an account of neoliberalism

1. Neoliberalism and After? Education,
Social Policy and the Crisis of Western
Capitalism
Michael A. Peters
University of Waikato
September, 2011

2. The Politics of Neoliberalism

3. Table of Contents
 Introduction
 Chapter 1 : Neoliberalism and After? Education, Social Policy and
the Crisis of Western Capitalism
 Chapter 2: „Individual‟ and „Community‟ as Political and Policy
Metaphors
 Chapter 3: Neoliberalism, Higher Education and Knowledge
Capitalism
 Chapter 4: Neoliberal Governmentality: Foucault on the Birth of
Biopolitics
 Chapter 5: Postmodernity, Neoliberalism and the Restructuring of
Education

4. Cont‟
 Chapter 6: The New Zealand Education Experiment
 Chapter 7: Rethinking Education as a Welfare Right
 Chapter 8: Postmodernity and the Philosophy of
Educational Reform
 Chapter 9: Governmentality, Education and the End of
Neoliberalism?
 Chapter 10: The Global Recession, Education and the
Changing Economics of the Self
 References

5. Book synopsis
 Neoliberalism represents a struggle between two forms of welfare
or social policy discourse based on opposing and highly charged
ideological metaphors of „individualism‟ and „community‟.
 The one form posits the sovereign individual or family
emphasizing the primacy over community and State; the
other, what might be called a rejuvenated social democratic
model, inverts the hierarchy of value to emphasize community or
„the social‟ over the individual.
 As such it is an intellectual struggle that runs through twentieth
century thought and traverses a range of subjects, with roots
going back at least to the Enlightenment in different native
traditions.
 It is therefore complex, subtle and dynamic, changing its
historical and disciplinary forms as its matured as a political
doctrine, international activist movement, and set of political and
policy practices.

6. The Setting
 The Fourth Labour Government, New Zealand, 26 July
1984 to 2 November 1990

7. Rogernomics
 Floating the NZ dollar
 Removing farm subsidies
 Introducing GST
 Reducing income and company tax.
 Removing controls on foreign exchange.
 Abolishing or reducing import tariifs
 Corporatising many SOE (PO, Telecom, AIrNZ); privatisation
 Reserve Bank new inflation target.
 Improving the reporting and accountability for government expenditure
(Public Finance Act, 1989)

8. „New public management'
 a systematic programme of corporatisation, privatisation and
commercialisation;
 a greater reliance on competitive tendering and contracting out;
 the devolution of human resource management to the chief
executives of individual departments and agencies;
 a move from cash-based to accrual accounting;
 improved systems of budgetary control;
 a greater reliance on financial incentives;
 major changes in institutional design, including the placement of
many service
 delivery functions in separate, non-departmental agencies.

9. Problems from the New Public
Management Reforms
 Fragmentation & proliferation of agencie– – eg. high risk
families can be involved with 23 separate agencies
 Coordination problems and costs.
 Reduced trust & cooperation between agencies.
 Reduced public servants capacity to collaborate.
(Walker 2004)
 Policy/funders isolated from direct accountability to
users.
 Weakened public service ethic – – corruption.

10. Distinctive NZ features
 Contractualism: governing the relationship
between agents and principals within the public
sector, as well as between public and private
organisations.
 Strategic management under which ministers
specify their strategic objectives over the medium
term and use these to set departmental priorities
 Minimisation of provider (or bureaucratic) 'capture'
via the vigorous pursuit of organisational
specialisation and the decoupling of potentially
conflicting functions. (Boston & Eichbaum, 2005)

11. Neoliberalism in NZ
 • Neoliberal economic institutionalisation
 • Punitive economic policy
 • Neoliberal public sector institutionalisation
 • Punitive social policy
 Social consequences of inequality

12. Phases of Neoliberalism
 • 1984-89 The New Zealand Experiment
- Instituting competitive mechanisms
- alongside attempts to preserve or extend social
democratic welfarism
 • 1990-99 Punitive neoliberalism
- Neoconservative authoritarianism
 1999- ‘”Partnering”ethos
- Labour-Alliance coalition
- Labour-PC-UFP coalition (Larner 2004)

