From the temple of neoliberalism

An internal study group of the International Monetary Fund (IMF) has recently reported that their decades-long advocacy and practice of neoliberal economics have serious failings. The Report is titled “Neoliberalism Oversold?”, with the boldfaced sentence: “Instead of delivering growth, some neoliberal policies have increased inequality, thereby jeopardizing durable expansion”. [Ref.4].

The Report recognizes that a major effect of neoliberal economics has been to heighten economic inequality between and within nations. As Benjamin Dangl wryly puts it, “They were only about 40 years late”. [Ref.5].

While the Report claims benefits of neoliberal ideology (“there is much to cheer in the neoliberal agenda”) it admits that it has not delivered on the following aspects:

# Benefits in terms of growth are difficult to establish,

# The costs of increased inequality are prominent, and

# Increased inequality hurts the sustainability of growth.

Forbes’ article by Tim Worstall [Ref.6] decries the arguments of failure of neoliberalism by quoting Financial Times: “…. the article is more a reflection of the vigorous debates under way inside the IMF than an official take-down of the free market policies the fund has long advocated”.

One observes that the holy grail of hitherto unassailable Hayek-Friedman economic growth has been questioned from within the temple of neoliberalism itself. Even if one admires the atmosphere of “vigorous debate” within IMF and the courage of the analysts of “Neoliberalism Oversold?” , one cannot help surmising that questioning what was unquestionable for 40-plus years is a step towards “take-down of [IMF’s] free market policies”, especially in light of 40-years-long well-argued criticism, and intellectual and grassroots objections to free-market policies.

It is curious that Worstall’s supportive article dated May 28, 2016, predates IMF’s Neoliberalism Oversold?” which is dated June 1, 2016. Notwithstanding that IMF has admitted to certain failings of neoliberalism and not to its failure, the failings that it has admitted to are so central to the success of neoliberalism that it is tantamount to admission of failure.

(Second Part of the Article: Neoliberalism2)