Default neoliberalism

65

HOW HAS THE EMERGENCE OF MARKET FUNDAMENTALISM GOVERNED WESTERN POLITICS OVER THE LAST FORTY YEARS? AND WITH THE FORTHCOMING NEGOTIATION BETWEEN THE STATE AND THE MARKET, HOW WILL ARCHITECTURE CHASE SHIFTING CAPITAL?

NEOLIBERAL SUPER-BOOM TIMELINE

A timeline of neoliberalism, privatization and the glorification of the market through cinema in Western political ecocomies

67

5

% change of UK G.D.P 1960- 2008

4

3

N Black civil rights leader Martin Luther King assassinated

Man on the French civil moon unrest Students and Workers strike in Paris

1962

04.04.68

05.68

20.07.69

http://news.bbc.co .uk/2/hi/europe/11 12551.stm

http://www.bbc.co.u k/news/world-us-canada-16759233

http://news.bbc.co .uk/onthisday/hi/d ates/stories/may/1 3/newsid_251200 0/2512413.stm

http://www.nasa.go v/audience/forstude nts/k-4/stories/first-person-on-moon.ht ml

http://www.guardia n.co.uk/news/data blog/2009/nov/25/ gdp-uk-1948-growth-econ omy#data

1970s: OIL CRISIS & STRIKES

1960s: An ERA of PROTEST

Cuban missile crisis

Default Neoliberalism

1

The Cold War, construction of Berlin Wall, Black Civil Rights movement , Anti-Vietnam Protests, counterculture and sexual revolution

2

UK: Industry is on a 3 day week because of strike by power workers and miners.

1973

http://news.bbc.co .uk/2/hi/europe/co untry_profiles/103 8820.stm

EO Britain joins Oil Crisis EEC starts NZ loses main export market OPEC proclaims oil embargo

Nixon resigns in the wake of the Watergate scandal

Friedrich UK currency Hayek wins crisis - govt Nobel Prize in loan from IMF Economic Science for his theory on markets

1973

1974

1974

09.76

http://www.bbc.co. uk/news/world-us-canada-16759233

http://neoliberalis meducation.pbwo rks.com/w/page/5 0843529/The%20 Neoliberalist's%2 0Timeline#

http://www.bbc.co. uk/history/interacti ve/timelines/british /index_embed.sht ml

1.10.73

http://www.nzheral http://www.timet d.co.nz/economy/n oast.com/timelin ews/article.cfm?c_i es/63496 d=34&objectid=10 833658

http://www.cca.q c.ca/en/exhibitio ns/73-1973-sorry-out-of-gas

Deng Xiaoping’s economic reform of China - adopt free market principles

1978

http://neoliberalis meducation.pbwo rks.com/w/page/5 0843529/The%20 Neoliberalist's%2 0Timeline#

g i o a r e

7

b n / T

#

69

beralis n.pbwo /page/5 The%20 st's%2 #

UK: “winter of discontent” industrial action, protests and strikes

Soviet Union and US sign SALT-2 agreement

07.11.78

11.78

1979

http://www.timeto http://www.bbc.co.u http://news.bbc.c ast.com/timelines k/history/interactive/ o.uk/2/hi/europe/ timelines/british/ind 1112551.stm /63496 ex_embed.shtml

1981: THATCHERism & REAGANism

78

2nd Oil Crisis strike of 37,000 workers at Iran’s oil refineries

Margaret Thatcher first female UK PM introduces free market policies

Ronald Reagan elected president

03.05.79

11.80

http://www.bbc.co.u k/history/interactive/ timelines/british/ind ex_embed.shtml

http://www.b bc.co.uk/ne ws/world-us-canada-16759233

Default Neoliberalism

OLI

g’s ic of adopt rket es

“The best way yo e people is by tu into poor people”o

– Billy Ray Valen R

IBE Trading Places

Thatcher government begins programme of privatisation of state-run industries.

Racial tension Springbok tour - UK economic sparks riots in polarizes NZ recession leads Brixton, UK to high unemployment in manufacturing

Argentina invades the Falkland Islands - UK intervenes

Mexican government devalues the peso by 78%

Thatcher re-elected by landslide

1981

11.04.81

07.81

26.01.82

02. 04.82

1. 02. 82

10.06.83

http://news.bbc.co .uk/2/hi/europe/co untry_profiles/103 8820.stm

http://www.bbc.co .uk/history/interac tive/timelines/briti sh/index_embed. shtml

http://www.nzherald .co.nz/economy/ne ws/article.cfm?c_id =34&objectid=1083 3658

http://www.bbc.co.u k/history/interactive/ timelines/british/ind ex_embed.shtml

http://news.bbc.c o.uk/2/hi/europe/ country_profiles/ 1038820.stm

http://monthlyrevi ew.org/2002/12/0 1/neoliberal-myths

http://www.bb c.co.uk/histor y/interactive/ti melines/britis h/index_embe d.shtml

Rogernomics begins NZ state assets sold and dollar floated

1984: Privatization

Rollover

m

l r

1984

http://www.nzher ald.co.nz/econo my/news/article. cfm?c_id=34&ob jectid=10833658

z o

4 3

71

est way you hurt rich is by turning them or people�

Ray Valentine

ld r

zher ono cle.

