This was published 5 years ago
Neocons on the mat, but don’t write off the market
By Scott Phillips
There is a growing disquiet around the developed world. After a decade of post-GFC prosperity (and 26 years of unbroken growth here in Australia), many people are working out that this new era isn't all it's cracked up to be.
At least, not for them.
The world has changed. Credit: AP
There was a time when economic success - and failure - was reasonably broadly shared. The rising tide, as the aphorism would have it, lifted all boats. Of course there was always inequality, haves and have-nots, but the spoils of growth tended to filter down to most, if not all, in one form or another.
In the 1980s and 90s, developed economies boomed. Inflation was bought under control. Unemployment fell. Standards of living rose quickly, as deregulation and globalisation brought costs down and productivity up. Throw in the benefits of fast technological change, and you had the makings of broad-based success.
But something funny happened on the way to prosperity. Globalisation meant growth for some parts of the economy, but stagnation and collapse for others. Deregulation led to workplace flexibility, but also minimal real-wage gains. Technology created white collar jobs at the expense of blue collar ones, but not all white collar jobs were safe.
And as the winds of change shaped and reshaped the economic landscape, more and more of the Western world's gains accrued to large businesses and those at the top of the workplace tree.
'Trickle down' economics, despite the mistaken (or wilfully ignorant) views of some in government around the world, didn't - and doesn't - work. The tax cuts that were supposed to spur growth either didn't work, or worked too well, helping the rich get richer, but doing almost nothing for the average worker.
At this point, ideologues started to man the barricades. Sometimes literally, in the case of Occupy Wall Street, but mostly metaphorically. And, sadly, it was all too predictable. Those on one side blamed Reaganomics and forecast the death of capitalism. Those on the other side argued that while there are negative side effects to growth, not growing would have been even worse.
They're both wrong. And right. But the usual retreat to opposite sides of the political and economic spectrum, followed by much throwing of rotten fruit improved nothing, made compromise difficult, and formented distrust.
Coming, as it did, at the same time as focus group-driven politics, there has been little in the way of leadership over the last decade or so, either, making rank ideology and political expediency uncomfortable bedfellows.
The result, now obvious, is an echo of Menzies' 'forgotten people'. But this time, rather than being offered a solution, the lack of leadership has left a vacuum that has been filled by an uninformed, angry populism here and overseas.
And, unhelpfully, such an environment leaves little room for the rational middle ground. It's hard to get people angry enough to vote for you if you're in the sensible centre. It's much easier - and sadly, more effective - to appeal to emotion, to tell people how bad things are, to offer a return to some distant, rose-coloured past.
But, whether we like it or not, we're not in Kansas anymore, Toto. And we should like it. On almost any objective measure, we are better off today than in the past. We have better healthcare, amazing technology, cheaper products and plenty more besides. But it has come with higher house prices, seemingly less social connection, and greater inequality.
Change is happening faster than ever. It's uncomfortable. Uncertain. Often unwelcome. But that genie isn't going back in the bottle. And we shouldn't try to stuff it back in, despite what the populists and idealogues on both the left and right would have you believe. But this article isn't aimed at them. They're unwilling or unable to change.
The excesses of what's now derisively called Neoliberalism or Neoconservatism are clear to those who look for them. On a social level, rising inequality is unwelcome and unfair. It's also damaging to the economy: not only will it increase calls for punitive tax and regulation, but the hardliners forget that the economy only grows when people have more to spend. And, while contentious, it's also pulling at the fabric of what we used to consider core Australian values. Without devolving into jingoism, it's hard to argue we're not less tolerant, cooperative, welcoming and fair than we used to be - or at least than we aspired to be.
Foolish takeaway
But trying to arbitrarily wind back the clock would rob us of the gains of the last three decades, in terms of rising standards of living, access to more diversity and opportunity and a world our forebears could not have imagined.
Our society and economy is changing at an unprecedented pace, improving much, but damaging some. We need to take better care of those who are casualties of change, and to be ever vigilant for the unintended consequences of progress. But we shouldn't try to stop the wheels of progress - as imperfect as it is, democratic capitalism is the best system we have.
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Scott Phillips is the Motley Fool's director of research. You can follow Scott on Twitter @TMFScottP. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).