Neoliberalism and the Global Financial Crisis

By Beder, Sharon | Social Alternatives, First Quarter 2009 | Go to article overview

Neoliberalism and the Global Financial Crisis


Beder, Sharon, Social Alternatives


The new right advocated policies that aided the accumulation of profits and wealth in fewer hands with the argument that it would promote investment, thereby creating more jobs and more prosperity for all. However financial markets provide opportunities for investment without creating jobs and, as the global financial crisis has revealed, speculative investment feeds an ephemeral prosperity that can be wiped out in a short time period. Inequities resulting from new right policies - including the deregulation of labour markets and the reduction of government spending - reduced consumer demand which had to be propped up with consumer credit and mortgage debt. Financial deregulation, also promoted by the new right, enabled financial institutions to dictate government policy and enabled wealth to be channelled into speculative investments exacerbating the volatility of share and housing markets. The combination of household debt and unregulated speculative investment led to the collapse of the subprime mortgage market followed by the bankruptcy of major financial institutions and the collapse of share markets around the world. Yet the Rudd government continues to place its faith in markets as a way out of the crisis.

The new right promoted a fundamentalist view of markets that came to be referred to as economic rationalism in Australia and, more widely, as neoliberalism. It advocated the replacement of government functions and services with those provided by private profit-seeking firms operating in the market (privatisation); deregulation of labour and financial markets; deregulation of business activities; free trade; and smaller government through reduced taxes, spending and regulation. These policies were promoted in the name of free markets, economic growth and the public interest (Beder 2006b).

The new right argued that competition and unrestrained selfishness was of benefit to the whole society in capitalist societies (Sheil 2000, 26). It asserted that, as a nation gets wealthier, the wealth will 'trickle down' to the poor because it is invested and spent, thereby creating jobs and prosperity. In fact, the global financial crisis has shown that financial markets provide opportunities for investment that provide relatively few extra jobs and that feed an ephemeral prosperity that can be wiped out in days.

Neoliberal theories were embraced by big business because they provided a legitimation for their pursuit of self-interest and avenues for business expansion (Beder 2006a, 151). They supported the argument that government regulation interfered with business and undermined 'enterprise culture' (Self 1993, 72). In this view, government intervention in the management of the economy is unnecessary and unwise because the Market is a self-correcting mechanism. There was, also, some appeal in free market ideology for governments too, in that it absolved them of responsibility for economic performance (Beder 2006a, 8).

Outcomes and Inequities

As neoliberal policies were implemented around the world, disparities in wealth and income increased and poverty increased, contradicting neoliberal theories that by increasing the wealth at the top everyone would be better off.

In Australia economic rationalism - adopted by the Hawke/Keating governments in the 1980s and continued by the Howard government in the 1990s - resulted in efforts to reduce government deficits, reduced taxation for high income earners, deregulation of financial institutions, floating of the dollar, reduction in tariffs and import restrictions, privatisation, and business deregulation (Garnaut 1994, 53-4). These reforms - termed 'restructuring' - were supposed to enhance economic efficiency, productivity and industrial competitiveness (Beder 2006b, 65).

The reinvigoration of the Australian manufacturing sector that was supposed to result from this 'economic restructuring' never occurred. The extra money generated in the 1980s by lower corporate taxes, higher profits and deregulation was seldom reinvested in productivity. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Neoliberalism and the Global Financial Crisis
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.