4&ob 3658

Default Neoliberalism

ER

mics

UK:12month national miner’s strike starts

IRA bomb Conservative Party conference

Mulroney initiates Canadian economic reform GST and Free Trade with the USA

British Gas privatized

12.03.84

12.10.84

17. 9. 84

08.12.84

http://www.bbc.c o.uk/history/inte ractive/timelines /british/index_e mbed.shtml

http://www.bbc.co .uk/history/interac tive/timelines/briti sh/index_embed. shtml

http://neoliberalism education.pbworks. com/w/page/50843 529/The%20Neolib eralist's%20Timelin e#

http://www.bbc.co. story/interactive/tim es/british/index_em .shtml

paving the way for British Aerospace, Cable, Britoil, t National Bus Company, Briti Airways, Rolls Royce, British Steel, British Telecom, the electricity indus and water companies

"Greed, for lack of a better word, is good. Greed is right, greed works.

Greed clarifies, cuts through and captures the essence of the evolutionary spirit."

- Gordon Gekko

RAL Bombing of the Rainbow Warrior

Chernobyl nuclear power station explodes

the

ish

stry

10.07.85

uk/hi http://www.gre melin enpeace.org/in mbed ternational/en/ about/history/t he-bombing-of-the -rainbow-war/

1986

http://news.bb c.co.uk/2/hi/eu rope/1112551. stm

Wall Street

1987: Wall Street Crash

y

The Money Pit

NZ StateOwned Enterprises Act takes effect liberalisation of state sector.

Reagan elects Thatcher’s Alan Greenspan 3rd term as Chairman of the UK PM Federal Reserve

BLACK MONDAY

Dow Jones fell 22.6 percent

London quoted shares fell by ÂŁ50bn FTSE dropped 300 points

01.04.87

02.06.87

11.06.87

http://www.nzherald .co.nz/economy/ne ws/article.cfm?c_id =34&objectid=1083 3658

http://topics.nytimes. com/top/reference/ti mestopics/people/g/ alan_greenspan/ind ex.html

http://www.bbc .co.uk/history/i nteractive/time lines/british/ind ex_embed.sht ml

19.10.87

http://news.bbc.co.uk/ onthisday/hi/dates/sto ries/october/19/newsi d_3959000/3959713. stm

http://www.telegraph. co.uk/finance/markets /2817724/Is-another-Wall-St-crash-comi ng.html

73

12 UK ports affected by seamen strike

Tim BernersLee invents the World Wide Web

Exxon Valdez 11 million gallons of crude oil spill in Alaska

the Berlin Wall Falls

1989

24. 3. 89

09. 11. 89

31.01.88

http://news.bbc.co.u k/onthisday/hi/dates/ stories/february/4/ne wsid_2534000/2534 143.stm

1989

Buy and Cell

Dealers

http://www.bbc.co.uk/ http://www.timetoast. history/interactive/tim com/timelines/evoluti elines/british/index_e on-of-neo-liberalism mbed.shtml

Tom Stoddart http://www.guardian.co.uk/worl d/gallery/2011/aug/13/berlin-wall-50th-anniversay-in-picture s#/?picture=377845305&index =11

Default Neoliberalism

L S Working Girl

S U Glengarry Glen Ross

The Bonfire of the Vanities Other Peoples Money

Thatcher resigns

Operation Desert Storm Liberation of Kuwait

Congress of People's Deputies vote for the dissolution of the Soviet Union

1992

1990

“poll tax” march of 700,000 riots in London

31.03.90

22.11.90

17.01.91 09.91

http://www.b bc.co.uk/hist ory/interactiv e/timelines/b ritish/index_e mbed.shtml

http://www.b bc.co.uk/hist ory/interactiv e/timelines/b ritish/index_e mbed.shtml

http://www.b http://news.bbc.co bc.co.uk/hist .uk/2/hi/europe/11 ory/interactiv 12551.stm e/timelines/b ritish/index_e mbed.shtml

Barbarians at the G

Los Angeles “Black Wednesday” Riots the Pound Sterling pulled out of EU’s Exchange Rate Mechanism

“It’s the economy, stupid”

28.04.92

16.09.92

10.92

03.01.93

http://www.nytim es.com/2012/06 /18/us/rodney-king-whose-beating-led-to-la-riot s-dead-at-47.ht ml?pagewanted =all

http://www.bbc.co.u k/history/interactive/ timelines/british/ind ex_embed.shtml

http://www.nytimes.com/ 2012/01/08/your-money/an-election-too-close-to-call-as-seen-in-a n-economic-lens.html?pa gewanted=all

http://news.bbc.co.uk/ b nthisday/hi/dates/stori n s/january/3/newsid_41 4000/4114673.stm 7

USA and Russia R halve nuclear l warheads

- James Carville 1992 Clinton Presidential campaign

75

U P

bbc.co.uk/o ates/storie newsid_411 73.stm

Report into the sale of arms to Iraq during the Gulf War published

01. 01. 94

15.02. 96

http://neoliberalisme ducation.pbworks.co m/w/page/50843529 /The%20Neoliberali st's%20Timeline#

http://news.bbc. co.uk/onthisday/ hi/dates/stories/ february/15/new sid_2544000/25 44355.stm

