Friday, October 22, 2010

Neo-liberal economists find new battlefront

There is war of debate is going on about the stimulus packages with respect to many issues like unemployment etc. It’s quite interesting to read and ponder how the "so called experts reacts".

I am posting the full debate below for record (dont' forget to read the Prof Lal's comments):

Neo-liberal economists find new battlefront

Michael Janda reported this story on Thursday, October 21, 2010 12:44:02

ELEANOR HALL: While many have criticised the scale of Britain's spending cuts one of the world's most powerful economic groups has praised the move to slash public debt, urging other nations to follow the UK's lead.

The Mont Pelerin Society held its biennial global meeting in Sydney and launched a stinging attack on the stimulus policies used to fight the global financial crisis.

The society's president professor Deepak Lal spoke to business reporter Michael Janda.

MICHAEL JANDA: Unbeknownst to most Australians one of the world's most powerful economic groups has recently visited our shores.

The Mont Pelerin Society was started just after World War II by Nobel Prize winner Friedrich von Hayek in an effort to fight back against communism, socialism and the Keynesian welfare state.

DEEPAK LAL: The society is literally there to promote the ideals of liberty - economic and political. The society has had, I can't remember - eight, nine Nobel Prize winners.

MICHAEL JANDA: That's the society's president professor Deepak Lal, a development economist from the University of California in Los Angeles.

And while its fight against communism largely ended in the early 1990s the society sees new battlefronts. One is the looming competition for economic supremacy between a free-market India and a state-controlled China.

DEEPAK LAL: China for 1500 years has been a tightly controlled bureaucratic authoritarian state. India for 2,000 years has been a completely anarchic society. Governments have never succeeded in doing anything.

And so as a result in India you've got civil society which actually manages to do all the things governments can't do. And that's its great strength.

In China if something happens to the state there will be another big band because the legitimacy that Chinese Communist Party which is the current dynasty, if that is eroded you could have chaos.

MICHAEL JANDA: Professor Lal says Australia should be careful not to over-commit to China.

DEEPAK LAL: If you're taking bets on the long-run, 20, 30 years, then clearly India is a better bet in my view, yeah.

MICHAEL JANDA: Another is the fight to quickly roll back the stimulus that most developed nations pumped into their economies during the financial crisis. And Professor Lal says the society is having some success.

DEEPAK LAL: The trouble is many other Western countries over the years have built up huge entitlement economies - welfare states in which you know they create politically determined income streams for all sorts of people.

And these then lead to a debt crisis. And this means that just trying to use the old Keynesian method, spending more, in fact makes this problem worse. And Britain for instance has bitten the bullet. It now decides, it's decided quite rightly the only way to deal with this is to reduce public debt levels.

MICHAEL JANDA: The society has a history of success, influencing the economic policies of conservative leaders such as Ronald Reagan and Margaret Thatcher in the 1980s.

A look at the guests at last week's conference shows the influence it has in Australia with former prime minister John Howard one of the key note speakers.

A key function of the society is attacking government intervention in financial markets and the economists who advocate it such as Nobel Prize winner Joseph Stiglitz.

DEEPAK LAL: Joe Stiglitz is a very smart theorist but he's got no sense as far as public policy is concerned. They've had all this stimulus and what has happened? Unemployment is still very high, no sign of it coming down. So they're going to try this next thing, print money.

MICHAEL JANDA: Professor Frank Stilwell who teaches political economy at Sydney University says the power of the Mont Pelerin Society to influence government policy shouldn't be underestimated.

FRANK STILWELL: Kevin Rudd at the time of the global financial crisis announced here the end of neoliberalism. But frankly a couple of years on it doesn't look like that. The neoliberals are resurgent.

And the meeting of the Mont Pelerin Society is I think part of that process whereby the right wing economists get themselves reorganised for a new assault on this Keynesian response to the crisis.

MICHAEL JANDA: And he's banded together with some other left-wing Australian economists to mount an irreverent challenge to free market economics through the Monty Pelican Society.

FRANK STILWELL: The name is of course ironic. But it's a serious attempt to provide a counter to these neoliberal views, stressing the need for governments to take responsibility for a more secure and a more equitable society.

MICHAEL JANDA: I'm guessing it's not quite as well funded and doesn't hold its meetings at the Hilton Hotel?

FRANK STILWELL: (Laughs) Absolutely no funding at all. And the small meetings are held periodically in a public place.

ELEANOR HALL: That's Sydney University professor Frank Stilwell ending that report by Michael Janda.

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