Oh dear, Ritchie\’s wrong again

But for all those who say that is unlikely to happen, it is wise to recall that for many years neoliberals thought they had no hope of overturning the post-war Keynesian consensus that delivered the greatest period of sustainable increased prosperity the world has ever seen.

Hmm. But did it? That\’s the question, isn\’t it?

Looking at Angus Maddison\’s figures for GDP per capita globally we see that 1939 (closest we can get to 1940) global GDP per capita as $2171. In 1975 (just to give us two 35 year periods) it was $3955. 180% of the first number. Then in 2010 it was $7k and a bit, also, remarkably, 180% of the earlier figure.

Yes, of course these are inflation adjusted numbers (1990 GK$ in fact).

The interesting bit is that yes, that Keynesian period led to higher growth in the already advanced economies than the neoliberal period did. And the neoliberal period has led to higher growth in the developing economies than the Keynesian period did. And given that we are indeed all good little liberals around here this is what we would desire from an economic structure, isn\’t it? That the poor should get richer?

And we can even offer a reasonable explanation of how this came about. Under the capital controls in place under \”Keynesianism\” (really Bretton Woods) capital has to stay at home and couldn\’t go off to be invested in making the lives of the poor better. Under neoliberalism the desire to exploit the poor was unleashed and capital could go grind their faces into the dust. And given that the only thing worse than being exploited by capital is not being exploited by capital this is what has made the poor richer. Those bastard capitalists buying machines for the poor to work with, building factories in which they can work with those machines.

Just another example of how neoliberalism is so darn pro-poor.

76 thoughts on “Oh dear, Ritchie\’s wrong again”

  1. It’s also worth remembering why Bretton-Woods was abandoned and the economic and social mess that it caused in the 70s throughout Europe.

  2. wait! according to Ritchie one Twitter ” @timworstall only deals in abuse. And straw men”, so that’s YOU told, eh? Cower before his overweening moral rectitude!

  3. The Meissen Bison

    GDP per capita is, I suppose, a useful benchmark but doesn’t the increase in world population during the period somewhat mask the overall growth in prosperity?

    Tim adds: That’s what the “per capita” part strips out.

  4. Couldn’t the population explosion itself be a sign of increasing prosperity?

    By the way, I am still enjoying the delicious irony of watching Richard Murphy, faced with a better player, abandon the ball, hack at his opponent and shout “But he deserves it, he’s a cheat”.

  5. I might be in error here, but IIRC capital controls aern’t a part of Keynesian economics, even though Keynes was one of the architects of Bretton Woods in his other life as a bureaucrat. I’m pretty sure his long term preference was for a global “banker fiat” and for national currencies to be free floating, as we have had in the “Neoliberal period”. Bretton Woods, the gold exchange standard, was something of a cobbled together compromise, its form dominated by American preferences.

    If the price of higher growth among undeveloped economies has been lower growth in the developed economies, that would actually be a pretty damning condemnation of “neoliberalism”. We might suggest that their higher growth has been due not so much to the neolliberal form of capitalism but due to, for instance, fewer poor countries being ruled by Sorbonne Communists; while the lower growth in the West would seem to bear out the populist argument that globalism (of the neoliberal kind) impoverishes the proletariat by forcing the poor to compete with the even poorer.

  6. @ #6 Ian B
    Since when did “Keynesian economics” have to adhere to the “principles” (aka policies) advocated by JM Keynes? He advocated running a budget surplus throughout the top half of the economic cycle.

  7. @Matthew L – oh, I think it would take a damn sight more than that to give Ritchie any credibility; not that it matters one jot to the dozens of fools who retweet his every utterance

  8. Emil,

    The posting is about which “system” produced the more growth. So, low growth is better than no growth, but not as good as more growth. If “neoliberalism” has resulted in lower growth than the Keynesian dispensation, that’s a mark against it.

    This sort of keeps niggling at me; at the risk of waffling anecdotage. My family in the early 1970s; my dad worked shifts in a ball bearing factory and my mum was a secretary (part time when I was very young). We had a nice semi-detached house (owned, not rented), a motor car, we went on family holidays (like most people then, the English seaside). By judicious money managing, they sent my elder sister to a private girls’ school and I was at a private primary (prep) school.

