US inflation surges to 7.5% in fastests annual rise in 40 years.
Inflation by itself will kick Joe Biden out of office.
Inflation, eh?
Maybe an economic history lesson is in order, starting with the UK (because that's where I am).
Thatcher got elected on the back of the Saatchi slogan 'Labour Isn't Working'. This is because there was, at that time, one million unemployed in the UK. For Friedman and Hayek (the economists who Republicans tend to favour), the focus of macroeconomic theory should be on controlling inflation. So Thatcher raised interest rates. This should lower demand as it then costs more to borrow money. Unfortunately, those higher interest rates attracted foreign capital, driving up the value of the British pound and making British exports uncompetitive.
The result was a huge recession. Unemployment soared to 3.3 million people, a significant chunk of British manufacturing was destroyed, and many traditional industrial centres were devastated.
Reaganomics didn't work either. As in the UK, interest rates were jacked up in an attempt to reduce inflation. Between 1979 and 1981, interest rates more than doubled from around 10% to over 20% per year. A significant proportion of the US manufacturing industry, which had already been losing ground to Japanese and other foreign competition, could not withstand such an increase in financial costs. The traditional industrial heartland in the Midwest was turned into 'the Rust Belt'.
Neoliberals subscribe to what is known as the D-L-P formula (De-regulation of the economy, Liberalisation of trade and industry, Privatisation of state owned enterprises). Financial deregulation in the US at this time laid the foundation for the unstable and morally egregious financial system we have today, which involves hostile takeovers, asset stripping, and so on. To avoid this fate, firms at the time of Reagan had to deliver profits faster than before, otherwise impatient shareholders would sell up, reducing the share prices and thus exposing the firm to a greater danger of takeover. The easiest way for a company to deal with this was through downsizing, reducing the workforce, cutting overheads and minimizing investments, even though these actions diminish the competitiveness of the business in the longer term.
Here's a damning statistic from Cambridge economist Ha Joon Chang: '...distributed profits as a share of total US corporate profits stood at 35-45 per cent between the 1950's and 1970's. Between 2001 and 2010, the largest US companies distributed 94% of their profits [to shareholders] and the top UK companies 89% of their profits.'
And here's another: '...in the UK, the average period of shareholding, which had already fallen from 5 years in the mid 1960's to two years in the 1980's, plummeted to about 7.5 months at the end of 2007.'
The D-L-P formula has also proved disastrous for developing economies too. One of the latest examples is India (often held up as a neoliberal economic success story) where 250,000 farmers have committed suicide because of what the novelist Arundhati Roy has called the 'Privatisation of Everything.' For the back story on that, read her book
Capitalism: A Ghost Story.
Let's also consider the instability of the financial markets that has been a consequence of the deregulation of them.
Start of 1990's - banking crises in Sweden, Finland and Norway
1994/95 - 'Tequila' crisis in Mexico
1997 - crises in 'miracle' economies in Thailand, Indonesia, Malaysia and South Korea
1998 - Russian crisis
1999 - Brazilian crisis
2002 - Argentina
2008 - We all know about that one
Virtually no country was in banking crisis between the end of the Second World War and the mid-1970's, when the financial sector was more regulated. Between the mid-1970's and the late 1980's, the proportion of countries who experienced a banking crisis rose to 5 to 10%, weighted by their share of world income. The proportion then shot up to around 20% in the mid-1990's. The ratio then briefly fell to zero for a few years in the mid-2000s, but went up again to 35% following the 2008 global financial crisis.
Now let's move on to look at the consequences for mental health of decades of neoliberalism, taking Mark Fisher as an example, along with teaching as a profession.
Fisher notes in
Capitalist Realism: Is There No Alternative that a correlation has been found between rising rates of mental distress and illness and neoliberal economics as practised in the UK, USA and Australia. For example, in Britain, depression is now, Fisher claims, the condition that is most treated by the NHS. He argues that this is due to the instability of the modern working environment, in which there is no longer any long term job security.
The pressures of constant evaluations that employees are repeatedly subjected to additionally results in an unprecedented level of bureaucracy and excessive paperwork ,which mainly involves employees having to prove that they are doing their jobs properly. Fisher sometimes refers to this process as 'Market Stalinism', as it is more readily associated with planned economies like the ones favoured by Marx, which are typically criticised for being excessively bureaucratic.
In state sector of UK teaching (arguably a laboratory for the application of free market principles), rigidly formatted and excessively detailed lesson planning is one manifestation of this bureaucracy at work and is part of the machinery of self-surveillance (as the documentation evidences the efficacy of the teaching). However, given that teachers these days are held to account for pupil's public examination performances, the teaching itself tends to be geared passing the examinations. Narrowly focused 'exam drills' replace a wider engagement with subjects.
Meanwhile, when it comes to pupils, Fisher states that 'it is not an exaggeration to say that being a teenager in late capitalist Britain is now close to being classified as a sickness.' One reason for this is, of course, because teaching to the test requires pupils to be constantly tested and evaluated.
Additionally, families are buckling under the pressure of a neoliberalism that requires both parents to work (and frequently to work long hours as neoliberalism promotes a 24/7 working culture). A consequence of this is that teachers are now increasingly required to act as surrogate parents, as profferers of pastoral and emotional support for pupils who, in some cases, are only minimally socialized.
Fisher goes on to conclude that, 'The 'mental health plague' in capitalist societies would suggest that, instead of being the only social system that works, capitalism is inherently dysfunctional.'
He isn't a lone voice, either. Paul Verhaeghe has taken a very similar line in his book
What About Me? The Struggle for Identity in a Market Based Economy. And, of course, Erich Fromm did something similar decades ago in his book
The Sane Society.
Lastly, Wilkinson and Pickett have provided a statistical foundation for the above arguments in their well-known publication
The Spirit Level, and also in their newest book,
The Inner Level: How More Equal Societies Reduce Stress, Restore Sanity and Improve Everyone's Well-Being. According to their research, in societies where there is more of a gap between rich and poor, levels of trust between citizens tend to be lower, people have fewer friends, more people tend to suffer from mental health issues and obesity, and levels of self-reported happiness are lower.
The last time I checked, the USA was found to be lagging behind less economically unequal countries on the following social and health indicators:
Physical health
Mental health
School success rates
Trusting others
Obesity
Drug addiction
Violence and murder
Rates of imprisonment
Chances of escaping poverty
Early or unwanted pregnancy
Infant mortality
The well-being of children in general
I could go on to explain why inflation isn't necessarily an issue unless it gets beyond a certain point, but maybe this brief survey of the bigger picture will hopefully do for now.
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