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  • The Neoliberal Fallacy
  • Adam Przeworski (bio)

Ours is an era of ideology. Several countries, in Eastern Europe and elsewhere, have recently begun the greatest ideologically inspired experiment since Josef Stalin initiated the forced industrialization of the Soviet Union in 1929. Although the prevailing mood echoes Konrad Adenauer's dictum of "no experiments," the economic transformations envisaged in these countries ironically mirror the communist project. They implement an intellectual blueprint, a blueprint drawn up within the walls of American academia and shaped by international financial institutions. These transformations are meant to have radical effects, to turn all existing social relations upside down. They offer a panacea, a magic elixir which, once taken, will cure all ills. Replace "nationalization of the means of production" with "private property" and "plan" with "market," and you can leave the structure of the ideology intact. Perhaps revolutions are shaped by the very systems against which they are directed.

Facing what are often the gravest economic crises in their history, countries all around the globe are told to plunge in and persevere. They are exhorted to plunge into reforms about which only one thing can be known with certainty: they will make most people worse off for some time to come. They are urged to short-circuit the democratic process by [End Page 45] introducing reforms so swiftly that citizens will have no time to mobilize effectively against them. Even after the pains of reform have made themselves felt, politicians are urged to stay the course, which most do. Union leaders speak publicly of their "hope [that] there will be unemployment." Finance ministers declare that if unemployment fails to rise to 8 or 10 percent, it will be "a sign that the reforms are not working." Government leaders declare their determination to persist "regardless of all the political pressures upon us."1

Neoliberal ideology, emanating from the United States and various multinational agencies, claims that the choice is obvious: there is only one path to development, and it must be followed. Proponents of this ideology argue as if they had a Last Judgment picture of the world, a general model of economic and political dynamics that allows them to assess the ultimate consequences of all partial steps.2

Yet this model is no more than a mixture of evidence, argument from first principles, self-interest, and wishful thinking. Moreover, even though market ideology now seems to have attained uncontested intellectual hegemony, the virtues of markets are being called strongly into question by recent developments in neoclassical economic theory—the very body of thought that heretofore has underpinned the claim that markets are efficient allocators of resources. The observations that a complete set of markets is unfeasible, and that information is inevitably imperfect, invalidate the case for the efficiency of the invisible hand.3 Moreover, observed patterns of economic growth cannot be explained without a recourse to externalities, thus thwarting any expectation that competitive markets are efficient in dynamic terms.4

Confronted with the real world, market ideology fares no better. The thematic statement for this symposium cites as the model to follow "the United States and other key countries in the West [that] have been governed for the past decade by conservative, pro-private enterprise parties." Yet if a Martian were asked to pick the most efficient and humane economic systems on earth, it would certainly not choose the countries that rely most on markets. The United States is a stagnant economy in which real wages have been constant for more than a decade and the real income of the poorer 40 percent of the population has declined. It is an inhumane society in which 11.5 percent of the population—some 28 million people, including 20 percent of all children lives in poverty. It is the oldest democracy on earth, but has one of the lowest voter-participation rates in the democratic world, and the highest per capita prison population in the world. Is this the model to follow?

These remarks should not be construed as a defense of traditional patterns of state intervention, whether under capitalism or socialism; as an argument against relying on markets; or as an attack on promarket reforms. They are, rather...


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