    And I’m just not at all convinced that a similar family today would have that much more than we had; other than electronic goods that nobody had then because they didn’t exist. Four decades of growth and creative destruction ought to mean that the working class should be livin’ it large style, and I just don’t see that around me.

  9. Again you keep on forgetting that the Keynesian system crashed in the 70s so the growth wasn’t very sustainable

  10. Ian B, isn’t the change from the 70s down to government – mainly tax (fiscal drag on the personal allowance, higher VAT) lowering net incomes and restrictive planning regulations (and perhaps changes in immigration policy) increasing house prices?

  11. IanB, even if we were to take for granted that the “neoliberal” system crashed in 2008 then that’s still a pretty poor argument for returning to something else that is not sustainable, wouldn’t you say?

    [I would argue that it wasn’t the neoliberal system that crashed but government backing of junk mortgages but that’s a separate argument]

  12. Surreptitious Evil

    my dad worked shifts in a ball bearing factory

    That’s very high-end engineering work.

    Of course, you probably wouldn’t be able to afford the schools – Baumol’s disease isn’t just for medics. Just as my parents sent my brother and I to a minor public day-school but I could not have afforded the equivalent for my kids. And holidays were generally to the Welsh seaside but, hey …

    Would they have ‘that much more’? Dunno. Most of the working class around me have cars (but, strangely, rather too many seem to be missing part of the exhaust system) and go on holidays. Albeit to the Spanish sea-side. So they have ‘different’.

  13. I’m not arguing in favour of Keynesianism. I am utterly opposed to it as I’ve often expressed here in comments.

    I’m discussing this within the context of Tim’s post, just compared the results of the two notional systems as they have existed; and that means we must take “neoliberalism” to mean the actual economic system we have had.

    I am in favour not of returning to Keynesianism, but of giving a free market system a try, for which I am routinely accused of being naive, dogmatic, mad, incurably romantic, etc etc.

  14. I have been too busy to comment on the numerous idiocies promulgated by Murphy in the past two days – What I would say in response to his claim here, which is manifestly absurd at almost any level (Sorry, Ian B) is that I am assuming unlike the ‘Courageous State’ , which is presumed to be global and indeed unchallengeable, his comments only apply to the Uk ( or indeed possibly parts of Western Europe)

    I think anyone looking at 18th, even 19th century within the UK would have a case that he is talking utter rubbish (par for the course) – Add in other parts of the World (the USSR from 1945 to 1978 partook of the greatest period of sustained prosperity the world has ever seen – WTF?) and even, unlike Ritchie learn something about the Period in question, and you get a very different picture.

  15. I don’t know why you’re apologising to me. I’m just repeating what Tim said; growth in the developed world has been lower under Neoliberalism than under Keynesianism.

  16. Ian B>

    “other than electronic goods that nobody had then because they didn’t exist.”

    Some of those are more valuable than others, but I’d argue that even the trivial ones like games consoles have vastly increased the true wealth of the kind of people you’re referring to because they’ve made cheap entertainment available to the masses that most find to be a fun pastime. If, as I expect, we end up over the next few decades with children getting most of their education through video games that will be both genuinely educational and also fun to play, then the poor will have access to a form of cheap, effective education that the children themselves don’t have to be forced to take advantage of; arguably that’ll be a bigger boon to the poor than even the Green Revolution.

    I haven’t even mentioned the internet. The world’s supply of knowledge suddenly available almost for free? Back in the late eighties, a set of the Britannica would cost you over a thousand quid. Mobile phones are well-known to boost GDP per capita in developing countries by a significant amount – something like half a percentage point per 10% of the population with phones.

    There, by the way, we come to the real nub. The seventies people you describe in your example were practically 1%ers on a global scale; not to call them fairly rich is to ignore the reality of the true poverty that was considerably more widespread back then.

  17. Dave-

    What’s interesting is that general growth should reduce the cost of staples (housing, food, fuel, etc) and what i was saying is I don’t think we’ve seen much of that. Indeed, DBC Reed et al would not unreasonable argue something along the lines that any such growth has been hoovered up by property costs.