Bank of England independence from political control

Asian Financial Crisis

Initiated by Thailand floating the baht

Economies of Indonesia, South Korea, Japan, the Philippines and Malaysia effected by contagion

06.05. 97

07.97

http://news.bbc.co. uk/onthisday/hi/dat es/stories/may/6/n ewsid_3806000/38 06313.stm

http://news.bbc.co.uk/ 2/hi/special_report/19 97/asian_economic_w oes/34514.stm

1999 : Dot.Com Bubble

North American Free Trade Agreement (NAFTA) between USA, Canada and Mexico

1997: Asian Financial Crisis

Russia lear

Rogue Trader

Pi

At the height of the dot-com boom. 308 companies went public. The 24 largest totalled $80bn in market capitalization

EURO as an electronic currency launched

01.01. 99

http://dealbook.nytim es.com/2011/03/27/i s-it-a-new-tech-bubble-lets-see-if-it-pop s/

Default Neoliberalism

at the Gate

15.02.99

http://www.bbc http://www.time.com .co.uk/history/i /time/covers/0,1664 nteractive/time 1,19990215,00.html lines/british/in dex_embed.s html

GrammLeach-Bliley Act repealed Market barriers set up by the Glass–Steagall Act of 1933

23. 4. 99

11.99

02.11.99

http://www.cpte ch.org/pharm/s n-may13.html

http://www.nytimes. com/2008/10/09/bu siness/economy/09 greenspan.html?pa gewanted=all

http://topics.nytimes. com/topics/reference /timestopics/subjects /g/glass_steagall_ac t_1933/index.html

The Bank

Global stock Denmark markets votes against suffer as joining EU Dot-com bubble bursts

Foot-and-mouth m disease in Britain B cost = $800mill 0 -2.4bill pounds

03.00

30.09.00

http://www.bbc. co.uk/history/int eractive/timelin es/british/index _embed.shtml

http://www.guardi an.co.uk/busines s/interactive/2009 /dec/30/businessreview-of-the-dec ade

2001 : U.S Recession

Greenspan and Rubin recommend that Congress strip the C.F.T.C. of regulatory authority over derivatives.

2000 : US economy slows

E R US opposes WHO resolution on public health

Boiler Room

2001

http://www.bbc.co.uk/hic story/interactive/timelinv es/british/index_embedx shtml

77

c.co.uk/hi ve/timelin x_embed.

28.06.01

http://www.guar dian.co.uk/busi ness/interactive /2009/dec/30/bu siness-review-o f-the-decade

UK trade deficit at 2.3 bn pounds

USA Pa Act app by the Senate

10.01

21.08.01

10.01

http://www.bbc. co.uk/news/wor ld-us-canada-16759233

http://www.guar dian.co.uk/busin ess/interactive/2 009/dec/30/busi ness-review-of-t he-decade

http://www o.uk/new us-canad 16759233

US enters Steep decline in U.S Stock Market Afghanistan

US Fed Reserve cut interst rates for the 6th time in a year

Greenspan lowers interest rates to limit damage, making mortgage payments cheaper

11. 09. 01

http://topics.nytimes.co m/top/reference/timest opics/subjects/c/credit_ crisis/index.html

Default Neoliberalism

R B

mouth Britain 0mill nds

Britain joins US in Afghanistan a week later

http://www.bbc.c o.uk/history/inter active/timelines/ british/index_em bed.shtml

B O

w.bbc.c s/worldda-3

declared bankrupt after massive falseaccounting comes to light

12.01

http://www.bbc.co .uk/news/world-us-canada-16759233

WorldCom's multi-billion dollar accounting fraud is revealed

President Bush signs into law a bill creating a Department of Homeland Security

100,000 farmers protest NAFTA in Mexico City

06.02

11.02

30. 1. 03

03.03

19. 11. 03

http://www.b bc.co.uk/new s/world-us-canada-16759233

http://www.bbc.co.uk /news/world-us-canada-16759233

http://www.oxfa m.org/en/files/p p030827_corn_ dumping.pdf

http://www.bbc. co.uk/news/wor ld-us-canada-16759233

http://www.carneg ieendowment.org/ 2003/11/09/naftas-promise-and-reality-lesson s-from-mexico-for -hemishphere/3ge

US invades Iraq missile attacks on Baghdad

Carnegie report finds numerous negative consequences of NAFTA

2004: Warning signs

e

Enron

2002: War spending increases deficit

atriot proved

Wolves of Wall Street

10 new states join EU making it the largest trading bloc globally by population

Economists o warn against a US housingS b bubble

01.05.04

07.04

http://www.bbc.co. uk/history/interacti ve/timelines/british/ index_embed.shtm l

http://www.nytim p com/2008/10/24 m siness/economye panel.html n

Housing o prices have risen fastere than inflatioa or househo income sinc 2001

79

.04

p://www.nytimes. m/2008/10/24/bu ess/economy/24 nel.html

O

Kyoto Protocol measures come into force

London Hurricane Bombings- Katrina 52 killed

2004

16.02.05

07.07.05

08.05

8. 12. 05

http://timerime.c om/en/event/107 3289/Capitalism +and+Freedom+ by+Milton+Frien dman/

http://www.bb c.co.uk/histor y/interactive/ti melines/britis h/index_embe d.shtml

http://news.bb c.co.uk/2/hi/e urope/country _profiles/1038 820.stm

http://news.bbc.co.uk/2/ shared/spl/hi/pop_ups/ 05/americas_the_story _of_hurricane_katrina/h tml/4.stm

http://www.ecb.i nt/ecb/html/crisi s.en.html

Government revenue shrank by 30%

ECB warns of financial imbalances

US Government heavily critisized for inadequate response

2006 : U.S housing market Peaks

ousing ces have en faster an inflation household come since 01

Australian privatization: since 1995 production grew by 133%.

