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The Neoliberal Collapse

Markets Are Not the Answer

Enter stage left: the Labour Party leader Jeremy Corbyn in London, October 2019 Sean Smith / EYEVINE / REDUX

Capitalism is in crisis. Until recently, that conviction was confined to the left. Today, however, it has gained traction across the political spectrum in advanced economies. Economists, policymakers, and ordinary people have increasingly come to see that neoliberalism—a creed built on faith in free markets, deregulation, and small government, and that has dominated societies for the last 40 years—has reached its limit.

This crisis has been long in the making but was brought into sharp focus in the aftermath of the global financial meltdown of 2007–8 and the global recession that followed it. In the developed countries of the Organization for Economic Cooperation and Development, economic growth over the last decade ceased to benefit most people. At the end of 2017, nominal wage growth among OECD members was only half what it was a decade earlier. More than one in three people in the OECD countries are estimated to be economically vulnerable, meaning they lack the means to maintain a living standard at or above the poverty level for at least three months. Meanwhile, in those countries, income inequality is higher than at any time in the past half century: the richest ten percent hold almost half of total wealth, and the bottom 40 percent hold just three percent.

Defenders of neoliberalism frequently point out that although decades of wage stagnation and wealth concentration have led to ballooning inequality in developed countries, the same time period has seen a dramatic increase in prosperity on a global scale. Over a billion people, they argue, have been lifted out of extreme poverty owing to technological advances, investments, and prosperity that were made possible by the spread of free markets. However, this argument fails to account for the critical role that governments have played in that change through the provision of education, health care, and employment. Such state interventions have arguably been as decisive as the invisible hand of the market in lifting living standards. This defense also ignores the fact that despite many gains in

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