    So one crude way to look at it would be disposable income after you’ve paid for your staples. The massive advances in consumer electronics have meant their prices plummeting far faster than the government and its financial sector handmaiden can inflate their prices, leading to the disposable income part of the wage allowing us to have three smartphones, a PC, a couple of laptops and a DVD player etc whereas in 1970 you got a black and white TV and a radiogram.

    But how much more bread can a factory worker and a secretary buy now compared to then? Not much, I suspect.

  18. SE, I have the greatest respect for ball bearing makers, but I don’t know quite what point you’re trying to make. Are you suggesting that my father was a highly skilled engineer on a consequently high income? If it’s not that, I’m not sure what you’re getting at.

  19. @IanB, “And Im just not at all convinced that a similar family today would have that much more than we had”

    To an extent, see Tyler Cowen: we can’t reinvent the TV (etc), we’re just inventing better ones.

    “But how much more bread can a factory worker and a secretary buy now compared to then? Not much, I suspect.”

    The average size of factory workers and secretaries now as compared with 1970 suggests otherwise.

    Look, things are miles better now.

    Dave has mentioned the internet, you yourself add lots of electronic gizmos. To take just one, the telly: this summer I shall be watching the Ashes and the Lions, live, with 30 different camera angles on a giant flat screen telly. Back in the 1970s, the Lions wasn’t televised live, and Richie Benaud and Jim Laker made do with one wicket camera. I don’t like football, but the Sky Sports coverage speaks for itself. This is a massive improvement in the lives of most blokes.

    Cars – they are much better now than they were in 1970s, and virtually all families have more than one.

    Leisure – in 1970, the pubs closed earlier and the beer was rubbish. The supermarkets were crap, and to continue the beer theme Party 7s were regarded as the state of the art. Yesterday I was drinking Marstons Strong Pale Ale and it is like nectar. Ecstasy is a quid a pill.

    Holidays – I was one of a vanishingly small number of kids in my group of friends (public school pupils from quite wealthy backgrounds, note) who flew abroad on holiday. We did so in crap, noisy and uncomfortable aircraft, at huge expense. Now I can fly to Geneva for thirty quid. People on the dole fly to the Costas.

    Music – mp3s and newer formats beat vinyl hands down (and I collect vinyl).

    Healthcare – way better.

    I could go on.

  20. Just picking unfairly on a couple of points, the beer thing seems to have little to do with economic growth and a lot to do with an anti-temperance surge (i.e. CAMRA). The Americans noticably didn’t have that, which is why they’re still drinking fizzy piss.

    And the TV thing is all about the BBC and state control, again not economic growth. You’ve only got to compare Star Trek with temporally equivalent Doctor Who to see that. British TV didn’t really start improving itself (i.e. emulating Yankee production quality) until the 1990s. Not because nobody could do that previously, but but because they didn’t give a shit and Brits, typically, accepted the wobbly sets, crap directing, stagey production etc as quaint.

  21. I think the Americans still have fizzy piss because they like it. Their brewing traditions are different to ours.

    Re the TV, I’m talking more about the technology and the existence of satellite broadcasters.

  22. It could be argued that people in the 70s liked Double Diamond and Watneys bloody Draught Red Barrel.

  23. It could be, but it would be insane. Not least because they’d still be in production! I was too young to appreciate it (b1968) but I remember my dad and uncles having virtually to force DD down.

  24. “What`s interesting is that general growth should reduce the cost of staples (housing, food, fuel, etc) and what i was saying is I don

  25. “What`s interesting is that general growth should reduce the cost of staples (housing, food, fuel, etc) and what i was saying is I don`t think we`ve seen much of that.”

    No, it should reduce the non-labour component of their price. In fact, the price of the food on supermarket shelves is well-known to be several times the production-cost alone. In essence, even buying something as simple as milk or potatoes you’re paying several times more for services than for the food itself itself.

    That said, food now is in fact far cheaper than in the seventies. The proportion of our incomes we choose to spend on it has remained roughly constant, but the quality and variety has improved out of this world. Cheese is probably the most obvious example – the standard seventies fare bounced if you dropped it. Fruit and veg is another – when’s the first time you saw a green coconut in this country, or a supermarket shelf full of mangoes? Out of season strawberries? Harrods, not Tesco.