Default Neoliberalism

onomists arn against S housing bble

M

US mortgage default and delinquency rates rise but LENDING DOES NOT SLOW The US housing bubble (sub-prime mortgages) was the detonator of a much larger “super bubble” that has been developing since the 1980s - George Soros

http://topics.nytimes.com/to p/reference/timestopics/sub jects/c/credit_crisis/index.ht ml

Soros, George – The New York Review of Books, v55, n19, 4.12.08 “the crisis and what to do about it” p.2

A Good Year

Japan Post Financial markets privatised potentially unstable, says Trichet

Early sign of Wall St issues - Bear Stern hedge fund loss in the mortgage market

Liquidity shortages worldwide

1. 1. 07

06. 07

9. 08. 07

http://topics.nytim es.com/top/refere nce/timestopics/s ubjects/c/credit_cr isis/index.html

http://www.ecb .int/ecb/html/cr isis.en.html

29. 01. 07

http://timerime.c http://www.ecb.i om/en/event/10 nt/ecb/html/crisi 73289/Capitalis s.en.html m+and+Freedo m+by+Milton+F riendman/

Interbank lending slows down

2008: The super-boom unravells...

The Pursuit of Happyness

81 Default Neoliberalism

DEFAULT NEOLIBERALISM

With the culmination of a sixty-year super-boom, the extent to which Western economics and politics were shaped

by Neoliberal capitalism was revealed. Market speculation and privatization encouraged by the Neoliberal agenda provided one of the most prosperous eras for Western culture. But with the systemic and procedural failure of the 2008 economic crisis, it became defined as an era of overextension and lack of financial restraint. By October 2008, European leaders openly blamed a “speculative capitalism� for the worst financial crisis since World War Two.1 This essay traces the rise of the Neoliberal ideology through the vocabulary of capitalism, the acceptance of the individual’s right to profit within politics and the current market fundamentalism that governs economic decision making. Despite current financial volatility and scepticism this essay argues that Neoliberalism remains the dominant ideology, defining the politics of Western cities.

The Western world’s shift from an economy of production to an economy of finance can be understood through the changing vocabulary of capitalism. With the adoption of the neoliberal ideology the definition of the economy shifted from an object managed by the State to the logic of markets as self-governing structures. Initially the term economy referred to physical processes that with the crisis of 1929 had proved their limits. Capitalism’s ideological dominance was weakened and post World War Two there was a battle concerning fundamental economic and governmental relations.2 It was from within this post-war development that the European model of the Welfare State and the corporatist model of the USA emerged.

The conception of the economy as an object to be managed was the driver of the State interventionist system in Europe. Economists particularly, John Maynard Keynes, described the totality of economic relations as a system of monetary circulation. With this proposition the economy became the central object of democratic politics rather than a physical process.3 For Western Europe the post war policies of the 1950s and 1960s were defined by Keynesianism and the management of monetary circulation became a State responsibility.

This Keynesian economic model was opposed by economist Friedrich Hayek. Hayek argued that the logic of markets or the logic of the individual decision maker negated the need for State management.

Leading up to the 1970s there was growing pressure on the social contract between State and citizen.

For many the post war expansion of State influence was considered too great, leading to strikes and protests.4 A growing disillusionment with inflexible institutions and bureaucracy was exacerbated by the economic instability of the oil crisis of 1973.

Promoting the virtue of the individual decision-maker as an economic force and principle for government, Hayek’s theory of markets found a political footing in the governments of Margaret Thatcher and Ronald Reagan. This alternative ordering of knowledge, expertise and political technology came to be known as Neoliberalism and led to the contraction of the State and expansion of the private sector.5 From the 1970s the vocabulary of markets became the focus of political discourse and the West became reliant on a system of international speculation and finance.6 Neoliberalism’s ideological strength lies in Hayek’s construction of an economic theory that backs up a political theory. Neoliberalism is based on the principle that human welfare is maximized and enhanced by a system of private property, free market, free trade and entrepreneurial liberties. In the promotion of

83

this economic model Neoliberals developed a highly persuasive rhetoric that “...the liberty and freedom of the individual could only be guaranteed by free markets, free trade and a strong system of private property rights.”7 Although ideals of liberty and individual responsibility were emphasized, the right over one’s body, free thought, expression and speech were merely derivative rights. It is the individual’s right to profit and the inalienable right to private property that is paramount.

