The most significant, recent news -- that trust in neoliberalism is dead, that confidence in the unrestrained free market has become unfathomable to the majority of U.S. citizens -- has become more evident since 2008. The event is of course obscured by neoliberalism's continued dominance of conservative and centrist governments, political parties and media, yet it is evident that we are now witnessing its inevitable sequence of delegitimation, ruin and replacement.
The Nobel prize-winning economist Joseph Stiglitz, in his recent book The Price of Inequality: How Today's Divided Society Endangers Our Future, summarizes some of the failures of neoliberalism via a number of statistics -- for example, by 2007 the average after-tax income of the top 1 per cent in the U.S. was $1.3 million while that of the bottom 20 per cent was $17,800. The richest 20 per cent earn in total after tax more than the bottom 80 per cent combined. Young men, aged 25 to 34, who only have a high school diploma, have watched their real incomes decline by more than 25 per cent in the last quarter century. Between 2005 and 2009, the average African-American household lost 53 per cent of its wealth, the average Hispanic household lost 66 per cent and the typical white American household lost 16 per cent. The American story over the past generation is one in which the rich get richer, the richest of the rich get even more rich, the poor become poorer and a number of the middle class have dropped into poverty. The above numbers defy political spin -- conservatives cannot explain away people's lived experience of neoliberalism's degenerative economic impacts.
The initial effects of this ideology's decline are of course the opposite of what we might hope: insecurity, unhappiness, frustration and gloom. These responses are predictable in light of the lack of a viable, confident alternative. Stiglitz notes that between 1950 and 1970 there was a reduction in inequality -- with income growth among every part of the population and with those at the bottom growing faster than those at the top. This growth was partially due to market changes but primarily because of government policies such as access to higher education provided by the GI Bill and the progressive tax system enacted during World War II.
Following Stiglitz's logic, the key alternative, in at least the short-run, is the substantial return of the state providing unemployment benefits, jobs training and social programs that cushion a precarious economic situation while also investing in alternative energy and sustainable economic production. The explosive success over the past decade of leftist-led countries in Latin America in terms of increased employment, prosperity and optimism is due to the self-assured intervention of the state. The key message for the United States is that while joblessness, poverty and despair remain high there is a need for a much greater role for government to stimulate the economy.
Thomas Ponniah is an Affiliate of the David Rockefeller Center for Latin America Studies and an Associate of the Department of African and African-American Studies at Harvard University.
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