    When it comes to beer, I think there’ve probably been too many non-economic factors at work to draw any clear conclusions. I suspect the switch from pub-drinking to home-drinking has been more influential than it’s given credit for in making the market more competitive (and therefore the products better), because, well, whoever heard of a tied-offie? The US, incidentally, is not the beer-desert some people make it out to be. You can even get decent beer in Texas these days.

  26. In which I strangely find myself agreeing with Ian B (though he may not agree with me). If I am a rationally self-seeking person, why should I give a toss about increased income in China? I want my income/welfare to increase. If Bretton Woods led to that, what’s the problem? (I am ignoring entirely the important debate about the improvement – or not- of beer. Not insignificant, but my beer drinking began post watneys.)

  27. Luke>

    Even if you couldn’t care less about other people, making them rich enough to trade with will improve the strength of the economy you’re working in and make you richer in the long run.

  28. Dave-

    But that’s the problem. The “selling point” of free markets, free trade etc is meant to be that everyone benefits. That is, an Englishman benefits from the Chinese benefiting, because they provide cheaper goods etc, it’s a win-win.

    But what Tim’s figures seem to be saying (I have no idea if they’re good figures, I’m just accepting his posting at face value) then that isn’t the case. The rest of the world are benefitting at our expense. In which case there isn’t a “we get richer in the long run”, just a “they get richer in the long run. And that’s no use.

  29. Ian B, I think we do agree on the main point. Tim’s figures suggest that the world as a whole is better off. Great. Wonderful. What’s in that for me?

    I may be prepared to sacrifice my own well being for the peeps in china or India, but as an Adam Smithian person, that would be wrong.

  30. Luke>

    I often say the long run is anything over fifty years. Come back in three years and tell us if you notice a difference then 🙂

    More seriously, and in response to Ian as well, growth hasn’t stopped in the developed world whilst the developing world was starting to catch up, and since a lot of catching up was needed, we’re not really at ‘long-term’ yet. We’re starting to see more and more benefits, from stuff like Indian call-centres – not an entirely consistent success, but generally a cheaper way to do things – and Korean cars to various tropical foods that are produced in export quantities by richer societies. Now consider where we’ll be when India and China are rich enough to produce and export their own high-value goods and services. would it be a bad thing if a billion Indians could put as much money into funding medical research as a billion Europeans do? What about relative trivialities like selling more cars, so the development cost per car coming down, or selling more jet engines (providing jobs in this country) when Africans start to fly around in comparable numbers to Europeans?

    Our entire wealth is based on trade, so it’s practically axiomatic that increasing the population with whom we can trade will increase our wealth.

  31. Luke,

    Yes, I think we do agree.

    Dave-

    I’ll say again, I’m presuming that Tim’s figures are correct. What you’re basically areguing here is that growth in China (etc) ought to benefit us in England and, free market theory says indeed it should. But the figures Tim quotes says that it isn’t.

  32. Ian>

    I didn’t think my point was particularly hard to grasp. Perhaps it was just obscured by the wall of text.

    “the figures Tim quotes says that it isn’t.”

    It hasn’t yet.

    Anyway, the figures don’t actually say that, because we don’t know if the previous regime’s growth was sustainable without making the developing nations richer. It’s perfectly possible growth would have stalled by now.

    The other thing I’d point out is that although I’ve cited computers as being something that make us richer, the computer revolution has cost us growth whilst we’ve been (correctly) switching resources into working out how to make it benefit us. We’ve done a lot of work there that’s barely starting to pay-off.

  33. Dave, ” What you’re basically areguing here is that growth in China (etc) ought to benefit us in England and, free market theory says indeed it should. But the figures Tim quotes says that it isn’t.”

    Look at it this way. If you’ve got loads of capital, it may make sense to employ it in China. Great for you, but for Ian B and me? Wouldn’t we be better off if you invested it here? As an Adam Smith/Randian/Worstollian, why should I care about anyone else?

  34. It hasnt yet.

    I too, eerily, am 47. How long do I have to wait, considering we’ve been waiting since 1975?

