The results are in. The Neoliberal model, based on empowering the FIRE (finance, insurance, real estate) sector, was initiated fully around 1980 and has now had 30 years.
The results? :drum roll: Poor growth and unprecedented wealth inequality.
But why did it fail?
Because Neoliberalim's central premise is wrong:
The reality it turns out is Rich Individuals do not allocate capital more efficiently or effectively than Poor(er) Individuals or the State.
Woops. Kind of a problem if the underlying ideology and public policy framework rests on redistributing wealth upward or trickle-down economics.
**** SUPERIOR VERSION****
The problem with the central premise of a rich few/plutocracy ruling the economy and subsequently politics of countries and the world has lead to two failings.
- Overall Global Growth has slowed - yes, that's right even before the present financial crisis global growth was lower than reached from 1950-1973 or the Golden Age of Capitalism.
So even if "a rising tide lifted all boats" we are below the previous high watermark.
- Inequality has gotten horrifically worse causing instability. In the United States in particular the Top 1% now own more financial wealth than the bottom 95% COMBINED.
This is where the FIRE economy comes in, Rich people it seems are not that interested in using the wealth they keep from not being taxed and regulated to grow the economy. They just want to grow their own bank accounts.
Enter FIRE, an entire industry now devoted mostly to trading and speculating rather than lending, underwriting or investing in new businesses. It's a mechanism for the rich to get richer not by producing more goods and services but gambling and loansharking poor(er) people.
The long term effects are now being seen.
Gently Moving Towards Plutocracy
Is there social mobility in America? Not much. The FIRE (finance, insurance, real estate) economy via Neoliberalism has seen to that. But what if things just say the same?
TheGini coefficient, a measure of the differences in income distribution, tells the tale.
The United States has one of the highest Gini Coefficients in the developed world. Was it always so?
* 1929: 45.0 (estimated)
* 1947: 37.6 (estimated)
* 1967: 39.7 (first year reported)
* 1968: 38.6 (lowest index reported)
* 1970: 39.4
* 1980: 40.3 - Reagan Revolution/Neoliberalism -> FIRE economy
* 1990: 42.8
* 2000: 46.2
* 2005: 46.9
* 2006: 47.0 (highest index reported)
* 2007: 46.3
* 2008: 46.69
* 2009: 46.8
Source: U.S Census Bureau
The data is unmistakably clear: The rich have gotten richer and the poor have gotten poorer. As result the rich have gotten more powerful and can now buy more influence and protect themselves from having to pay taxes, comply with regulations or observe any democratic checks on their power.
Neoliberalism's spectacular failure to both grow the overall pie and keep a reasonable balance between the haves and the have-nots has wreaked havoc on our planet and species. Reorganizing our societies for total rule by the rich was tried in the 1980s with terrible results. To move forward we must reimpose control on our economy and our lives.
We must put out the FIRE.