In what may be a sign of a “shifting zeitgeist,” a new paper published this week by economists with the International Monetary Fund questions the very neoliberal policies the body has imposed.
Entitled “Neoliberalism: Oversold?” (pdf) the IMF’s Jonathan Ostry, Prakash Loungani, and Davide Furceri focus their analysis on two policies of what British writer George Monbiot dubbed the “zombie doctrine”: “removing restrictions on the movement of capital across a country’s borders (so-called capital account liberalization); and fiscal consolidation, sometimes called ‘austerity,’ which is shorthand for policies to reduce fiscal deficits and debt levels.”
An evaluation of these two neoliberal policies, the authors write, leads to “three disquieting conclusions.” As they note in the paper:
The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.
The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.
They go on to note that “since both openness and austerity are associated with increasing income inequality, this distributional effect sets up an adverse feedback loop. The increase in inequality engendered by financial openness and austerity might itself undercut growth, the very thing that the neoliberal agenda is intent on boosting.