13. Phases of neoliberalism?
 1999-2002 Helen Clark with Alliance
 2002 reelection of Helen Clark‟s government (2nd term)
with 41% of the vote ..Jim Anderson‟s Progressive
Party
 2005 Clark‟s minority government coalition, alliance
with NZ First
 2008 John Key‟s coalition government with ACT, United
First and Maori Party
 2011 election : 50th NZ Parliament

14. Key‟s Policies
 National‟s plan is to sell off 50% of the state-owned electricity companies and Air New
Zealand if they win this year‟s election.
 Health privatisation: selling off the public hospital and health facilities and replacing them
with corporate healthcare on contract to the Government.
 Education: National cut funding for night classes and tertiary education; slashed
$400million in funding for trained teachers in early childhood centres. According to the
NZEI, “The cuts will affect 93,000 children enrolled in 2000 early childhood services”.
 The Trans-Pacific Partnership Agreement (TPPA) is a free trade agreement being
negotiated between New Zealand, the US and seven other countries.
 In 2010 John Key brought in his long awaited tax cuts. Yet of the $14 billion of tax cuts
that Key announced for the next four years the richest 10 per cent of people got 42 per
cent of the tax cuts and the bottom 20 per cent got just 2 per cent.
 http://socialistaotearoa.blogspot.com/2011/06/guide-to-john-keys-war-on-working.html

15. Economic Policy Framework
 Free Trade and Investment, Estalished as a principle
 Capital Controls lifted
 95% of imports duty free Average weighted tariff 0.7% (Conway 2002)
 Privatisation: 40 state enterprises sold for $19billion, 80% to overseas investors (Goulter 2002)
 Reserve Bank Act (1989)– Reserve Bank Independence Priority to price stability in public contract
 Fiscal Responsibility Act (1993)
 Government publishes long-term fiscal objectives eg. Levels of public debt, spending, taxes, debt.
 Sets a policy norm of fiscal restraint.
 Employment Contracts Act (1991)
 Abolished compulsory conciliation & arbitration – abolished guaranteed bargaining role for unions.

16. Labour‟s Modifications
 Reserve Bank negotiations
– Did not reappoint neo-liberal gover
Renegotiated Policy Targets Agreement:
– “ “In pursuing its price stability objective ‘… shall seek to avoid
unnecessary instability in output, interest rates and the exchange rate"
 • Renationalisation –
Air New Zealand – tourism lifeline.
Accident compensation –
Auckland metropolitan rail network $200m (cf. $328m from sale of whole
rail system)

17. Cont‟
 Ministry of Economic Development – Small venture capital fund
aimed at regional development
 Employment Relations Act 2000
– No significant change to legislation but increased union
confidence.
– recognises need for good faith behaviour
– promotes mediation but little use has made - 4,802 cases in
2002/03 (Lafferty & May 2004)
– Further amendment in progress to encourage collective bargaining
– Holidays Act 2003 providing penalty payments for work on public
holidays and 4 weeks annual leave from 2007

18. Social Policy
 Top marginal tax rate cut from 66% to 30% (Darwell 2003)
– One third of the tax reductions 1996-1998 went to those on highest income quintile
(Goulter 2001)
 Welfare Payments
– 1990 – – Social welfare income entitlements cut 1.7% GDP (Goulter 2001)
 Employment Relations (from ECA)
– Union membership fell from 56% of wage & salary earners to 21% 1989-99. (Lafferty
& May 2004)
– Workplace coverage by collective bargaining halved. (Goulter 2001)
– Significant reductions in penal and overtime rates, maximum hours of work, service
and other allowances. (Goulter 2001)

19. Labour’‟s modifications
 – Top marginal tax rate increased from 33% to 39%
(applies at 3rd income quintile). (Darwell 2003)
 • Transfers
– Reduced state housing rents from market rates
– Reduced interest rate on student loans from market
rates (Goulter 2001)
 • Labour Market – Increased minimum wage

20. Employment and Incomes
 Unemployment
- 1986 4.0% (Mäori 10.7%)
- 1991 10.3% (Mäori 25.4%)
- 1996 6.1%
- 2003 4.7% (Mäori 10.2%)
 Real per capita national disposable income ($1996) – –
- 1988 $22,573
- 1992 $21,000
- 2003 $27,237

