The Cloudy Future of Neoliberalism - Political Forum

factfinder · 10-12-2007, 10:09 AM

In May 03 the British weekly Economist,a cautious and vigilant guardian of orthodox neoliberalism , published a „revolutionary“ editorial and comprehensive article on the neoliberalism signalising a sudden change of its
strategy : the Economist reminded that „ Malaysia responded to the financial crisis from the years 97-98 by breaking one of the most sacred canons of the neoliberalist orthodoxy – it introduced a tight control of the capital flow , and it was successful … „ The next moment the Economist started to indulge in self-criticism … „ Our magazine has maintained for many long years that any sort of the capiotal flow control is an absolutely unthinkable taboo , but now we admit that the world capital market is a very rough and dangerous ocean, especialll for the economy markets of the developing countries which are not properly endowed for sailing in it safely … „ curiously enough the Economist quoted …
It also reminded of the similar case of Chile which introduced taxes on the capital imports as a measure against its instability . In other words, we may say that in certain cases the cotrol of the capital flow is justifiable which Washington will never admit,however, as its agreements with Chile and Mexico prove ,with the US having demanding of these two countries a total liberalization of the capital flow …

Brother Oz · 10-12-2007, 10:54 AM

Well, that's surprising. Many people have been saying for years that Malaysia and Chile did well because of capital controls, but no neoliberal would ever admit that, because it challenges their core doctrine of laissez-faire capitalism.
I wonder what the impact of this will be in the long run? Will Neoliberalism collapse? I hope so, but far more likely is that this will just be ignored and it will be business as usual.

LessGovMrPrez · 10-12-2007, 11:15 AM

What exactly is capital control here?

Cutting spending?

Tim · 10-12-2007, 11:17 AM

Two examples of emergency situations where the temporary control of capital helped avoid further deterioration are not convincing evidence for the intervention of the state into the economy.

These two examples are outweighed by the innumerable examples of the disatrous results of government intervention.

I am suprised by the foolish editorial in the Econmist, and the silly, solemn tone. They are seriously reconsidering their commitment to free-market capitalism because of these two isolated examples? I will believe it when I see it. One editorial does not a policy make.

Any nation that moves backward will be punished ruthlessly by the markets. If any nation announces that they have moved decisively in favor of state control of the economy, fund managers from New York to London to Tokyo will move assets. (That goes for the US as well, if Hillary and her left-wing cohorts grab the reins of the nation and attempt to implement a far-left economic "policy")

Brother Oz · 10-12-2007, 07:25 PM

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What exactly is capital control here?

Cutting spending?

No, it's laws that regulate the way that currency is moved and traded.

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Two examples of emergency situations where the temporary control of capital helped avoid further deterioration are not convincing evidence for the intervention of the state into the economy.

Well of course it's not evidence why the whole strategy should be changed, but it does show that the free market does not work best in every single situation.

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One editorial does not a policy make.

Quite true. Many magazines try and publish a range of views, so I doubt this one article represents a sudden complete change of view from the Economist.

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If any nation announces that they have moved decisively in favor of state control of the economy, fund managers from New York to London to Tokyo will move assets.

That is true. Which is why a)they wouldn't announce it, they'd pretend that currency controls were just a temporary thing, or b)they'd do what Malaysia did, and bring in the currency controls so fast that no one would have time to move their currency. Of course, no democracy could do that, as these things have to be debated first. So I really doubt we'll see any Western country bringing in any sort of currency control any time soon.