Ignore the populists, neoliberalism is the best system the world has ever known Imagine you thought that helping the worst-off was what mattered most, but that free markets were the best way of […]

Imagine you thought that helping the worst-off was what mattered most, but that free markets were the best way of doing it.

You might be a neoliberal: someone who thinks that lightly-regulated markets, free trade and free movement are the best way to create wealth and innovation domestically and globally, but that the state does have a role to play in redistributing some of the proceeds to the least well-off.

So far, despite what people like John McDonnell claim, that system has worked. The post-1970s neoliberal era has seen billions of people plugged into global capitalism, and the results have been spectacular.

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Spectacular results

Extreme poverty has fallen from 44% of world’s population in 1981 to 9.6% today. Global child mortality, illiteracy and pollution are less than half what they were in 1990.

Over half of China’s growth since 1980 has come from openness to trade and privatization of state-run industries. Under communism, Chinese GDP per capita was $300/year. Today, it’s $10,000/year and rising. India, Vietnam and Bangladesh, too, are growing thanks in part to neoliberal-style reforms.

Household incomes have more than doubled in real terms since the late 1970s

In Britain, inequality is now at its lowest point since 1985. Wages for the bottom 20% have risen by 13% in real terms since the crisis. Household incomes have more than doubled in real terms since the late 1970s. Consumer technologies like smartphones and the sharing economy are advancing by leaps and bounds.

So why have people reacted against neoliberalism?

One reason is that the pace of change is frightening.

Automation is responsible for 88% of lost manufacturing jobs

Automation, not globalisation, is replacing old manufacturing jobs – it is responsible for 88% of lost manufacturing jobs. Immigration, though it helps to pay for our welfare state, is resented by some voters. Here there is a case for cash transfers to compensate people who lose out.

And in some cases the government has not been neoliberal enough. London, Sydney and San Fransisco all have unaffordable housing because their planning policies keep land from being developed.

In Tokyo nearly all plans for almost any building type are allowed if they meet safety and height regulations. Well-located apartments are easy to find for £350/month. There is no reason we couldn’t have the same in London with a little more neoliberalism – and Tokyo has some the strictest safety regulations in the world.

Reports of neoliberalism’s demise have been exaggerated

Donald Trump is as anti-neoliberal as it gets, and things are nearly as bad in Britain. The Conservative manifesto was nearly as hostile to markets as Labour’s. And both Theresa May and Jeremy Corbyn have pledged to end freedom of movement with the EU, making them the two most anti-immigration major party leaders in decades.

But this populism is mostly an Anglo-Saxon phenomenon. Refugee-friendly Angela Merkel is set to win comfortably in Germany. And France’s Emmanuel Macron – the wunderkind of modern neoliberalism – has revolutionised French politics, smashing the National Front and Socialists in the process.

I wouldn’t predict a new ‘neoliberal moment’ yet, though if Macron’s policies work voters in other countries may look for their own neoliberal Napoleon. But reports of neoliberalism’s demise have been exaggerated. Those of us who value markets as a weapon against poverty are not ready to throw away the best system the world has ever known just yet.

Sam Bowman is Executive Director of the Adam Smith Institute.