A New Perspective
New Directions in Modern Economics series
Chapter 1: Introduction
The dominance of Keynesian-type and State-led development policies in much of the capitalist world during the 1950s and 1960s came under attack by the New Right in the 1970s, an onslaught that eventually culminated in the elections of Ronald Reagan and Margaret Thatcher. The free market doctrine that became the new conventional wisdom had as its intellectual foundations the theoretical views of Friedrich Hayek and Milton Friedman. It was the promise of laissez faire policies at home and abroad that persistent unemployment and stagnant growth would be eliminated once the State had been rolled back and free market policies instituted. Especially after the Berlin Wall came down and the former Soviet Union collapsed it became almost an act of political and professional suicide for both parties of the Left and non-neoclassical economists to question such policies. Henceforth, Fukuyama’s ‘end of history’ thesis pointed to a rosy future in which there would be no room for dissenting views. However, the recent triumphs of left-leaning political movements across much of Latin America and the disaster unleashed by Hurricane Katrina, which revealed the deep class fissures in American society and stark evidence of decades of neglect of its public infrastructure, show that the record of neo-liberalism has been less than stellar. Most importantly, the current depression-like world economic crisis should be embarrassing to free marketers, whose triumphalism had reached a crescendo in the 1990s. Quite simply, if the New Right analysis of markets were correct, the global march toward free markets over the...