Op-ed: I'm a neoliberal. Maybe you are too
This piece first appeared in the National Business Review on 19 May 2017
I’m a neoliberal. Maybe you are too
Opinion piece by Jordan Williams
‘Neoliberal’ is a fashionable term, but is often poorly defined and misunderstood. Radio New Zealand could barely contain itself last month when former-Prime Minister Jim Bolger repudiated neoliberalism and, incredibly, blamed his Government’s ‘neoliberal’ policies from the early nineties as a cause of New Zealand’s ‘growing inequality’ [of course as demonstrated by Bryce Wilkinson and Jenesa Jeram of the New Zealand Initiative, inequality has barely changed, but I’ll leave that for another day].
‘Neoliberal’ gained credence by those who use the term to attack fans of the free market – applying the ‘neo’ prefix to paint a greed-obsessed narrative of what was more commonly known as ‘classical liberalism’, ‘libertarianism’, or in 1980s New Zealand, ‘monetarist’ policy.
Rather than spend our time defending the left’s ill-defined strawman, or debating the term, I say it is time we embrace it.
The Douglas-Richardson economic reforms, although treated as controversial in the media, are also mostly accepted as mainstream and prudent. Nine years of Labour Government under Helen Clark didn’t rollback a single initiative. But we lack a useful descriptive term. People who, like me (and many of the commentators in this paper), argue that the reforms set New Zealand up for at least two decades of economic prosperity and should go further, lack a label to grasp. We are people who are libertarianish — but fundamentally different to the mainstream libertarian movement when it comes to important values and approaches. Libertarians, in their eyes, see us as too corporatist, statist, or leftist, especially when it comes to our dismissal of wholesale legalisation of drugs and other social ills.
I am one of them, and perhaps you are too. Our left-wing opponents describe us as neoliberal to slander us. Why not follow the Suffragettes and wear this label with pride?
Here are a few common beliefs that I think “we” have in common. I’m not claiming that these beliefs are exclusive to us, of course.
We like markets — a lot. We think that markets are by far the best way of organising most human affairs that involve scarce resources, because they align people’s incentives in ways that communicate where resources can be used most efficiently, and give people reasons to come up with new ways of using existing resources. We are proud of New Zealand leading the world in implementing a tradeable quota fishing rights management system. This serves to prevent the near-certain degradation of the natural resource when in common ownership. We want to harness markets and market-like systems in areas they’re not present at the moment — healthcare, education, water allocations, organ allocations, traffic congestion, land-use planning.
We base our beliefs on empirics, not principles. There is an unlimited number of stories that you can tell about the world, but only a few are true. You find out which are true by comparing the stories to reality with experiments and throwing away the ones that don’t fit. It doesn’t matter if a theory appears to be internally coherent — if it can’t stand up to experimentation, it is probably wrong. In particular, quantitative empirical research is what we look for.
This annoys our libertarian friends. We appreciate the inefficiency of the ACC-model and the necessary health and safety approach lacking economic incentives (and safeguards) created by personal injury tort-law. Nevertheless, we wouldn’t give it up in favour of our previous legal lottery – where fault (and the ability to pay by a tortfeasor) is determinative of whether compensation is receivable following injury. It is not perfect, but better than the alternative.
We are liberal consequentialists. A system is justified if it is the one that best allows people to live the lives that they want to live, or makes them happiest or more satisfied than any other. There are no inherent rights that override this. People’s wellbeing is all that matters, and generally individuals are best at defining what is best for themselves. We are suspicions of big government, and appreciate that, in general, people make better choices about how to spend their money than public agencies or politicians.
We care about the poor. Caring about people’s wellbeing leads us to caring about the worst-off people. Usually an extra $200 makes a pauper better off than it makes a millionaire. This diminishing marginal utility means that poor people’s lives are the easiest to improve for a given amount of time, energy and money.
We care about the welfare of everyone in the world, not just those in NZ. It’s natural to feel more in common with people who live near you and live like you, just as it’s natural to care much more about your family than about strangers. But when it comes to policy, we care about improving everyone’s lives, wherever they are. Increased international trade, less barriers, and adoption of ‘neo-liberal’ market reforms, have seen extreme poverty fall from 44 percent in 1980 to around 10 percent today. We know this is a good thing, even if we would prefer that developing countries worked harder and faster to bring their labour standards up to par.
We try not to be dogmatic. Testing your beliefs against the world requires you to be prepared to throw out the ones that are wrong, even though it’s often painful to do so. This means that we have to be willing to change our minds, contradict our friends, forsake our heroes, and be unpopular with fellow-travellers who think that they’re obviously right. Sometimes we wonder whether we’re contrarian, or find ourselves respecting those who we disagree with, but value their holding truth to power.
One way to deal with the emotional costs of this is to internalise the virtue of open-mindedness so that changing your mind makes you feel just as good as being ideologically consistent once did.
We think the world is getting better. And, really, it is: pro-market ideas have taken hold nearly everywhere, raising living standards by an extraordinary amount for a huge number of people. The centre-ground consensus in nearly every developed economy is extremely pro-market and liberal compared to where it was fifty years ago, and although they are often less pro-market than they were one hundred years ago, that is offset by major advances in the rights of women and non-whites.
Assuming life-expectancy is the best single measure of economic, health and social progress, the world is a tremendous place. Two hundred years ago no country enjoyed average life expectancy of more than 40 years old. Today, no county’s population has an average life expectancy of less than 50.
We believe that property rights are very important. Predictable and formalised ownership of scarce resources is extremely important. It allows people to make long-term plans for the future, which incentivises improvement of their own circumstances. Overriding property rights capriciously undermines the incentive people have to hold off from consuming and invest in their futures instead, because they will be unsure about whether they’ll actually get to enjoy the returns of that investment. This is extremely important in the developing world, where weak or nonexistent property rights preclude capital accumulation and growth.
But we’re comfortable with redistribution, in principle. Because we’re consequentialists we don’t think that property rights are morally significant in and of themselves — they’re a useful rule that allows the economy to function properly but there is no intrinsic value to them. People don’t really deserve the talents they’re born with any more than they deserve to have been born in a rich country rather than a poor one, or to be born in 1996 rather than 1896. Because of this, redistributing wealth or income from lucky people to unlucky people may be justifiable, if it’s done without depressing economic growth too much.
Too much redistribution can have bad consequences because taxes tend to depress investment and growth, but too little redistribution has bad consequences too — poor people don’t live good enough lives. A neoliberal is someone who believes that markets are astonishingly good at creating wealth, but not always good at distributing wealth.
- We think the rule of law is important. We understand that there is a difference between the rule of lawyers and the rule of law. We approve of English-law bright line doctrines: law which is certain and predictable, as opposed to principle-based and interpretive or flexible. Even if regulation isn’t perfect, better to have certainty so people can order their businesses and lives around predictable regulative outcomes. We are suspicious of regulatory discretion, applaud permissionless innovation and generally welcome technological innovation/disruption.
I’ve noticed that most, if not all, the above statements are true of many people I hang around with and consider my closest intellectual bedfellows. I also suspect a weak version of most of them is held to by many people who consider themselves centrists, and that a very weak version of this might be the basic ideology that underpins the modern world.
My name is Jordan Williams, and I’m a neoliberal.
Jordan Williams is the Executive Director of the New Zealand Taxpayers’ Union. This piece is an adapted version of an opinion piece by Sam Bowman of the Adam Smith Institute published in 2016.