After two decades in the cradle of Keynesianism at the University of Cambridge, the South Korean economist Ha-Joon Chang has moved to the University of London. But his critiques of the hegemonic neoclassical economics for decades have not changed.
Cambridge historian Gary Gerstle has just announced “the fall of the neoliberal order”…
It seems to me that the announcement of the death of neoliberalism is premature. Neoliberal thought is not as strong or as comprehensive as before. But its resilience is truly amazing given the magnitude of the crisis it provoked in 2008. The entire neoliberal ideology should have lost its credibility. But there was no acknowledgment that the system was wrong.
At first, there was...
That did not last long, about eight or nine months. Then they did what was necessary so that the dominant ideology and the main institutions were not discredited. The euro crisis was decisive in rescuing the system. It allowed the adoption of the cultural discourse, that of which the Spanish and the Greeks are lazy and wasteful. It was an important part of the arsenal to maintain the status quo.
Or something even worse than the status quo...
Yes. The incredible thing is that with the monetary expansion policies they abolished the capital market to keep the system afloat. They placed the interest rate at zero or less. Thus they gave an unlimited offer of money to financial institutions, although not to the rest of the economy. I think people don't realize the importance of those monetary policies. Financial markets have become totally decoupled from the real economy. It is a system designed to protect financial institutions and the ultra-rich. We saw this clearly in the pandemic in the US and the UK, where the financialization process has gone further. Economies collapsed, but markets broke records.
Regarding the global economy, the media narrative has changed; The New York Times already announces the end of globalization due to the primacy of geopolitical issues and the deterioration of the relationship with China...
That is nonsense. They present it as if it were the second cold war. But in the cold war the two blocs did not even maintain commercial relations. Now the US economy can't hold its own without cheap imports from China. The median wage has been stagnant since the 1970s; people in the lower class have only been able to retain some purchasing power thanks to cheap imports from China and because they carry huge amounts of debt. They depend on China.
Is that still true?
Yes. China has 13% of Treasury bonds. How can you face a country that makes your consumption model possible and that has a seventh of your debt? Actually, the US and China are conjoined twins. They cannot be separated. The US has realized that China has become too strong. But it would take decades to disassociate. You can't magically smuggle multinational factories out of China. They can try it with other Asian countries like Vietnam. You can relocate a T-shirt or toy factory, but if you want to relocate an iPhone factory, that's another story.
Foxconn (Taiwanese iPhone maker) says it will move some of its production out of Shenzhen.
They will say that. But can they do it? And in what period of time? Intel is going to build its microprocessor plant in Malaysia, its first outside of China. But it's just a factory. And these industries cannot be repatriated to the US It is a fantasy. The US has already destroyed its industrial base. You can bring the factory, but you don't have skilled workers, researchers at universities, small suppliers. You can't bring that over night. Maybe you can relocate to another country that has some manufacturing base, but if you relocate to Vietnam or Malaysia or wherever, in what sense is that the end of globalization? What is being said about the death of globalization is nonsense.
In geopolitical terms, the United States does want to reduce the power of China, right?
In a geopolitical sense, certainly, but I think they are late. If they wanted to stop China, they should have done it ten years ago. These restrictions on exports of microprocessors to China may have the opposite effect and accelerate China's speed of catching up in those areas. China is already a highly advanced economy, a leader in climate change technologies, artificial intelligence, and nanotechnology. They are even with the US and are closing the gap in other areas. The US is putting a lot of pressure on Korea, on Taiwan, on the Japanese to boycott China, but will it be effective? Right now we have pro-American governments in countries like South Korea that, for the moment, are receptive to pressure from Washington. But it is not the cold war. They all have feet on both sides. And there may come a time when they say to the US: "Sorry, but China is more important to us than you are."
Spain has recorded better GDP growth and the lowest inflation in the Eurozone. And unemployment goes down. But it doesn't seem like people are very satisfied.
That is why I disagree with those who believe that neoliberalism has ended. You can reduce its reach, modify it, give it a different coat of paint. But in the core everything remains the same. Even the left-wing parties have to play the game, otherwise the investors will leave.
