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Economists Have Been Lying to Us for Decades

Not intentionally, but they’re still wrong.

Glen Hendrix
Aug 25 · 10 min read

First let’s get a critical definition out of the way. When I first heard the term “neoliberalism” it conjured up in my head a new age of bright-eyed, knowledgeable hippies with progressive agendas. I was wrong. Neoliberalism and its policies seek to give the private sector ever more and the public sector ever less control of free market capitalism. It is an economic philosophy that tends toward privatization, deregulation, globalization, free trade, austerity, and reductions in government spending.

Neoliberalism was famously espoused by President Ronald Reagan and Prime Minister Margaret Thatcher in the mid 1980s and has been very popular with the wealthy ever since. It has been the driving force of our economy for the last four decades. This ideology has been a major contributor to the housing crash of 2008, the degradation of the environment and climate change, the intensification of wealth inequality and child poverty, the collapse of public health and education, the offshoring of wealth, the election of Donald Trump, and even the exaggerated effects of the COVID-19 epidemic on mortality and the economy.

Its popularity with sectors of the not so wealthy (even though they have no idea what neoliberalism is, much less that it is inimical to their well being) can be explained by propaganda the wealthy can well afford to spread by various means in print, radio, TV, and internet. Their message is to denigrate unions (to keep labor cheap), stigmatize government spending as wasteful (except for the military which they make money from), lower taxes on the wealthy (because they are the source of all jobs and the government would just waste the money anyway), and deregulate business and finance (because it is just more efficient that way — in taking your money). They repeat these mantras over and over until people believe them, even economists.

Here’s the kicker. Mention “neoliberalism” to just about anyone and they will say, “You do and you’ll clean it up.” Well, they’ll probably just give you a shoulder shrug and an “I don’t really know what that is.” If you ask a Russian about communism, they will not give you a blank stare and pretend not to know what that is.

With Americans, it is no pretense. The blank stare is real. We don’t know what the overarching economic theory is that has been incorporated into our government since Ronald Reagan causing devastating problems with our economy and our society. Write this down and don’t forget it. It’s neoliberalism!

The wealthy know the power of neoliberalism is in its anonymity. As long as the proletariat cannot name its nemesis how are we to know its even there, much less devise a defense or counter attack?

The neoliberal economist believes that: 1) raising wages kills jobs, 2) raising taxes kills economic growth, and 3) government regulations reduce business efficiency.

Neoliberalism is, basically, the economic and social script the government has followed for the last 40 years, post Ronald Reagan, and it has nearly destroyed this nation. Let’s take each of these neoliberal beliefs one-by-one and examine them closely to understand why the last forty years of economic ideology is based on false beliefs.

Lie Number One: Raising wages kills jobs.

Neoliberal economists believe the free market is in equilibrium and if you increase one element another must, necessarily, go down. If you increase wages, there must be a loss in jobs. One can argue that because an employer must pay more for labor, on average some employers will not stay in business because they cannot afford the increased cost. Ergo, a loss of jobs. Or they will have to let go one or more employees and have the remaining take up the slack. Same result, a loss of jobs.

Numerous industry-financed studies or those done by right wing think tanks find that jobs go down after wages go up. Independently conducted studies, curiously, find that increased wages have little to no affect on jobs.

Thankfully, there is a real life situation that can give us an indication of who is telling the truth. In 2014, Seattle passed a law that established the minimum wage at a little over $9 an hour to be gradually increased to $15 by 2021. It is currently $16.39 for companies with over 500 employees (like McDonalds or Starbucks), $15.75 an hour when working for a company smaller than 500 employees and not receiving tips, and $13.50 dollars an hour if one does receive tips. The University of California, Berkeley did an analysis of this situation and found that the increase in wages did not lead to job losses.

In fact, Seattle restaurant business is booming. Think about it. The reason is obvious. The people working in restaurants, not an inconsiderable number, now have the money to dine in restaurants should they so desire. This is a concept pioneered by Henry Ford in 1914, when he doubled his employees salaries to $5 a day, twice what other car manufacturers were paying. This enabled them to go out and buy the very vehicles they were working to build. Ford literally invented the middle class by doing this. In our modern society this principle has been all but forgotten. Current average wages have the same purchasing power as they did 40 years ago, about the same time neoliberal economics were put into effect.

Martin Johnson, 54, is one of those workers directly affected by this increase. In addition to being able to go out to eat more, he says, “. . .You feel better about yourself — you feel appreciated.”

The federal government needs to implement the $15 an hour minimum wage nationwide. It would be a big boost to the economy.

Lie Number Two: Raising taxes kills economic growth.

From the end of WWII to 1963, the top marginal income tax rate was 91% except for a couple of years when it was 92%. In 1964, we got a big tax break down to 77% and then to 70% in 1965 and it stayed at 70% until Reagan took office in 1981, and it went to 50% and has been drifting downward ever since to its current paltry 37%. So, if we ever invent a time machine, we need to go back to the 50s and tell them how bad they are screwing up by ruining the economy with high taxes. Oh . . . wait! Those were the best decades for the U.S. financially, especially for the poor and middle class.

Neoliberal economists just don’t finish the sentence. “Raising taxes kills economic growth of the wealthy’s Swiss bank accounts.” They always forget to mention that last part. And the wealthy don’t possess some superpower of job creation. There are a few geniuses like Elon Musk and Sir Richard Branson that make their ideas reality on a regular basis, creating whole industries and the jobs that go with them. Most of the 1% are one trick ponies that would rather increase their wealth by sleazier methods like buying monopolies and tax breaks or forcing the competition out of business.

