Some Recent Failures of Neoclassical Economics

Have you noticed that practically all these neoclassical types do is lie? There’s a reason for that. Their theory is good for the rich and the upper middle class only, and it’s crap for everyone else. They can’t come out and say that, so they have to lie to the 80% of the population who is going to get screwed by their rentier and banker class philosophy and tell them that it’s good for them.
This is similar to the modus operandi of conservatism. As conservatism is always and everywhere a philosophy of the plutocrats that benefits them and some upper middle class folks and hurts everyone else, they can’t very well be honest about the nature of their class war project. This is why conservatives, everywhere and Earth and all down through the past, have always lied. Conservatism is dishonest because it must be. A philosophy that benefits the top 20% while harming the bottom 80% is going to be difficult to sell to the masses if you are honest about, although Americans may well just go for it, as they are just that stupid.
Analyses of neoliberalism in the past few decades around the world showed that it tended to benefit about the top 20% of society and harm about the bottom 80% of society. That is, there is a huge wealth transfer from the bottom 80% to the top 20%. It resulted in damage or collapse of health and education figures in most places where it was tried, and the resulting death toll is surely in the many millions. This is why so many nations have been trying to chuck it lately.
Even major ruling class organs like Time Magazine admitted that decades of neoliberalism in recent years in Latin America had largely failed.
Neoclassical economics killed 15 million people in Russia alone in the 1990’s.
Neoclassical economics has failed to lift people out of poverty. Peru and India have implemented neoliberal policies in recent years. After years of high growth in Peru, the poverty rate remained flat at 51%. In India, after 16 years of high economic growth, the malnutrition rate was flat at 51%. Neoclassical economics is trickle down supply side economics, and we all know that doesn’t work.
The neoclassicals caused the recent financial crisis that took out the US economy and nearly took down the world’s economy with it.
Neoclassical economics destroyed Latvia, leading to a 20% loss of GDP, 2/3 as great as the Great Depression in the US. Housing values collapsed, losing 70% of their value. Wages were deliberately collapsed by the neoclassical government. They deliberately reduced public sector wages 30% and are now trying to spread it to the private sector. So it appears that one of the goals of neoclassicalism in Latvia is the destruction of wages.
Hoover’s neoclassical economics only deepened and worsened the Great Depression in the US.
Neoclassical economics caused a depression in Ireland with 10% loss of GDP.
The top neoclassical economists, including Hayek and Friedman, went down to Chile and advised Pinochet on how to run his economy. They implemented the most radical experiment in neoclassical economics that has ever been tried. The result was one of the worst economic depressions in modern history. However, at the end of Pinochet’s term, workers had lost 1/3 of their wages, and there was a massive wealth transfer from the bottom 2/3 to the top 1/3. Hayek and Friedman both said that neoclassical economics was so bad for workers and ordinary people that the only way to put it in was via a dictatorship. This is why both Hayek and Friedman were huge cheerleaders for the murderous Pinochet.
The countries that got creamed worst in the financial crisis were those that had followed neoclassical theories in their financial system.
Iceland underwent possibly one of the most radical experiments in neoclassical restructuring of its financial sector. The result was that when the crash hit, Iceland was ruined. Its three largest banks went bankrupt, and there was a run on banks. Iceland itself was effectively bankrupt. The banking collapse was the worst suffered by any state in recent history.
The Icelandic stock exchange collapsed and lost 90% of its value. Sure, let’s privatize social security! If Iceland had privatized social security, your social security check would have lost 90% of its value. Instead of getting $1000/month, you would get $100/month.
The cost of the crisis exceeded 75% of the nation’s GDP. Since then, Iceland has been in recession, with a 5.5% loss in GDP, but it is expected to fall by 10%, meaning that Iceland will go into a depression. 500,000 depositors outside of Iceland could not access their money for some time. A giant German bank, BayernLB, nearly collapsed and had to be bailed out by taxpayers. Pensions collapsed and lost 20% of their value. Inflation is expected to run up to 75% this year.

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0 thoughts on “Some Recent Failures of Neoclassical Economics”

  1. First.. there is no pure neoclassical economical state in the world (as there is no pure communist state..)… the current Hong Kong would come closest… as for the US property bubble… it was US government directed policy and willful neglect of fraud which help create the property bubble….
    As the Soviet Union and Latvia.. why did they shift away from command economies in the first place…?

  2. Neoclassical economics only works in theory. That’s all it’s good for- teaching basic economic principles. After that, you’re best off kicking it to the curb.
    Economists do it with models? NO! Real economists do it with empirical evidence. EVIDENCE is what’s needed. I’m TIRED of these silly models and abstract nonsense like “ceteris paribus” or Pareto efficiency. THEY’RE NOT REALISTIC!
    Who is the IDIOT who came up with an Edgeworth Box in the first place??

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