August 30, 2011

From Iceland to Libya; Pros & Cons of Neoliberalism.

You would want to have been living on the moon for the last couple of years, not to have felt in some small way the influences of the global recession. The United States have been hit quite hard—but not as much as Europe, struggling to keep its head above water with the troubles of the P.I.I.G.S. (Portugal, Iceland, Ireland, Greece and Spain) at the forefront of problems with the Euro.

Although, really you could discount Iceland in the list as they are actually holding their heads above water since their very own revolution and turning away from Neo-liberalism. 

Iceland was one of the richest countries in the world, mainly through five years of neoliberal policy. Their banks were privatised and started to offer online banking services which brought good turnovers at very little costs, offering high returns. But as investments grew (UK and Dutch investors were very much interested in Iceland’s online banks), so did the foreign debts. By 2007 debts were 900 times bigger than Iceland’s GNP. The three largest banks; Landbanki, Kapthing and Glitnir were nationalised and then Iceland declared bankruptcy.

There were protests and the Government of the time resigned. Elections were brought forward and a left-wing coalition found itself in power—turning its back on neoliberalism. This changed things completely. It was decided that the Icelandic people were not responsible for the debts built up by the private sector.

The International community put pressure on Iceland to try to make them put heavy taxes on the people to pay back the debts. The British government threatened to freeze Icelandic savings and checking accounts. But as Head-of State Olafur Ragnar Grimsson declared; “We were told that if we refused the international community’s conditions, we would become the Cuba of the North.  But if we had accepted, we would have become the Haiti of the North.”

And in a referendum in early 2010, 93% of the people voted against paying the debt back. The IMF froze its loan and an angry Icelandic people went for the heads of those responsible, launching civil and penal investigations against the bankers. With Interpol putting out arrest warrants for those that had fled.

Iceland declaring the people as sovereign and rewriting their constitution to make sure that the whole aren’t responsible for the debts of the private few has not made big news, in fact it’s not made any news. Maybe because the country has gone against the neo-liberalist ways of the IMF and European Union and are actually starting to recover.

Ref; A story missing from our media; Iceland’s on-going revolution. By Deena Stryker.

This turning away from neoliberal small government to a larger government looking after the interests of the whole, seems to be working for Iceland. Something that would seem preposterous to the rest of Europe, let alone the United States, where a free market goes hand-in-hand with “The American dream.”

Neo-liberalism isn’t a term used much in the United States. So what is it exactly?

Neoliberalism is the defining political economic paradigm of our time – it refers to the policies and processes whereby a relative handful of private interests are permitted to control as much as possible of social life in order to maximize their personal profit. Associated initially with Reagan and Thatcher, neoliberalism has for the past two decades been the dominant global political economic trend adopted by political parties of the center, much of the traditional left, and the right. These parties and the policies they enact represent the immediate interests of extremely wealthy investors and less than one thousand large corporations.”

 Noam Chomsky and the struggle against neoliberalism.

Government and beurocracy is seen to get in the way, being incompetent and parasitic. As seen in the USA the term neoliberalism is translated into free market where policies encourage private enterprise and consumer choice. Entrepreneurial initiative and personal responsibility are rewarded.

To a certain extent, this is positive. The possibility is there for anyone to work hard in their chosen business and make good money. The American dream is just that… work hard with perseverance and fortitude and the world is your oyster.

But, it’s believed to move away from big government. Government is pushed towards playing a lesser role in Education, Social welfare and Medicine.

Education becomes something only available to those that have the money to pay for it. In Britain, third level education is to become more costly starting next year, with students having to pay up to sixty thousand dollars in the first three years, with the fourth year being free. Those that graduate and find work will pay back loans for ten years or more. Second level education however, is largely free, although this is not so much the case with Ireland’s “free education” where parents are required to pay for books and equipment each year, as well as paying for the relevant uniforms for each child.

Social welfare is an area that is another bane for the private corporations and the wealthy public. Why should the wealthy have to pay taxes for lazy people that can’t get off their behinds and find work? Very true to a certain extent. In Ireland, where the social welfare system is very good, there is a percentage of  “free loaders” who use the system to their advantage, garnishing everything they can without ever truly being pro-active in their search for work.

There is on the other hand, tens of thousands of Irish people who have suddenly found themselves out of work due to the economic downturn. Hard working people who find themselves on the unemployment line, with no chance of work.

The amount of mature students has risen sharply as these people take what chance they can to re-educate themselves in the hope of finding work. Here the social welfare system lends a hand as those that qualify can keep their allowances and go back to college.