    I just cobbled together some figures for how prices have changed as multiples since 1977:

    Average wage: 8.32
    McDougall’s flour: 5.25 (Tesco ad)
    Jacobs Cream Crackers: 7.73 (Tesco ad)
    House Price: 12.38

    I mean, the point here would be that in the “Neoliberal Era”, the general population have been asked to accept mass unemployment, the disappearance of much industry, ruptive social policy, an immigration flood, draconian workplace cultures, intense job competition, etc, and for that they get to live in a house 2/3 the size and have a paltry 7% more cream crackers as compensation.

    It’s hardly stellar, is it?

  35. So Much for Subtlety

    And we can even offer a reasonable explanation of how this came about. Under the capital controls in place under

  36. So Much for Subtlety

    And we can even offer a reasonable explanation of how this came about. Under the capital controls in place under [Keynesianism] (really Bretton Woods) capital has to stay at home and couldn’t go off to be invested in making the lives of the poor better.

    There is another explanation as well – African socialism. It is not just that investment is flowing out of the West, it is also that the Third World has to varying degrees given up trying to find an alternative to capitalism and have been forced to embrace the market.

    It is amazing how fast your economy can grow when you’re not trying to cut off your nose to spite your face.

  37. So Much for Subtlety

    Dave – “Even if you couldn’t care less about other people, making them rich enough to trade with will improve the strength of the economy you-re working in and make you richer in the long run.”

    All other things being equal. Are they equal? No doubt German industrialisation provided a lot of goodies to a lot of people. Unfortunately it also ended with bombs raining down on the East End in two World Wars. But still that was better than Soviet industrialisation that came close to destroying Britain utterly.

    What makes you think that a wealthier China or India is good for us much less the world? It is not as if they have shown themselves to be particularly liberal or friendly to the West.

  38. Ian>

    How are those rose-tinted goggles of hindsight working out for you? I’m afraid you’re never going to see any benefits if you keep ignoring any benefits and pretending everything was better in the seventies.

    Some things haven’t improved much, and won’t improve much, like the basic costs of living. What you can buy with the rest has improved an immense amount. And let’s not add house-prices to this argument, because I think we can all agree that it’s a distorted market at the moment.

    Some things remain unquantifiable. How do you value the relatively wide availability of heart transplants, for example?

  39. Well, they do them on the NHS don’t they? What’s “neoliberal” about that? More Attleean (i.e. “Keynesian Era”) isn’t it?

    I don’t have rose tinted specs. I’m just comparing the two systems, as in the original post, and noting that the purported benefits to the general population of neoliberalism don’t seem to be very clearly manifest in the statistics on offer.

  40. …which brings us back to the issue of why an Englishman should be pleased that the Chinese are doing well.

  41. SMFS>

    We were discussing economics, not politics 🙂

    In my opinion, though, the richer nations get, the less tolerance their citizens have for jingoistic nationalism and overseas aggression, what with having better things to do spending all that lovely moolah they’re now getting.

    Moreover, one might well go on to argue on that basis that a poor China would have much less to lose in starting a global war than a rich one, and on balance we’d rather have them rich.

  42. “I’m just comparing the two systems, as in the original post, and noting that the purported benefits to the general population of neoliberalism don’t seem to be very clearly manifest in the statistics on offer.”

    Yet.

    Clear enough for you?

    You’re also adding claims about how nothing has got better since the seventies, citing three prices, one of which is also anomalous. Put that way, the argument destroys itself.

  43. “yet”

    Well, we’re looking at a 40 year period, basically an entire working lifetime.

    As to the prices, I tried to find some products which are comparable across the two periods. You could also have had Ski yoghurt and Heinz baked beans, but I was a bit bored looking things up by then.

    The house price might be “anomalous” but it’s also (a) part and parcel of the “neoliberal era” and (b) a very important price for real people living through those times.

  44. “Well, we’re looking at a 40 year period, basically an entire working lifetime.”

    Since 1975? As I said before, come back in three years. Go-on, someone set me up for that line again…

    As I said, let’s avoid house prices as evidence, since we all agree that the figures there are skewed, but could spend all week arguing about why. It’s too much of a side-track.

    Really, I don’t think I’m saying anything more than that Tim’s view is not inconsistent with the evidence, because it’s not. Personally, I don’t think the systems in place were responsible for the levels of growth – and, quite possibly, the change in system was a response more than a cause, as we shifted from one phase of a much larger economic trend to another. The fundamental cause of the great economic growth in the first part of the twentieth century was that they were cashing in on work done during the industrial revolution, just as in another few years or decades we’ll be cashing in extra growth from the work being done now on the computer revolution.