We need the tax rates of the 50s and 60s. The wealthy need to start pulling their own weight again. They won’t spend enough in a market economy to help out. They can’t buy that many more shoes, cars, houses, happy meals, and lattes than the next guy. I mean they could, but they won’t. Their tax money, however, can pay for much needed infrastructure, healthcare, and education so we can really get the economy humming and let innovation hit new strides.

We’ve lost the war on poverty. There is a greater percentage of people living in poverty now than in 1969 and their degree of poverty is more severe, on the order of third world countries. Families living on $2 a day. People should not be living like that in America or anywhere, for that matter. They need better subsistence support, and tax money is needed to do that. Inequality of wealth is now greater than at any time in history because modern technology allows the purchase of so much more personal power and influence at a relatively small price. Don’t get excited, it’s still more than you or I can afford.

The problem with people living a marginal existence is that is all they think about — that next meal, are they going to make the rent this month, is that cut from peeling potatoes going to turn to gangrene and if it does will I lose that hand. Aside from being morally repugnant, this is a waste of brainpower. You can’t raise kids in that kind of environment and expect them to contribute. We don’t know where our next Einstein, Newton, or Feynman is coming from. We, as a nation, need to start playing with a full deck to be competitive and survive as a civilization.

Lie Number Three: Government regulations reduce business efficiency.

If you’ll notice, we have relaxed regulations on businesses so much, and businesses have gotten so efficient that they are about to cook the planet. This is capitalism on steroids getting wasted at spring break during a bubonic plague epidemic. And that’s just climate change.

We need to bring back industry regulation on an industrial scale. No more making money off the ability to foist industrial waste onto shared public treasures like the atmosphere and natural waterways and the oceans at no expense or risk or without long term mediation plans. We need to bring back the EPA and give it fangs so these things can be regulated!

No more planned obsolescence. Look, I’m going to sell you all these wonderful gadgets for an enormous amount of money, but they’ll be pieces of crap in a couple of years, and you’ll have to come back and buy some more. Don’t worry. You won’t have to do this for very much longer because we are destroying the planet in the process of making you billions of new gadgets every year. That is about the sickest, most horrendous business ethos I’ve ever heard of, yet we think of it quite matter of factly as just the way things are done now in that silly old business world. It needs to be regulated!

This doesn’t just apply to gadgets. Do you really think the big players in Genetically Modified Organisms aren’t going to take a page from this playbook and start making GMO textiles for the clothing industry that wear out faster? Have you noticed how fast your new cotton clothes or sheets are wearing out compared to those you’ve owned in the past? This can’t be controlled by simple inspection. This technology requires the resources of a government to even figure out how they are trying to screw the consumer. It needs to be regulated!

No more giving away natural resources for a pittance. If someone wants to take millions of barrels of oil or billions of gallons of water or hundreds of tons of gold out of publicly owned ground and sell it all over the world, we, the citizens of the United States of America, should get a fair deal for that resource. Our national wealth and heritage are being sold out from under our feet for pennies on the hundred thousand dollar bill. It needs to be regulated!

Homo economicus:

Neoliberal economic theories are based on a mythical being called Homo economicus. This is the idealized model used in working up economic theories. The model is perfectly rational with interests and preferences and always makes decisions to cater to or augment those interests and preferences. In other words, a perfectly selfish being with no regard for other’s interests or preferences. Neoliberal economic theory is based on a sociopath. Is it any wonder, then, that twenty-one percent of corporate CEOs are sociopaths?

Neoliberal economic theory applied as a giant experiment to our economy has allowed it to devolve toward a degenerative form of capitalism where money is directly translatable to power by the ability to purchase legislature granting an individual or company a competitive edge over everyone else In this system, or to purchase propaganda to convince people to do their bidding, or to purchase mercenaries to go physically take care of situations they would not dare do themselves.

There is no longer any regard for the greater good of the whole system of a corporation which includes workers, customers, and the environment.

Why don’t we tell these neoliberal economists to take a hike? We can do that. They call economics the dismal science. In its current state, I would call it the abysmal science. This would still be inaccurate because it is not a science at all, even with all the math you see in those text books. It is just these notional ideas about how economics works. It is more of a belief system.

Let’s declare we are going to believe something else. We are going to believe in a Homo economicus that is a smart, fair-minded, loving, generous person. One that would not take profits by wrecking the planet or purchasing monopolies to ruin competitors and cheat the customer. In fact, let’s replace Homo economicus with Homo sapiens, a real person, that can balance profits while overseeing fair wealth distribution and manage resources and waste to the betterment of society, not its detriment.

How do we do that? I’m pretty sure the current administration is a big fan of neoliberal economics, whether they are consciously aware of that or not. That should give you an idea of how to vote come November. I cannot guarantee the Democratic Party will adhere to something besides neoliberal economic theories but I can guarantee they will be more likely to do so than the Republicans. There are a couple of progressives, notably Bernie Sanders and Alexandria Ocasio-Cortez, that have very different economic theories from neoliberalism and are working with Joe Biden to apply those to our current problems. I say God bless and good luck to them. Get out and vote but be safe! Put a first class stamp on that mail-in ballot.

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Glen Hendrix

Written by

Artist, writer, poet, inventor, entrepreneur

Age of Awareness

Stories providing creative, innovative, and sustainable changes to the education system

Glen Hendrix

Written by

Artist, writer, poet, inventor, entrepreneur

Age of Awareness

Stories providing creative, innovative, and sustainable changes to the education system

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