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The "Neoliberal Delusion" Condemned: Oscar Lafontaine

"The `delusion' prevails in neoliberalism that `the national economies flourish when the people don't do well'.. The neoliberal world econmic order in which 95 percent of capital transactions consist of speculations.. is unstable. This is a system that jumps the track again and again without people knowing whether it has completely derailed." Oscar Lafontaine is a champion of redefining work and reducing worktime
The "Neoliberal Delusion" Condemned

Oscar Lafontaine urges a regulation of capital transactions - "Business policy" endangers social balance - "The Pentagon is America's economic motor."

[This article originally published in the Austrian Standard November 11, 2003 is translated from the German on the World Wide Web,

Vienna - "The European stability pact belongs on the scrap heap of history", the former German finance minister and ex-SPD head Oscar Lafontaine declared Monday night in Vienna. In a lecture, he ridiculed economic policy according to neoliberal standards. The "delusion" prevails in neoliberalism that "the national economy flourishes when the people don't do well".

Lafontaine urges a regulation of capital transactions and a "change of the central bank constitutions". "An expansive monetary policy is vital in times of economic decline", the 60-year old explained.

Liberation from the Stability Pact

Lafontaine described the EU-stability pact with its maximum annual rate of 3 percent new indebtedness of member states as an "obstacle" for crisis policy. "If we in the EU want to make our own decisions to start the economy, we must liberate ourselves from the stability pact." He seemed convinced that this idea will prevail.

That the central banks make price stability their only task as neoliberalism teaches is "nonsense", Lafontaine said. They are also responsible for growth and employment. Concerning the European Union, the ex-SPD chairperson supported a uniform economic- and finance policy. The uniform monetary policy already requires this.

95 Percent Speculations

Lafontaine regards the neoliberal world economic order in which "95 percent of capital transactions" consist of "speculations" and don't involve commodity transactions as "unstable". "This is a system that jumps the track again and again without people knowing whether sit has completely derailed. This worldwide gambling casino must be subject to rules."

The SPD politician considers regulation of capital transactions as possible. Lafontaine sees great resistances regarding the US. Financial institutions and the weapons- and oil industries are interwoven with politics through the system of private financing of election campaigns.

US System Endangered

According to the former Saarland prime minister, ex-US president Bill Clinton had to promise in the election campaign to change nothing in the neoliberal course to gain Wall Street support. Lafontaine sees the democratic system of the US endangered. "If this continues, we must speak of plutocracy, not democracy" since changes can be blocked if they don't please a minority.

He criticizes as a "strange" neoliberal wage policy that wages can be forced down for reasons of competitiveness while manager salaries rise for the same reasons to prevent their exodus. He also condemned the attitude that "social benefits cannot be allowed" to remain competitive.

"Almost criminal"

Lafontaine signed off on privatizations of institutions for basic provisions of the population like old age provisions. Here neoliberalism would be "almost criminal". "Profits are privatized while losses are socialized", he explained.

Lafontaine now expects a "pendulum shift in the other direction" after an ideology that "sets the market higher than rules given by the society itself". This ideology is built on the "growth and prosperity of a minority".

Social Balanced Threatened

In Oscar Lafontaine's opinion, the Reform Agenda 2010 of the German government of chancellor Gerhard Schroeder is based on "ancient demands of entrepreneurs" and "isn't an original creation of the SPD". "If only business policy is accepted, the social balance is threatened", the ex-finance minister and former SPD leader Lafontaine warned in a televised interview. Neoliberal policy doesn't bring any reduction of unemployment but rather "the opposite".

The United States opened the floodgates for neoliberal reforms with the tax cuts. "One could say the Pentagon is America's economic motor". He doesn't see the good growth statistics in the US as a model for Germany. "We don't want to inflate the military budget." Investments in education, research and the infrastructure are vital. Unlike "prosperity for all", the goal of Ludwig Erhard, the father of the social market economy in Germany, neoliberalism only brings "increasing poverty for all".

Careers Aren't Planned at 60

On the question of a possible return to the political stage, the German ex-finance minister said he isn't interested in a political comeback. "I am for a comeback of my policy." He recently reached age 60. "At 60, careers aren't planned any more."

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