  45. So Much for Subtlety

    Dave – “We were discussing economics, not politics”

    There is a distinction?

    “In my opinion, though, the richer nations get, the less tolerance their citizens have for jingoistic nationalism and overseas aggression, what with having better things to do spending all that lovely moolah they

  46. So Much for Subtlety

    God I hate WordPress.

    Dave – “We were discussing economics, not politics”

    There is a distinction?

    “In my opinion, though, the richer nations get, the less tolerance their citizens have for jingoistic nationalism and overseas aggression, what with having better things to do spending all that lovely moolah they-re now getting.”

    Well this has been true of Western European populations but it is a typically liberal mistake to assume what is true of WASPs is true of all mankind. The Chinese do not seem to be moderating all that much and Islamic terrorism appears directly related to the rise in wealth in the Middle East. But even if it is so, that still leaves a dangerous spot between a country being too poor to threaten anyone and being too rich to care.

    On top of which not all threats are military. Take wildlife. So far East Asians are showing not one bit of concern about the fate of all those endangered species. Just because WASPs care and are rich, it does not mean other people will care once they are rich.

    Finally, running a successful economy seems to be a WASP thing. As WASPs decline, both relatively and absolutely, other countries will have to try to manage the world economy. They may copy Germany. Or they may copy Argentina which used to be the richest nation in the world. That poses a real risk to everyone.

    “Moreover, one might well go on to argue on that basis that a poor China would have much less to lose in starting a global war than a rich one, and on balance we’d rather have them rich.”

    One might. Assuming that played any role in why countries go to war. Usually they do so because they think they can win. As China becomes richer, it is obvious that it has a better chance of winning.

  47. So Much for Subtlety

    Ian B – “I-m just comparing the two systems, as in the original post, and noting that the purported benefits to the general population of neoliberalism don-t seem to be very clearly manifest in the statistics on offer.”

    Benefits are very hard to weigh up too. Take the Sexual Revolution. For every young man who is screwing lots of pretty young girls, there are half a dozen men who have had all contact with their children cut off and are now paying a fortune so their ex-s boyfriend does not have to work.

    How do you measure the benefits of more Indian take away with the costs of Yardie gangsters?

    I wonder if you asked people, assuming it was possible, whether they would like to go back to the 50s and try again, and what policies would they prefer not to repeat, what they would say. I would suspect most would say immigration was a disaster.

  48. The general rule since WWII is that advanced (Western or Westernised) nations are unwilling to fight wars on their own territory, and thus prefer to pick fights in faraway places and watch them on telly.

    Interestingly, WASP England managed to so badly mismanage an empire spanning a quarter of the globe that it couldn’t beat Germany, who had “one sausage factory on Lake Tanganyika”, so I’m not sure what to make of this argument that WASPs==good economic management. Might be not so much Protestants vs. everyone else, as Lutherans vs. Calvinists.

  49. I would suspect most would say immigration was a disaster.

    I would too. Really, only the New Class still believe in it because (a) it dismays Conservatives (b) cheap nannies and gardeners (c) cheap labour in general (d) it gives them something else to manage.

    It may have been the worst policy since George III in one of his weirder moments ordered that the entire populace must paint themselves blue on Tuesdays.

  50. So Much for Subtlety

    Ian B – “The general rule since WWII is that advanced (Western or Westernised) nations are unwilling to fight wars on their own territory, and thus prefer to pick fights in faraway places and watch them on telly.”

    I do not think anyone is willing to fight wars on their own turf. Japan did not start WW2 thinking it was a great opportunity to remodel Tokyo-s suburbs. However Britain has actually fought the IRA at home and sort of almost won. Spain has fought ETA at home.

    But what is interesting about the West since about 1919 is that they have not been willing to fight at all. They have to be dragged into it and then they usually give up and go home. The moralising and crusading Americans are an exception, but even then they did not seek to pick fights, but only defended territory they thought was important. Well, mostly.

