In 1989 an influential political scientist named Francis Fukuyama released a defining paper called “The End of History and the Last Man” that suggested the end of Communism would clear the way for market-oriented liberal democracies. Nations all around the world would flourish under a market system that removed tariffs and other barriers to economic growth; competition would open up new opportunities for products, goods and services and it would occur in a democratic environment under governments that espoused deregulation. But most of all, everyone would benefit. This would be the final, eternal form of governance in human society.
That was the idea. And for a while it looked like it might work as moderates like British Labour Prime Minister Tony Blair, United States President Bill Clinton joined conservatives like Australian and British Prime Ministers John Howard and John Major. Big free trade deals like the North American Free Trade Agreement were negotiated and held up as a victory for laissez-faire market economics. Deregulation of markets was the “in” thing to be seen doing – encouraging investors to sink money into new ventures, simplifying or getting rid of pesky legislation was seen as a necessary part of this.
I have mentioned the transition to a market economy that was attempted in New Zealand in other posts – how the Labour Government of David Lange started it and then how it was continued by the National led Government of Prime Ministers Jim Bolger and Jenny Shipley. Free trade agreements with various countries were touted as the way forward. Particularly high on the agenda were deals with China and the United States. Despite her reputation as a socialist, Labour Prime Minister Helen Clark oversaw the N.Z.-China Free Trade Agreement in 2008; initial negotiations. Ms Clark also did not attempt a buy back of the former Electricity Corporation New Zealand assets that had been sold when E.C.N.Z. was broken up, causing a 100% increase in power prices across ten years.
In 2002 the price of housing began to increase in New Zealand. A property that might have been worth $150,000 in 2001 would increase to $550,000. Investors, realizing the potential for meltdowns overseas were starting to become interested in having a rainy day solution in New Zealand. A property to quickly move to if their existing situation became untenable along with opportunities to invest some of their money and get a return through renters was suddenly not a bad thing to have.
So convinced were many by it that when warnings about the potential for a massive economic depression to rival the 1929 Great Depression sounded, no one wanted to know. Despite years of increasingly dire warnings that the financial markets were about to face a massive and probably violent correction, the thought that institutions like Lehman Bros., Fannie Mae and Freddie Mac could fall over in the United States along with smaller ones in New Zealand like Capital Merchant Finance, was dismissed as not being possible. “Too big to fail” was a popular phrase to describe financial establishments that were thought to be indestructible.
This might have been the end of neoliberalism, but it was not. Within two years, the economic and financial commentators appeared to have completely forgotten the purpose of President Barak Obama introducing the Dodd Frank Act. Mr Obama’s legislation was simply seeking to give assurance that Americans could trust their banking sector, that there would not be another major crisis like the Global Financial Crisis of 2007-2009. He was also seeking to ensure that Americans would be able to trust the financial tools they use to purchase property and their ability to service their finances would not be burned.
But 30 years after Francis Fukuyama’s “End of History”, the tide is beginning to turn against the neoliberalism he and others have espoused. And perhaps, what I call the “Second coming of History” is here. Find out more in Part 2.