Neoliberalism and greater Inequality

bu-op-icons-benjie By BENJIE OLIVEROS
Bulatlat perspective

The country is ushering in a new administration by the month’s end. While previous administrations came and went, the neoliberal agenda has remained. There has been no deviation from the neoliberal policies that have been implemented since the time of the Marcos dictatorship. However, since incoming Pres. Rodrigo Duterte has promised to implement change and address poverty, there could be some space for discussions on the direction that the country would take.

One topic that immediately sparked a debate is on neoliberal economics. Progressive multisectoral alliance Bayan immediately criticized the probable continuation of the neoliberal agenda under the next administration with the appointment of adherents to neoliberal economics in Duterte’s economic team. People from some quarters reacted calling those who criticize neoliberal economics as purveyors of an obsolete ideology and as being out of touch with reality.

After all, any university-educated economist would find no other recourse but to remain faithful to neoliberal economics: balance the budget, make the government lean, and pass on services that could be more efficiently run by the corporate sector to the latter; liberalize trade and investments to stimulate growth and facilitate the transfer of much-needed capital and technology to underdeveloped countries; remove all fetters to business activity and profit-making ventures so that the economy would expand; and all these would redound to more employment and a more vibrant domestic market. Right?

However, when crisis after crisis struck the world economy and inequality worsened, questions are now being raised regarding the correctness of neoliberalism. Consider this:

– 71 percent of the world population holds only 3 percent of global wealth
– The world’s wealthiest comprise 8.1 percent of the population and yet owns 84.6 percent of global wealth
– 78 percent of the world’s millionaires reside in North America and Europe
– “Ultrahigh net worth individuals” own 12.8 percent of global wealth and yet they constitute just a tiny fraction of the world population
– The world’s 10 richest billionaires own $505 billion in combined wealth, which is higher than the GDP of most nations

This increasing income disparity is being mirrored in the Philippines. According to data from think tank Ibon Foundation:

– The wealth of the 10 richest Filipinos has more than tripled from P630 billion ($13.695 billion) in 2010 to P2.2 trillion ($47.8826 billion) in 2015, or a 250 percent increase
– The net income of the country’s Top 1000 corporations grew from P804 billion ($17.478 billion) in 2010 to P1.0 trillion ($21.739 billion) in 2013, or a 26 percent increase.
– Poverty incidence is still high at 25.8 percent in 2014, using the government’s very low poverty threshold of P58/person/day ($1.26)
– 66 million Filipinos live on P125/day ($2.71)

Even the main multilateral institution that has been pushing the neoliberal agenda, the International Monetary Fund (IMF), is now recognizing the direct impact of neoliberalism on poverty and unemployment. In a study written by the Deputy Director of the Research Department of the International Monetary Fund Jonathan Ostry, which he co-authored with Prakash Loungani, an advisor to the Research Department of the IMF and Davide Furceri, who is also with the same department, with the title Neoliberalism: Oversold?, it was concluded that neoliberalism has indeed engendered greater inequality.

The IMF study zeroed in on the negative effects of two neoliberal policies: financial openness or the deregulation of capital flows and fiscal consolidation or austerity measures, which seek to balance the budget, reduce government expenditures and debt.

The study asserted that “the expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and know-how to developing economies. Privatization of state- owned enterprises has in many instances led to more efficient provision of services and
lowered the fiscal burden on governments.”

Well, did the study factor in the loss of jobs in domestic manufacturing, especially in underdeveloped countries, due to the closure of companies that lose out in the competition from imports and multinational corporations? How about the increasing landlessness resulting from land-use conversion and the inability of local agriculture to compete with imported agricultural products?

In terms of transfer of technology, how come countries dependent on foreign investments have not been able to develop their local industry?

Did the privatization of power result in better services and elimination of power outages? Did the privatization of water services improve the access of the people to ample, clean water? How about the privatization of the Metro Rail Transit (MRT)? Did it result to better commuter train services?

However, the study acknowledged that the liberalization and deregulation of capital flows, especially portfolio investments and hot, speculative, debt inflows increased the vulnerability of countries to financial crashes and has resulted in greater inequality. Regarding fiscal consolidation or austerity measures, it was concluded that this lowers the output of the economy, as the government cuts back on productive expenditures, and results in worsening unemployment. It also recommended the institution of redistribution policies such as increased government spending on education and training.

So if neoliberal economic policies worsened inequality, unemployment and poverty, and have made essential services inaccessible to majority of the people, due to increased rates and prices and the deterioration of services, why shouldn’t there be a review of the whole neoliberal agenda? If the neoliberal agenda did not deliver as promised and has instead made the country more vulnerable to crisis, has failed to develop the country’s basic industries, and has reversed the development of the country’s agriculture, why should the next government not explore other models and frameworks?

There is wisdom in developing local industry to provide for the people’s needs and the country’s development. In like manner, wouldn’t the implementation of a genuine agrarian reform program free the rural sector from feudal backwardness and unleash the productive potential of farmers who constitute the majority of the population? Actually, all developed and economically powerful countries right now underwent a process of developing their national industries and implemented an agrarian reform program, albeit limited, to free the farmers and the whole nation from the fetters of feudal backwardness. Why could we not do the same? (

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