21. Income Inequality
 Living Standards – Lower for 90% of Nzers in1996 than in
1981(O‟Dea2000)
 Income Inequality (top quintile/bottom quintile disposable
income) – – 1988 2.4times – 200 12.7 times
 Families with Low incomes (less than 60% of median
income)
 – 1998 23.2% – – 2001 23.2%
 Foodbanks in Auckland – – 1984 16 – – 1996
130(Conway2002)

22. International Context
 Thatcherism: low inflation, the small state and free
markets through tight control of money supply,
privatisation and constraints on the labour movement.
 Reaganism: Reduce Growth of Government spending;
Reduce Income Tax and Capital Gains Tax; Reduce
Government regulation; Control the money supply to
reduce inflation.

23. Washington Consensus
 Fiscal discipline
 A redirection of public expenditure priorities toward fields offering both high economic returns
and the potential to improve income distribution, such as primary health care, primary
education, and infrastructure
 Tax reform (to lower marginal rates and broaden the tax base)
 Interest rate liberalization
 A competitive exchange rate
 Trade liberalization
 Liberalization of inflows of foreign direct investment
 Privatization
 Deregulation (to abolish barriers to entry and exit)
 Secure property rights

24. The theorist
 Michael Foucault, The Birth of Biopolitics (2008)
 “I thought I could do a course on biopolitics this year. I will
try to show how the central core of all the problems that I am
presently trying to identify is what is called population.
Consequently, this is the basis on which something like
biopolitics could be formed. But it seems to me that the
analysis of biopolitics can only get under way when we have
understood the general regime of this governmental reason I
have talked about, this general regime that we can call the
question of truth,
of economic truth in the first place, within governmental
reason.”

25. The Birth of Biopolitics
Lectures at the College de France, 1978-1979

26. The Liberal Art of Government
 What are the specific features of the liberal art of government as
they were outlined in the Eighteenth century? What crisis of
governmentality characterises the present world and what
revisions of liberal government has it given rise to? This is the
diagnostic task addressed by Foucault's study of the two major
twentieth century schools of neo-liberalism: German ordo-
liberalism and the neo-liberalism of the Chicago School. In the
years he taught at the Collège de France, this was Michel
Foucault's sole foray into the field of contemporary history. This
course thus raises questions of political philosophy and social
policy that are at the heart of current debates about the role and
status of neo-liberalism in twentieth century politics. A remarkable
feature of these lectures is their discussion of contemporary
economic theory and practice, culminating in an analysis of the
model of homo oeconomicus.

27. Distinctiveness of Foucault
 „Neo-liberalism is not Adam Smith; neo-liberalism is not
market society; neo-liberalism is not the Gulag on the
insiduous scale of capitalism‟ (BB: 131). This assertion is
meant to distinguish his position from three approaches to
neo-liberalism, namely, the economic point of view that it is
„no more than the reactivation of old, secondhand economic
theories‟ (BB: 130), the sociological point of view that „it is
just a way of establishing strictly market relations in society‟
(ibid), and the political point of view which claims neo-
liberalism to be „no more than a cover for a generalized
administrative intervention by the state‟ (ibid.).
 Cousins Venn

28. The problem of neo-liberalism
 „The problem of neo-liberalism is rather how the overall
exercise of political power can be modeled on the
principles of a market economy ... to discover how far
and to what extent the formal principles of a market
economy can index a general art of government‟ (BB:
131).

29. Three Schools of Economic
Liberalism
1. Austrian Economics: methodological individualism, spontaneous
self-organising markets (thru‟ price mechanism); Carl Menger, Eugen
von Böhm-Bawerk, von Mises, Hayek
2. German Ordoliberalism –
2a Ordoliberalen: state ensures free market order; Alexander Rüstow,
Wilhelm Röpke
2b Frieberg Law and Economics: Husserl; Walter Eucken and „social
market economy‟; Franz Böhm – the market as a juridical construction
3. American, Chicago School: neoclassical revival of homo
economicus (individualism, rationality, self interest); Stigler, Friedman,
Becker, Posner, Lucas