Neoliberalism was sold to the public as liberty from State control but it became an obligation of any enterprise to profit above all else. Since the 1970’s the Neoliberal ideology has been the

justification for the deregulation of the economy, removal of barriers to foreign investment and privatization of State assets. The individual’s right to profit is promoted as the basis of capitalist enterprise; it is therefore seen as a responsibility of the State to protect this right to profit. This position implied a trade-off. Social justice was marginalized and the Welfare State shrunk in the acquisition of market freedom and competition.

economy. Instead it served the individual, or more accurately some individuals. David Harvey argues politics has been consumed by economics or more specifically by the emphasis on the individual’s right to profit. Resolutely Marxist, Harvey is damning of the private sector’s influence on politics, observing it is not the Republicans or Democrats that hold power in Government but the ‘Wall Street party.’8 With the financial crisis of 2008 and subsequent recession the world was reminded of market capitalism’s inherent instability. But although Harvey suggests the protesting of the Occupy movement and the notion of “we are the 99%” is a positive step towards popular democracy, this is optimistic. The influence of this movement is debatable when analysed alongside the current political and economic reality.

Neoliberalism has been used as a tool to legitimize the withdrawal of the State. Perceived State influence has been reduced but the sentiments that initiated this ideology still exist today. A suspicion of the consolidation of control the State represents and a disillusionment with State control remains.

Currently there is intense criticism of European leader’s mismanagement, lack of consensus and indecision surrounding the Euro currency crisis. With the imposition of austerity there is increasing conflict between citizen and State. There is also a growing cynicism regarding the private sector’s influence on the State. US government systems are ridiculed as the corporate model is reduced to a White House controlled by lobbyists.9 And within the UK and New Zealand privatization or asset sales are met with a, seen this before, eye-rolling mentality. The fiscal mining of the Welfare State for surplus is read as governmental desperation and incapability by the media and public.10

Default Neoliberalism

At some point the finance industry stopped being a service industry. It no longer served the State or the

This growing dissatisfaction, conflict and disenchantment combine to undermine the State’s authority. And although it is increasingly difficult to claim privatization and the market hold the solution to the current financial situation, the market’s superiority has not been abandoned.

Paradoxically it is argued there is not enough reliance on markets and privatization to solve financial instability. In fact the transfer of public services to the private sector is now being sold to society as a necessary strategy in the resolving of debt. In New Zealand the government is pushing for the sale of State assets to offshore investors.11 In the US any mention of State funded healthcare gets branded socialist.12 And the European Union’s resolve to protect the common currency has imposed austerity measures resulting in further economic contraction for financially stressed nations.

Neoliberalism has won the battle of the narratives. How this crisis is interpreted, measured and how it should be solved will be debated on its terms. Despite current financial instability the Neoliberal ideology has not been abandoned; the market remains dominant in our political and economic vocabulary. There is no popular discrediting of the market and it remains the dominant politico-economic structure of the West. The market, or more specifically the individuals’ right to profit, has not been challenged. Instead there is currently fierce debate concerning our treatment of it; theories of market behaviour, derivative performance, whether or not it should be re-regulated and to what level and who assumes the power as the regulator.

Addressing the first concern George Soros, trader, analyst and now economic theorist, argues against a market fundamentalism that extended the super-boom and underpinned the financial crisis and calls for a re-evaluation of prevailing theory of market behaviour. Market fundamentalism deems that financial markets tend towards equilibrium and that the common interest of capitalism is best served by “freeing” the market from external influence and allowing participants to pursue their self-interest.13 This prevailing theory of market behaviour and the assumption that the market is “free” has governed the developed world’s economic policy over the last 40 years. But “[t]he severity and amplitude of this crisis provides convincing evidence that there is something fundamentally wrong with this prevailing theory and the approach to market regulation that has gone with it”14 George Soros argues this blind faith of market fundamentalism was based on a false premise. Markets did not have an ability to correct their own excesses and every time credit expansion was at risk, financial authorities intervened by absorbing debt and engineering capital to stimulate the economy. The market’s cyclic nature of boom and bust was ignored and a super boom was prolonged through greater credit expansion thereby creating a false economy of growing debt.

85

With each periodic crisis, tampering was used to reaffirm the free market’s superiority and its tendency towards equilibrium.15 And perhaps if authorities had succeeded in containing the US sub-prime mortgage crisis, it would have been another test and proof of market superiority.

Market fundamentalism falsely preserved the image of the market as stable and fuelled the Neoliberalist and capitalist agenda.16 Furthermore the deregulation of developed economies since the 1980s under Neoliberalism led to a shocking abdication of responsibility and allowed the private sector to function relatively unchecked.

Yet market fundamentalists continue to argue that things did not go far enough; that government involvement was in fact too great, complete deregulation was not achieved and this ultimately exposed the market to weakness. George Soros disagrees; arguing that the defect was inherent in the system, there was no single external force to explain the financial collapse, “the crisis was generated by the financial system itself.”17 Soros believes the current market fundamentalism must be abandoned and proposes that the valuation of markets produces a cyclical “vicious and virtuous”circle that further affects the market.18 Firstly Soros stresses the importance in understanding that markets are susceptible to distortion and bias and therefore do not reflect prevailing conditions accurately. And secondly that the distorted views of the market participants expressed in market prices can affect the underlying fundamentals that market prices reflect. Soros believes this two-way circular connection between price and reality, or reflexivity, defines market behaviour. And as a self-reinforcing system it has the ability to deviate from equilibrium considerably if there is a misconception, misinterpretation or a “bubble” that is ALSO present in reality. 19 These deviations are common in relation to property. Soros believes it is impossible to prevent bubbles in the market but to prevent future crisis, regulators must accept responsibility for preventing asset bubbles from growing too big.

