The death of neoliberalism appears to have been exaggerated

The big news is that neoliberalism has failed. Or at least that is the tale being promoted by a union leader.

Albino Vargas published an opinion piece Tuesday and then distributed it. The article cites a research report in an International Monetary Fund magazine, and he wrote that the account said that the benefits of neoliberalism have been exaggerated. He is secretary general of the Asociación Nacional de Empleados Públicos y Privados. The organization opposes privatization and reducing the size of government.

In English the title of the article is “Neoliberalism: Oversold?” The research article is Jonathan D. Ostry, Prakash Loungani and Davide Furceri, all of the Monetary Fund staff.

The authors explain that the term neoliberalism is a label used more by critics than by the architects of the policies. Vargas is one of those critics, and the thrusts of his article must be music to the ears of those who are not fond of capitalism.

The authors point out that the so-called neoliberal agenda rests on two main planks:  The first is increased competition achieved through deregulation and the opening up of domestic markets,

including financial markets, to foreign competition. The second is a smaller role for the state, achieved through privatization and limits on the ability of governments to run fiscal deficits and accumulate debt.­

The article is far more upbeat than Vargas would recount. “There is much to cheer in the neoliberal agenda,” said the authors. “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.”

The authors make their case about problems caused by these policies by focusing on the movement of money across national borders and what they call fiscal consolidation, which is paying down the national debt. Basically they say that a flood of new money into a country creates problems as does taking a hatchet to the budget.

Of  course these are narrow, technical objections that worry economists more than others. But by cherry picking this academic discussion, Vargas can suggest what he calls the death of this ideology.

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