30. Human Capital Theoryin neoclassical literature
 "Investment in Human Capital and Personal Income
Distribution” Jacob Mincer, 1958
 Theodore Schultz - the speed of recovery in postwar
Germany and Japan was due to a healthy and highly
educated population; The Economic Value of Education
(1963)
 Gary S. Becker (1964, 1993, 3rd ed.). Human Capital: A
Theoretical and Empirical Analysis, with Special Reference
to Education. Chicago, University of Chicago Press.
 The theory of human capital investment relates inequality in
earnings to differences in talents, family background, and
bequests and other assets

31. Gary Becker
 1992 Nobel prize
 His foremost achievement is to have formulated and
formalized the microeconomic foundations of the theory. In
doing so, he has developed the human-capital approach into
a general theory for determining the distribution of labor
income. The predictions of the theory with respect to the
wage structure have been formulated in so-called human-
capital- earnings functions, which specify the relation
between earnings and human capital.
 http://home.uchicago.edu/~gbecker/Nobel/nobel.html

32. The Global Failure of
Neoliberalism
 Privatize Profits; Socialize Losses
 The ideology of „market fundamentalism‟ has failed
 Bush‟s policies have served the military-industrial complex.
 “Neo-liberal market fundamentalism was always a political
doctrine serving certain interests. It was never supported by
economic theory. Nor, it should now be clear, is it supported
by historical experience. Learning this lesson may be the
silver lining in the cloud now hanging over the global
economy” – Stiglitz

33. „The End of Neoliberalism?‟
“The fact that the credit crisis has reached this point
marks the failure of the central claim of the neoliberal
program, namely that private capital markets, free from
intrusive government regulation, can enable individuals
and households to handle the risks they face more flexibly
and efficiently than a social-democratic welfare state.”
--John Quiggin (2008)

34. Neoliberalism and the debt
crisis
 The recent financial crisis has led to a sharp increase of
public debt on a scale unprecedented since the end of
Second World War. Today the debt-to-GDP ratio (that is the
cumulative total of all government borrowings less
repayments that are denominated in a country‟s home
currency) of the G7 group of nations is at its highest level for
60 years.
 In United States the federal government between 2011 and
2020 is expected to accumulate a deficit of almost $10
trillion as calculated by the Congressional Budget Office. By
2023 total government debt is expected to reach 100% of
GDP.

35. Austerity politics
 Austeritys measure to avoid sovereign default
 Wage reductions to public sector workers (20%
Greece)
 Massive cuts to social welfare
 Cuts to education; rise in student debt
 Rise in poverty especially for single women led families
(Blacks & Hispanics)
 http://revolutionarydemocracy.org/rdv16n2/pratyush.htm

36. Longtime critics of
neoliberalism
 The imposition of market fundamentalism runs in
complete opposition to neoliberalism‟s own libertarian
premises and emphasis on negative freedom.
 neoliberalism is a class project that benefits the rich
and leads to ever-increasing inequalities both within
and between states.
 “Ironically, a free-market-loving Republican
administration is presiding over the most ambitious
intrusion of government into the market in almost
anyone‟s memory.” –Robert Riech

37. Neoliberal state-centrism?
 The move to state-centric policies and to forms of Federal
regulation in the U.S. and elsewhere now seem almost
inevitable. Government intervention is now suddenly back in
fashion and on the books at the IMF and World Bank.
 “Neoliberal globalization will be written about ten years from
now as a cyclical swing in the history of the capitalist world-
economy. The real question is not whether this phase is over
but whether the swing back will be able, as in the past, to
restore a state of relative equilibrium in the world-system.”
 -Wallerstein

38. Changing nature of world
markets
 Economic decline of US and break up of Euro-zone
 Rise of BRICS and state capitalism especially in China
 Enforced neoliberalism – increasing social conservativism
with emphasis on austerity policies
 Legitimation of bail outs of banks and insurance companies;
massive stimulus to capital
 Emergence of algorithmic capitalism – 90% of equity
markets with greater risks of uncertainty and system-event
failures

39. BBC - independent trader on
global crisis
 http://www.youtube.com/watch?v=lqN3amj6AcE&feature=share
The end