20

Financial engineering must be regulated against and governments must make it

a priority as financial engineering often circumvents regulation.21 A period of credit expansion must now be followed by a period of contraction as the current credit instruments and practices are unsound and unsustainable.22 Financial authorities like the US Federal Reserve are no longer in a position to continuously stimulate the economy to avoid recession.23 Soros acknowledges that change will inevitably be determined politically, through the negotiation of regulators and market participants, but warns that both regulators and market participants base their views on a distorted view of reality.24 The possible succession of deregulation by a punitive reregulation is a valid concern. One echoed by economic historian Niall Ferguson.

Default Neoliberalism

offers the theory of reflexivity as an alternative paradigm. Based on the ideas of Karl Popper, reflexivity

At the 2012 Reith Lectures, Ferguson warned that an over-complication of the market through regulation detracts attention from the necessary enforcement of foul play.25 With a mild contempt for the public sector, Fergusson argued regulation favours codes of compliance over individual and corporate responsibility and instead argued for a greater financial accountability and the enforcement of penalties for current misdemeanours.

Fergusson used the United Kingdom’s IMF loan in the 1970s as a past example of “bad regulation and bad monetary policy”26 believing this approach more damaging than the subsequent deregulation.

And in regards to the Basel 3 and the Dodd Frank Act recently passed in the US, Fergusson argued it exemplified a lack of competence within the regulatory authority. For Fergusson the 80 pages intended to place tighter controls on Wall Street instead produce excessive complexity in legislation, and more room for misinterpretation or misuse.27 Fergusson describes financial markets as an evolutionary process similar to the natural world, believing this is an explanation for regulation’s futility as it is unable to pre-empt progress. Not only is Ferguson’s language obnoxiously metaphorical, but this Leave it up to Darwin theory demonstrates his market fundamentalist position, and therefore bias.

Fig. 20.

David Thatcher

Martin Rowson

87

The expression of suspicion toward a creeping government influence in the economy by both Soros and Fergusson is valid. The overt alternative to the unregulated liberty enjoyed by market fundamentalism over the last 60 years is increased governmental control. In the aftermath of the super-boom,

governments are positioning themselves as economic godfathers, abdicating responsibility for the crisis yet dispelling theory and reform. This position is highly contradictory, in one breath Western politicians condemn a speculative capitalism for the current crisis, yet with this act of shifting accountability from themselves to the private sector they call their own influence or authority into question.

If the State has truly shrunk to this station, does it have the necessary means to restore economic stability? The disillusionment present during the 1960s remains. And in this era of economic insecurity the contract between citizen and State is coming under greater strain. How governments negotiate what is perceived as the economy will define the political climate.

Politicians are posturing themselves as economic analysts. David Cameron’s close relationship with contraction as the solution to EU currency crisis has led to her being dubbed “architect of austerity”.28 (Fig. 21)

Fig. 21.

Queen of Austerity

KALs Cartoon

Default Neoliberalism

the banking sector has earned him the title David Thatcher (Fig. 20), while Angela Merkel’s hard line on

“It’s the economy, stupid”

29

This slogan coined by James Carville during the Clinton presidential campaign of 1992 was applied to the 2012 Obama campaign by New York Times journalist Jeff Sommer, who lamented on the great emphasis economic policy and climate has in the election of political leader.

89

Political leaders are being characterised by their economic position and pitted against each other in the media. Who is best fit to run the country is becoming synonymous with who is best fit to run the economy.

Election coverage reads like a financial CV of the contestants. The French election in April and current US election exemplify the current consumption of politics by economics and an acknowledgement of the States growing role in the management of the economy.

Current financial instability is being blamed on deregulation and used as an excuse to secure greater governmental control of the economy. Conditions will be placed on the bailing out, concessions, aid and economic stimulus packages distributed by the government. It is entirely plausible that in future the State will not just become a market participant, but also a redistributor, a warrantor and purchaser with final authority.30

Governments are not proposing an alternative ordering of knowledge; they are mediating a system few understand. It is not surprising then that citizens are disillusioned. What is then questionable is whether the State holds enough public trust to take charge of fiscal reform? Whether globalized markets pose too great a challenge for singular States? And whether examples of economic partnerships like the EU have the political consensus to implement currency reform? With the vast contextual variation of market economies in the developed world due to Neoliberalism’s uneven geographical development, the future politico-economic climate is difficult to predict.

These issues are highly detached from architectural discourse and excluded from what is commonly accepted as architecture’s sphere. But this separation of architecture from politics should be heavily criticized; in an era of instability any reluctance to engage with political or economic realities will be deservedly scorned. Architecture as a profession is not autonomous; architects are deeply immersed in the structures of property and capital. Architects are active in the construction of the city as the place-makers of ideologies. So architecture must question the political and economic frameworks, perhaps more so in an era of such rapid change.

Default Neoliberalism

But to what end?

Fig. 22.