    “Interestingly, WASP England managed to so badly mismanage an empire spanning a quarter of the globe that it couldn’t beat Germany, who had “one sausage factory on Lake Tanganyika”, so I’m not sure what to make of this argument that WASPs==good economic management. Might be not so much Protestants vs. everyone else, as Lutherans vs. Calvinists.”

    Well being a good economic manager does not necessarily make you good soldiers. But I would normally argue that only Northern European Protestants are capable of proper economic management, but today I got a bit lazy. WASP is easier to write. I am starting to think it is not completely true though. Look at the Netherlands:

    http://www.spiegel.de/international/europe/economic-crisis-hits-the-netherlands-a-891919.html

    (Hat tip to MarginalRevolution)

  51. Well, the Netherlands had history’s most famous bubble, the Tulipomania.

    It seems to me we can explain all this with one explanation, which ties into this “Neoliberalism” theme. It is the fallacy that money (and thus the financial sector) “drives” the economy. The Dutch proved all that time ago that generating large numbers of high value contracts (a boom) leads inevitably to a bust. Money does not drive the economy. It is simply a tool. Destabilise the money supply, and you just generate chaos.

    But we keep forgetting this. And this may be why “Neoliberalism” seems to have not worked after all much better than Keynesianism. In a sense, it a kind of 20th century “Progressive” centrally managed capitalism. The same central planning ideologies that didn’t work for industry, didn’t work for town and country planning, and don’t work for society, don’t work for finance either. Who’da thunk?

    As it stands, I think we’re all in the same boat, WASP or not. The system just doesn’t work.

  52. Tim isn’t saying that Western living standards haven’t increased under neoliberalism – the data he’s using says that real GDP per head from 1975 to 2010 rose 80% in western europe, 100% in the UK.

    What the data says is that the increase in the UK / western europe was less than it was:
    1) in those same countries in the 1945-75 era; and
    2) in the rest of the world in the 1975-2010 era.

    Does that mean that neoliberalism reduced living standards for the UK / europe? No, because we still had a big increase in our real per capita incomes (based on Tim’s stats, not beer quality).

    Does that mean Keynsianism would have been better for us than whatever we’ve had since 1975? Not necessarily – that assumes that Keynsianism was responsible for the 1940-75 increase and that it could have continued.

  53. And I still think it’s important that the thing Ian B says has gone up most in real cost is housing – which is a result not of neoliberalism but of central government control, increasing the population through immigration whilst restricting the growth in housing supply through planning laws.

  54. I wonder how far the increased cost of private schooling (Ian B’s other example of something less affordable than it once was) is due to the increasingly onerous inspection regimes?

    It must be very difficult these days to open a new private school, whereas in the past it seemed you just hired a decrepit building and a few oddballs who couldn’t get a job after leaving Oxford.

  55. Richard,

    The original question in the post (and I’ve said several times I’m arguing within that context) was whether the Keynesia Era or the Neoliberal Era had created the greatest increase in living standards, and by Tim’s own stats the answer is the Keynesian Era.

    (One interesting issue btw is whether the phrase “the world had ever seen” refers to a global metric (i.e. global GDP) or a local one (i.e. British GDP). At first sight, and TIm has taken it as such, it refers to the global. But if I say, “Britain had the largest navy the world had ever seen” we’re on a local metric. So, not sure what Ritchie is measuring anyway. Since the Third World wasn’t Keynesian in the main, he may be specifically referring to the British economy that was).

    So, within the context, I (and nobody else) is saying that Neoliberalism reduced income, merely that it has not done as good as job as the previous system in raising it.

    Outside Tim’s context, we cannot use Neoliberalism as a synyonym for free markets; there seems to be a general agreement here that it is not that. “Neoliberalism” refers to the state-entangled system we currently have (and have had since, say, Thatcherism), a specific feature of which is central government controls of numerous types. Neoliberalism is not libertarianism. Its main function, arguably, is to give libertarianism and free markets a bad name, by being a straw man for the Left.

  56. So Much For Subtlety

    Ian B – “Well, the Netherlands had history-s most famous bubble, the Tulipomania.”

    Yeah but they do seem to have learnt their lesson. At least until recently.

    “It seems to me we can explain all this with one explanation, which ties into this

  57. So Much For Subtlety

    Ian B – “Well, the Netherlands had history-s most famous bubble, the Tulipomania.”

