The Dangerous Ideology Called Neoliberalism: Part II
“This anomalous system backfired and hit the US economy hard.”
When the neoliberals deregulated currency and equated that policy with a policy of economic liberation, they did so without understanding the nuances of inflation; why prices are rising and they have not understood the intricacies of supply and demand in the economy. Quantitative easing or printing money was done arbitrarily to maim the US economy to meet its political goals.
In fact, the loan of Treasuries to support the deceptive quantitative easing policy was taken from the reserve currencies of World Bank member countries and used by the US Federal Reserve to secure short-term mortgages, making so countries like the Philippines, part of the consortium of reluctant lenders.
When the United States decoupled the dollar from the gold standard, Nixon never thought that his decision would primarily reduce the budget deficit as agreed in 1946 during the Bretton Woods agreements. The arrogance of the United States was exuding as it was the only industrial power not affected by war and holds more than 70 percent of total world manufacturing output to dominate the world economy. Thereupon, the United States measured the value of the dollar against its GDP.
The switch to GDP in 1973 was caused by its involvement in the Vietnam War. The formula gave the United States a respite to experience financial easing to reignite another adventurism even as the Cold War with Russia has yet to be concluded. The neoliberals have sought to revive the US economy by relying on the validity of the unlimited flow of capital. The theory was based on the strength of America’s GDP, which then accounted for over 70 of the world’s total manufacturing industries.
This was followed by their global campaign for globalization or free trade by reducing tariffs. Countries were forced to open their doors more widely instead of simply accepting the most-favored-nation (MFN) clause. Many were prompted to join the World Trade Organization (WTO) after the United States and its European allies made sure their version of free trade was passed.
Many underdeveloped countries have joined, believing that tariffs will be reduced. Instead, it resulted in the revaluation of their currency, allowing the United States to increase imports while exporters decrease the value, not the volume, of their goods.
China has been pressured into joining the WTO and believing that free trade will work to its advantage. The currency and wages were low, and Chinese workers had skills, efficiency and a level of production acceptable to American and European standards. China has interpreted free trade to its advantage as giving socialism Chinese characteristics to advance economically.
Neoliberals never predicted that the unequal trading system would change not only in the value of currency and goods due to the gradual improvement in the country’s exports, viz. by the concomitant increase in the value of their currency. Neoliberals have remained obsessed with the huge profit from outsourcing.
When the bad side of outsourcing and offshoring production plants began to affect their economy, such as incurring a huge trade deficit, the United States began accusing China of violating trade patents and laws on trade. copyright, forcing foreign countries to reveal their trade secrets, increasing their royalties, and unilaterally imposed trade sanctions for allegedly participating in unfair competition or defying its trade policy. The case against Huawei is based on fears that China is on the verge of overtaking the United States in the area of ââ5G technology.
Globalization has turned into an exception policy in the United States. Most appalling was the demand to devalue or revalue the currency. Consumers are required to pay more for their purchase while reducing their exports. To avoid resistance from most wage earners, the neoliberals have called rising inflation a normal situation in the economy that consumers should not worry about.
The decoupling of the dollar was followed by the deregulation of commodity prices, including those classified in utilities such as fuel, electricity and water. The neoliberals have even repealed the local anti-usury law.
Either way, the US economy may have recovered slightly. The dollar rose against other currencies. Monetarists have called the devaluation a “floating rate” to indicate that the price increase is only temporary even though the policy has been imposed against the will of the monetary authorities. The public had to accept a depreciation of more than 100 percent of its currency.
Some say the shift from gold to GDP initially helped increase excess capital and the United States used it as capital to invest and engage in the nefarious practice of outsourcing. What the neoliberals didn’t know was that they opened Pandora’s Box to the early demise of capitalism through the unique process of deindustrialization.
The neoliberals had a smile on the new economic order. The modus operandi allowed the US dollar to automatically increase its imports due to the decline in the value of foreign exports. The trade imbalance between the United States and the underdeveloped countries has grown considerably.
Many countries began to look for an alternative market that would price their exports well to allow local consumers to buy more imported goods, and allow some of their currency to save and help grow their economy. .
This allowed China to rapidly expand its market to Africa and Latin America. It was not the Marxist ideology that prompted countries to move closer to China, but the need to adopt one that could offer higher prices for their exports.
As the neoliberals increased the value of money, they forgot that the domestic cost of labor and services, as well as the cost of living, would also increase. The prices of imported goods negated the gains made through outsourcing.
To ward off the danger, the neoliberals once again coined a new economic term called âreal wageâ to differentiate it from ânominal wageâ. Critics of neoliberal ideology like Jeffry Sachs, Richard Wolff and Chris Hedges complain that since 1973 American workers have not received a real pay rise. As the practice continued, people realized that they had been harmed for years by their legitimate income. The US economy has evolved into a plutocratic economy, with a handful deciding economic policies while the vast majority of Americans languish in poverty.
Today, China has accumulated enough surpluses starting with a low value of the renminbi. Slowly, it is preparing to reach parity with the US dollar. The neoliberals have committed a monstrous crime of financial injustice because the open valuation of currency has turned against it to ensure that the tenet of Marxist economics is the creation of wealth through production.
President Trump has applied his pagan âAmerica Firstâ nationalism by imposing excessive tariffs on US imports, mainly from China. But in its rush to offset the trade deficit, it actually imposed tariffs on U.S. imports. The tariffs increased the value of US imports which was added to the cost price.
There is no way for the neoliberals and their monetarist cabal to escape the trap they have created. The deindustrializing system of the American economy has reduced their glamorous metropolis to a city of tents, retarded intellectual growth due to unaffordable tuition fees, shortened the lives of the poor due to the high cost of medical services and l hospitalization, multiplied the number of homeless. , has skyrocketed drug sales and intensified racial discrimination and social unrest due to income inequality.
The disparity between the value of the US dollar and other currencies resulted in a financial collapse. Some call this “state of economic imbalance” as what happened in 2008. Often times, this happens when investment does not match output and by volatility in the currency. This anomalous system backfired and hit the US economy hard.
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