Howard Roark, Starchitect?

The Fountainhead

91

If architecture fails to engage with politics it could be seen as superfluous, a luxury to be enjoyed in times of boom and ignored during an era of contraction. Architecture will need to position itself, develop the narrative, the brief and their role within a constantly changing scenario. Is the architect the advisor, the artisan, the critic, the businessmen or the socialite? Is the architect perceived as an individual? Or does the role of the architect fracture and specify further, to a point where the singular architect is the myth of the practice?

Architecture has not functioned autonomously over the last sixty years; it has glorified the individual along with the economists and politicians of Neoliberalism. Perhaps the architectural equivalent to

Ronald Reagan or Alan Greenspan is the ‘Starchitect’? Perhaps Ayn Rand’s ‘model citizen’, the individualistic visionary uncompromising in his ambition for progress, is the contemporary basis for identifying the architect?

that The Fountainhead’s Howard Roark be attached to the contemporary Neoliberal city. Ayn Rand’s writing Atlas Shrugged and The Fountainhead glorified the right of individuals to live entirely for their own interest.31 The belief in the legitimacy of private ambition or the “the virtue of selfishness”32 is highly polarizing yet has been widely read over the last fifty years and embraced by libertarians, politicians and free market enthusiasts as a “moral defence of capitalism.”33 Also by extension perhaps Howard Roark’s emotive declaration of the architectural ego, “The only thing that matters, my goal, my reward, my beginning, my end is the work itself. My work, done my way,”34 has shaped the profession, or at the very least the public’s perception of the profession.

In The Fountainhead Howard Roark’s success is measured by the construction of the tallest skyscraper, the lonely visionary who rejects mass opinion in the search for the iconic. In the postmodern condition the iconic has both a capital value and a celebrity status. In an era of excessive monuments to the individual greatness of the architect, Rem Koolhaas and Reinier de Graafs’ wish to divorce themselves from the image of the ‘Starchitect’ is interesting and rather contradictory.35 The similarity between OMA’s Manifesto for simplicity (Fig.25) and Howard Roark’s rejected skyscraper proposal (Fig.23, 24) is surely deliberate. Leaving the question open as to whether OMA’s manifesto is a commentary on the reproduction of unoriginal gestures or just another strategy for maintaining their iconic image?

Default Neoliberalism

If Modernism is to be associated with social housing schemes and the Welfare State perhaps it is fitting

Fig. 23.

Howard Roark’s visionary architecture

Fig. 24.

Original still 00:10:42

The Fountainhead (edited)

The Fountainhead

93 Default Neoliberalism

Fig. 25.

OMA’s visionary architecture

Manifesto for Simplicity

Fig. 26.

The Model Citizen

Klaustoon

95

Architectural production is highly susceptible to the flows of capital, following growth and surplus. If the next boom or growth period is to happen outside of the West, perhaps Western architecture will have to migrate or realign itself geographically. Or perhaps architecture will chase an internal shifting of capital?

As State owned and managed enterprises shrank under privatization, so did architecture’s place in the public sector. Before the New Zealand Ministry of Works and Development was privatized and disestablished in 1988 it employed planners, architects, landscape architects and engineers. As the State becomes a larger stakeholder in the fiscal system, as either regulator or redistributor, what currently constitutes the public sector could increase again. Will the vocation of the State architect re-

emerge? Or will architects remain in the private sector, hiring themselves out as consultants?

Will competition decrease as singular architectural practices hold monopolies over State commissions? Or will architects be simply written out of the equation?

designed by architects employed in the public sector during the 1960s and early 70s. By Reinier de Graaf’s own admission, “In the age of the ‘Starchitect’, the idea of suspending the pursuit of a private practice in favour of a shared ideology seems remote and untenable.”36 But this nostalgic glamorising of public works and civil servants is interesting considering the status of the ‘Starchitect’ is fragile. Perhaps in lieu of this OMA is looking to drum up some business with European councils?

Default Neoliberalism

The recent exhibit Public Works by OMA at the Venice Biennale showcased 15 European buildings

A blind faith in the “free” market has been used to justify the deregulation of markets, the pursuit of self-interest and superiority and stability of market capitalism. With the current culmination of a 60 year super-boom, the world has again been reminded of the market’s inherent instability. But the systemic and procedural failure of the 2008 financial crisis has not led to an attack on the Neoliberal ideology or market fundamentalism. Instead public debate again addresses the role of the State in the economy as a possible regulator and market participant. George Soros and Niall Fergusson represent two positions on the treatment of the current recession and contraction following unprecedented credit expansion. Both question issues of State influence, misconceptions regarding the market and financial policy and highlight the potential political tension possible in the coming years. What both Ferguson and Soros exemplify is the current inability to perceive an economic system beyond the market and an overriding wish to understand or rationalize systems of complexity. The assumption that financial decision making is based on rational choice removes its human element and elevates the system to a position of superiority. This treatment of the market as an extraneous system should be questioned. “The time has come to reconstruct the economic sciences as sciences of the irrational, as a theory of a passion-driven and arbitrary behaviour.”37 In reality the financial decision making of the individual is rarely rational, so it must be assumed that as long as the market is governed by human logic it will be prone to unpredictability, manipulation and frailty.

