The global economy came down with a bad case of stagflation (weak growth and rapidly rising prices) in the 1970s. Neoliberalism was touted as the medicine that would cure the sickness, delivering growth and stability through market deregulation, lower taxes for the rich and cuts to public spending. Yes, overall inequality would increase. But the wealth generated by the richest would ultimately trickle down, making everyone better off.
“That was the promise: a smaller slice of the pie, but as the pie is so much bigger you’ll actually have more of it,” says the economist and bestselling author Prof Ha-Joon Chang. But things haven’t quite panned out like that.
Chang, who teaches economics at Soas University of London, argues that neoliberalism has not only failed to deliver the growth and stability that proponents promised, but has “over-delivered” when it comes to increasing inequality. He also claims that mainstream economists, politicians, thinktanks and academics readily ignore this fact.
“The extent of the wilful neglect of evidence is shocking. The refusal to hold people accountable is shocking,” he says. “It is hardly ever admitted – at least in the mainstream media and mainstream academia – that things have become worse under neoliberalism.”
Chang’s charge sheet rests on the difference between growth during the 50s, 60s and early 70s – the so-called golden age of capitalism – and the neoliberal era ushered in by Thatcherism and Reaganomics. During the golden age the world economy grew at roughly 3% a year in per capita terms, according to his calculations. But over the past 40 years it has only managed about half that figure, so “growth has basically collapsed”.
Although the neoliberal period has generally seen lower inflation, other forms of economic instability have replaced it. “During the golden age of capitalism there were hardly any banking crises,” Chang says. “But since the financial markets were liberalised in the 1980s we’ve had literally dozens and dozens … the biggest one being the 2008 global financial crisis.”
Over the same period, inequality has increased in most parts of the world. “In some countries it has gone into the stratosphere,” says Chang.
At this point, a neoliberal might point to China’s explosive economic growth over the past 40 years. Doesn’t that prove that neoliberalism can actually deliver on its promises?
“It maybe proves that capitalism works better than communism,” says Chang. But given that China’s distinct brand of economics includes capital controls and huge state-owned enterprises, “this is not neoliberalism”.
Other parts of Asia haven’t fared as well as China during the neoliberal era, and “when you come to the Middle East and Africa, it is rather depressing”, says Chang. Between 1980 and 2018, for example, he calculates that per capita income in sub-Saharan Africa grew at 0.3% a year compared with about 1.6% in the period after the second world war. Chang says this latter figure is “actually higher than the rate of growth during the Industrial Revolution in Britain and other European countries”, and that parts of the areas covered by Soas – its focus is Asia, Africa and the Middle East – have “really suffered” as a result of neoliberal policies.
Soas is one of the few higher education institutions where students are encouraged to interrogate the failures of capitalism described by Chang (most recently in his book Edible Economics: A Hungry Economist Explains the World).
“Soas is full of people who are engaged in a critical approach to economics and other social sciences,” he says. “It’s really one of a handful of places in the UK where the neoclassical school of economics – especially of a neoliberal variety – is not dominant.”
The university’s expertise in Africa, Asia and the Middle East also means that students benefit from an unrivalled focus on the economic and political issues faced by developing and emerging economies. They are pushed to challenge orthodox economic policies and envision alternative ones. Indeed, critical thinking is the cornerstone of all Soas teaching. “Once you teach students that, they will approach whatever they are going to do in future with critical eyes, which is extremely important.”
Soas is also a place where knowledge of the real-world economy is valued. “In many economics departments, almost everything you learn throughout your three-year BA is maths and stats. And knowledge of the real world is accepted only if in its statistical forms,” says Chang. “Statistics are important. But that’s not the only way to understand the world.”
The university also engages with the public on social justice and economic issues. Staff members often write for newspapers, for example, or give talks on problems of austerity to local community organisations and trade unionists. “Our staff members are not just academics in an ivory tower,” says Chang. “They are social activists.”
In other words, they are people “who actually do the fieldwork, who look at political situations in rural areas of developing countries, who go and talk to government ministers in order to figure out how to design different policies – and that is reflected in our teaching”.
Former students have recently gone on to join institutions such as the Bank of England, the European Central Bank and the UN. “They are still very junior so they don’t have huge influence yet,” says Chang. “But my view is that in 10 to 15 years’ time they will be in important positions, and they will make a difference to what these organisations do.”
Discover how studying economics at Soas can open your mind to another world