    Yeah but they do seem to have learnt their lesson. At least until recently.

    “It seems to me we can explain all this with one explanation, which ties into this [Neoliberalism] theme. It is the fallacy that money (and thus the financial sector) [drives] the economy.”

    I prefer to think of it as the result of over-spending, over-borrowing, under-saving and easy credit. Because the Baby Boomers are saving for their retirement, and the East Asians have been flooding the West with cash, there has been too much money sloshing around and instead of making sure it went to a proper home, our governments have been encouraging very poor lending decisions. I see nothing wrong with a Financial sector at all. Although it does drive housing prices up.

    “As it stands, I think we-re all in the same boat, WASP or not. The system just doesn-t work.”

    Some of us are in worse boats than others. But as the national language of Britain will be Urdu by and by I don-t suppose it matters much. It is only worth thinking about the future if you have one.

    Richard – “Does that mean that neoliberalism reduced living standards for the UK / europe? No, because we still had a big increase in our real per capita incomes (based on Tim-s stats, not beer quality).”

    Real GDP per capita is not the same as living standards. Britain’s living standards may have gone up. We have to some extent got richer. But for many people, especially those that cannot afford to live in gated communities or distant hard to get to suburbs, quality of life has gone down enormously. Look at the litter, the grafitti, the casual violence and vile manners that make up most of London for instance. The 1970s were not a Golden Age. Nor I suppose were the 60s. But in many fundamental ways – not all easily measurable in money terms – they were better. Well, not the 70s perhaps.

  58. @SMFS “Look at the litter, the grafitti, the casual violence and vile manners that make up most of London for instance. The 1970s were not a Golden Age. Nor I suppose were the 60s. But in many fundamental ways

  59. @SMFS “Look at the litter, the grafitti, the casual violence and vile manners that make up most of London for instance. The 1970s were not a Golden Age. Nor I suppose were the 60s. But in many fundamental ways not all easily measurable in money terms they were better. Well, not the 70s perhaps.”

    Entirely correct. The standard leftist response is to say, Pah! You think the past was a golden age!, but in some ways it was.

    If we could only have the crime rate and self-respect of the 1950s with the tech and living standards of today I think we’d have it pretty much sorted.

  60. OT, but there is plenty of beer in the USA that is not fizzy piss; indeed there are some truly excellent brews available.

    It’s just the stuff they “export” that is fizzy piss.

  61. You can have the crime rate of the 50s and tech/living standards of today. It’s called Switzerland.

  62. JamesV – yes, I first had American craft beers in San Francisco in the mid to late 1980s. But it’s more a Bud/Miller sort of place.

    You’re right re Switzerland. You can also get it in England in eg The Cotswolds where I live, and lots of other places. You just can’t reliably get it in any big city or town.

  63. All “stuff” is cheaper and better than it was 40 years ago. The reason everyone in the West feels poorer is because the State f*cks people over whenever it can – mainly by preventing a free market in house building, taxing energy many times more than it did 40 years ago and making many things more expensive than they need to be by excessive regulations. Indeed most “stuff” is cheaper and better in spite of the best efforts of the State to make it otherwise. Imagine how cheap life would be if the State just got its fingers out of everyones business and let them get on with it.

  64. Ian B
    ” . . . wasn’t Keynesian in the main, he may be specifically referring to the British economy that was”

    “Most notably by R.C.O.Matthews in his article ‘Why Has Britain Had Full Employment Since the War ?’ (Economic Journal, September 1968). For Matthews, the question was provoked when he found it difficult to identify direct evidence of a Keynesian stance of fiscal policy in the U.K. He noted that, rather than a budget deficit designed to support a high level of aggregate demand, the government had persistently had a budget surplus, although he recognized that a surplus observed ex-post is not necessarily inconsistent with a deficit
    intended ex-ante. P47.
    Matthews did not dispute this, but pointed out that :… throughout the post-war period the
    government, so far from injecting demand into the system, has persistently had a large current account surplus.
    From this he inferred : Fiscal policy as such therefore appears on the face of it to have been deflationary in the post-war period, quite strongly deflationary in fact, rather than the reverse. ” P197
    http://www.press3.co.uk/publications/to_full_employment/chapters/

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