97

NOTES 1 2 3 4 5 6 7 8 9

10 11 12

14 15 16 17 18 19

20 21 22 23 24 25 26 27 28 29

30 31 32 33 34 35 36 37

Default Neoliberalism

13

Katrin and Nelson D. Schwartz Bennhold, “European Leaders Vow to Fight Financial Crisis,” The New York Times(2008), http://www.nytimes.com/2008/10/05/business/worldbusiness/05euro.html?_r=2&.

Arjen Oosterman, “State, Society and the Corporate; An Interview with Timothy Mitchell,” Volume 30, no. 4 (2005): 10.

Timothy Mitchell, Carbon Democracy: Political Power in the Age of Oil (London: Verso Books, 2011). 418.

1968 student protest in Paris, miner and power workers strike in 1973 resulting in a three day week, the 1973 Oil Crisis, UK currency crisis in 1976 leading to loan from IMF (see Neoliberal Super-boom timeline ) Oosterman, “State, Society and the Corporate; An Interview with Timothy Mitchell,” 10.

Ibid., 11.

David Harvey, A Brief History of Neoliberalism, (Oxford: Oxford University Press, 2005), http://site.ebrary.com/lib/auckland/ Doc?id=10180656. 7.

David Harvey, Rebel Cities: From the Right to the City to the Urban Revolution (New York: Verso, 2012). 159.

Obama’s economic stimulus package is an example of the lobbyists enacting their influence on legislation, “…specialinterest groups were lining up for hand-outs in an economic stimulus bill and urged senators to keep it focused on simple tax rebates.” David Herszenhorn, “Democrats’ U.S. Economic Stimulus Plan Blocked in Senate,” The New York Times(2008) http://www.nytimes.com/2008/02/07/business/worldbusiness/07iht-07usecon.9820532.html.

George Monbiot, “Damaged by the Evils of the Market,” The Guardian(2001), http://www.guardian.co.uk/society/2001/ mar/21/7?INTCMP=SRCH. Claire Trevett, “PM: Nats to Sell parts of State Assets,” The New Zealand Herald(2011), http://www.nzherald.co.nz/business/ news/article.cfm?c_id=3&objectid=10702066.

Ann Marie Cox, “Obamacare Upheld by the Supreme Court, but not yet by American Voters,” The Guardian(2012), http:// www.guardian.co.uk/commentisfree/2012/jun/28/obamacare-upheld-supreme-court?INTCMP=SRCH. George Soros, “The Worst Market Crisis in 60 Years,” Financial Times(2008), http://www.ft.com/cms/s/0/24f73610-c91e11dc-9807-000077b07658.html.

George Soros, “The Crisis & What to Do About It,” The New York Review of Books 55, no. 19 (2008), http://www.nybooks. com/articles/archives/2008/dec/04/the-crisis-what-to-do-about-it/?pagination=false.

Soros, “The Worst Market Crisis in 60 Years”. 1.

Soros, “The Crisis & What to Do About It”. 3.

Ibid., 1.

George Soros, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means, (New York: Public Affairs, 2008), http://ezproxy.ouls.ox.ac.uk:2048/login?url=http://library.books24x7.com/library.asp? B&bookid=28357. 71.

For example real estate bubbles driven by an increased willingness to lead from banks and a rise in property prices , “the misconception is that the value of the real estate is independent of the willingness to lend” in Soros, “The Crisis & What to Do About It”. 2.

Ibid., 4.

Ibid.

Soros, “The Worst Market Crisis in 60 Years”.

Ibid.

Ibid., 2.

BBC Radio 4, “Niall Fergusson: The Rule of Law and Its Enemies,” in The Reith Lectures 2012 (BBC, 2012).

Ibid.

Ibid.

Helena Smith, “Greece Raises Security for Angela Merkel Visit,” The Guardian(2012), http://www.guardian.co.uk/ world/2012/oct/09/greece-security-angela-merkel-visit.

“IT’S the economy, stupid may not be either party’s official slogan in this year’s presidential campaign. But it might as well be.” Jeff Sommer, “Through an Economic Lens, An Election Too Close to Call,” The New York Times(2012), http://www. nytimes.com/2012/01/08/your-money/an-election-too-close-to-call-as-seen-in-an-economic-lens.html?pagewanted=all&_ moc.semityn.

Peter Sloterdijk, “Iconoclastia: News from a Post-iconic World,” in Architectural papers, ed. Florian Sauter (Zurich: ETH, 2009), 72.

Harriet Rubin, “Ayn Rand’s Literature of Capitalism “, The New York Times(2007), http://www.nytimes.com/2007/09/15/ business/15atlas.html?_r=2pagewanted=print&.

Ibid., 2.

Ibid., 1.

Ayn Rand, The Fountainhead, Centennial ed. (New York: Plume, 2005). 579.

Reinier De Graaf, “Manifesto for Simplicity™” (paper presented at the SerpenƟne Gallery Manifesto Marathon, London, 19.10.08 2008).

OMA, “Public Works Opens at the Venice Architecture Biennale 2012,” http://oma.eu/news/2012/oma-opens-public-worksexhibition-at-venice-biennale.

Sloterdijk, “Iconoclastia: News from a Post-iconic World,” 72.