The Irish government is struggling to find a balance between corporations that seek to have the minimum wage lowered and the rising cost of living. If there was no minimum wage, then people would not bother to find work, but if there were no social welfare system and no minimum wage, maybe people would have to take any job they could get, but then it wouldn’t be possible for most to pay for their groceries or their accommodation in a country where pretty much everything is taxed.

Although… a kind of balance is being sought, where small and medium enterprises can offer internships to those out of work, with the government sharing some of the cost of wages.

A lot of Americans work two or three jobs to keep up. Minimum wage is low compared to Ireland, but compared to Ireland, the general cost of living is incredibly low. For instance; Irish people pay huge tax at the gas pumps as well as a yearly “road tax” and up to 75% tax on new cars.

Health insurance however, is expensive in the US. Neoliberalism can be seen here again, going against President Obama’s plan to try for a public health system, with the majority of people wanting to pay hefty insurance rates rather than pay higher tax. This seems slightly paradoxical to Ireland and Britain as here we see private health care for those that can afford it and a public health system where those that can’t afford it are only charged for certain things. Whereas in the US people are charged huge amounts by insurance companies, to offset the costs of those that can’t afford it.

 The tea party movement in America could also be seen as a neoliberal agenda in their policy to lower taxation. Although they don’t exactly want to take power away from government, certainly their views on the environment and especially their views against the Emissions cap where corporations are charged for polluting the environment are largely neoliberalist.

Neoliberalism is not just seen by those that oppose it, to make the rich richer and the poor poorer and more disenfranchised, it’s an anathema for democracy;

… to be effective, democracy requires that people feel a connection to their fellow citizens, and that this connection manifests itself though a variety of nonmarket organizations and institutions. A vibrant political culture needs community groups, libraries, public schools, neighborhood organizations, cooperatives, public meeting places, voluntary associations, and trade unions to provide ways for citizens to meet, communicate, and interact with their fellow citizens. Neoliberal democracy, with its notion of the market uber alles, takes dead aim at this sector. Instead of citizens, it produces consumers. Instead of communities, it produces shopping malls. The net result is an atomized society of disengaged individuals who feel demoralized and socially powerless.”

The riots during August ’11 in London, England have shown us what happens when working class people lose their sense of community. People frustrated with not being able to afford the lifestyles that the media tell them is “normal” strike out against those they see as being better off than they are. What they don’t see, because of the lack of community, is how hard those better off people worked to get where they are.

The pre-Thatcher generation of Britain, before neoliberalism would certainly look on at these riots in abject horror, with a post-war British people coming together to rebuild a country. Everything was nationalised with the average working class person not looking to do anything more than earn a living and raise a family.

The rise of Thatcher’s neoliberal policy’s and their negative side effects can be seen in “The winter of discontent” in 1979 as well as the Miner’s strikes of the early eighties.

Strangely though, this seems in stark contrast to what is currently happening in Libya. The richest country in Africa where, per capita people are wealthier than they are in Britain;

“The living standards of Libyans have improved significantly since the 1970s, ranking the country among the highest in Africa. Urbanization, developmental projects, and high oil revenues have enabled the Libyan government to elevate its people’s living standards. The social and economic status of women and children has particularly improved. Various subsidized or free services (health, education, housing, and basic foodstuffs) have ensured basic necessities. The low percentage of people without access to safe water (3 percent), health services (0 percent) and sanitation (2 percent), and a relatively high life expectancy (70.2 years) in 1998 indicate the improved living standards. Adequate health care and subsidized foodstuffs have sharply reduced infant mortality, from 105 per 1,000 live births in 1970 to 20 per 1,000 live births in 1998. The government also subsidizes education, which is compulsory and free between the ages of 6 and 15. The expansion of educational facilities has elevated the literacy rate (78.1 in 1998).

The Libyan government has weakened the private sector and confined it to mainly small-scale businesses. While this policy has damaged the Libyan economy significantly, it has also prevented the accumulation of wealth by a small percentage of the population. While the ruling elite (i.e., top civil servants, military officers, and politicians), enjoys much higher living standards compared to average Libyans, and corruption exists within its ranks, Libya is not a highly polarized society divided between extremes of wealth and poverty.”

Read more: Libya Poverty and wealth, Information about Poverty and wealth in Libya http://www.nationsencyclopedia.com/economies/Africa/Libya-POVERTY-AND-WEALTH.html#ixzz1WYLT8dxh

It seems that the lure of the free market and neoliberalism is the green grass on the other side of the fence for the Libyan people and it will be interesting to see how they fair over the next few years compared to Iceland who have turned their backs on neoliberalism, and the rest of Europe, who look to find some common ground between neoliberal policy and democracy.

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