The word “neoliberal,” like “neoconservative,” has become a sick joke. Of course it does not mean “liberal” in the Adlai Stevenson sense. It should be “neolibertarian.” And neolibertarians have pretty much done for libertarianism what neoconservatives did for conservatism – that is, discredited it for about the next 5,000 years. No, really, thanks, guys.

The central fallacy of neolibertarianism is that, since history offers so much evidence that minimalist states (based on simple or negative law) provide better customer service than maximalist states (based on complex or positive law, aka central planning, aka regulation), reducing the scope of law (aka deregulating) can generally be expected to improve the quality of government.

This assertion is so ridiculous that to call it a theology is an insult to theologians. It cannot withstand even a moment’s consideration. If it were true, statism would have disappeared long ago, rather than being anywhere triumphant.

In numerical optimization terms, forgetting of course that we could never describe quality of government as a number, neoliberalism assumes that the optimization surface is one big mountain with the minimal, night-watchman state at the top. A simple hill-climbing strategy will allow us to ascend this lovely monotonic slope.

I have no doubt that such a mountain exists. I just don’t think we’re on it.

I think the maximalist states are enormous Rube Goldberg machines that barely work on a good day. Removing parts from these machines is not liable to fix them. It is liable to make them break down entirely. And the most likely result of this is a whole new Goldberg module which is designed and assembled with absurd haste and attached with 20,000 rolls of duct tape. Sarbox, anyone?

Neoliberalism is not an effective strategy for decreasing the size of government. It is an effective strategy for damaging government, for discrediting libertarian ideas, and ultimately for making government larger and less effective.

So when I look at our present financial imbalances, I see a broken regulatory system. There are many interesting ideas for repairing this system. I believe it would be better to replace it. But I have yet to detect any particles of productive information emanating from those who think that it’s great that this system is broken, or that by pulling out more parts we could break it even better.

STS, there’s nothing to fear about disparities of wealth and, therefore, there’s nothing to fear from globalization. That is, if we assume (1) wealth does not confer political power and (2) political power does not influence the distribution of wealth. If these two assumptions don’t hold, then we got ourselves a nasty feedback going on.

Starvation or Neo-Liberal Globalization. Pretty black and white, eh? How could I have missed it?

Yeah, people get bummed out about disparity. Still, it beats starving to death by quite a ways.

Ditto.

Don’t feel bad; sometimes I confuse myself.

Sure, homeowners are winners, and living in a fool’s paradise. Can’t we have it both ways? Consumers get cheap goods, but less job security. Globalization creates linkages to which our economic intuition has yet to adapt, no argument there.

But, a set of institutions, rules and agreements that has produced so much good for so many people, over such a long time is under threat. The threat is from people – mainly politicians, but also media commentators – who haven’t a clue what a real difference a manufacturing-for-export job means to generations of people in poor countries.

I’ve lived in Asia all of my adult life. I’ve personally seen the results of globalization and the failures of not pursuing it vigorously enough. These opponents to proven success really tick me off.

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RebelEconomist,

You and I agree about a lot of things. I use the word “globalization” very deliberately, both as what I believe to be an accurate term and to get in the face of the anti-globalization crowd.

There is a real threat in America (and Europe) today that the overwhelming success of increasingly open economies is no longer recognized, and that the next trend is in reverse. The WTO is dying, to take one example, because the rich are arguing about the price of the food produced by the poor (and, other things).

I agree that China, India, et al, have decided to wake up and take their share. They added billions to the labor pool, skewing the returns on labor and capital. But, who are we to say they are not entitled to a place at the table?

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Ponzi Q. Globalization (cute),

The next time you’re in a rural Chinese village, one where every single family knew starvation in every single decade for the past millennium, ask yourself this: “What the heck was I thinking when I wrote that glib remark about Chinese and Indians vs. China and India?”

Yeah, people get bummed out about disparity. Still, it beats starving to death by quite a ways.

Per your distinction between ‘China’ and ‘the Chinese’ getting their share, I think we need to remember that the distributional effects of globalization here in the US are quite the reverse of leveling. If the upper tiers had been losing ground these past few years, we’d already have returned to the McKinley Tariff so central to 1890′s Republicanism and every talking head on TV would be reciting the credo of Protection!

Great handle btw, you hardly need to type anything else to make your point

‘China’ and ‘India’ may be finally taking their share. Now let’s hope that the billions of Chinese and Indians also get theirs.

Even if all economies were becoming more closed, the US would still get relatively poorer, and of course, to the extent that trade really is welfare-improving, every country would be absolutely poorer than otherwise.

One benefit of this, in the U.S. at least, could be a leveling of the disparities of wealth. Envy is a powerful emotion. Let’s face it, people are bummed when they see others doing much better than themselves. If not too severe, the increase in absolute poverty may actually lead to an increase in happiness.

BTW, I’m not advocating a closed economy, just pointing out a potential silver lining.

You’re confusing me. You quote Peter Schaeffer approvingly, yet seem to miss his underlying premise that the “housing bubble winners” are living in a fool’s paradise.

I for one don’t think globalization is bad and especially not as a consequence of your little 4 step (spoof) argument. But I do think that globalization creates linkages to which our economic intuition has not yet adapted.

When Warren Buffett spins a yarn about two islands entitled ‘Squanderville vs. Thriftville’ and publishes it in Fortune magazine — here’s a link I just found by googling: http://www.dailyreckoning.com/Squanderville.html (you have to scroll down a fair way) — he’s attempting to help his fellow citizens develop a feeling for these counterintuitive changes in the world economy. Maybe Buffett is too old-fashioned and pessimistic, but I suspect some of those “housing bubble winners” with IO mortgages are erring a bit on the optimistic side as well.