Neoliberal Urban Policy and the Transformation of the City

Reshaping Dublin

A. MacLaren, S. Kelly, A. MacLaren, S. Kelly, Kenneth A. Loparo

• Publisher: Palgrave Macmillan
• Year: 2014
• ISBN:
  9781137377050
• Topic: Politique et relations internationales
• Subtopic: Politique sociale

This book reviews the character and impacts of 'actually-existing' neoliberalism in Ireland. It examines the property-development boom and its legacy, the impacts of neoliberal urban policy in reshaping the city, public resistance to the new urban policy and highlights salient points to be drawn from the Irish experience of neoliberalism.

Part I

Setting the Context

Introduction

The contextual background to the examination of the growing influence of neoliberalism and its impacts on urban policies and practices in Dublin are established in five chapters. Although the rise of neoliberal ideology and its influence on policy have been well covered in the literature, for those unfamiliar with this material the first chapter provides a brief introduction to neoliberalism, noting its rise from obscure academic origins to dominate the character of state policies internationally. It is followed by chapters which examine its increasing influence in Irish decision making at national and local levels, the nature of the financial architecture which was established to facilitate the functioning of finance capital, the changing legal framework for Irish urban planning and the increasingly entrepreneurial manner of its operations.

1

Neoliberalism: The Rise of a Bad Idea

Andrew MacLaran and Sinéad Kelly

Introduction

For almost 30 years, governments internationally have become increasingly seduced by an agenda which has sought to place ‘the market’ at the heart of economic life. It is well summarised by Brenner and Theodore (2002, p. 350) when they state that ‘the linchpin of neoliberal ideology is the belief that open, competitive, and unregulated markets, liberated from all forms of state interference, represent the optimal mechanism for economic development’. Neoliberalism comprises a range of ideas and a theory of economic practices which propose that human well-being is best advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterised by strong private-property rights, free markets and free trade. It is a somewhat unfortunate term because the word ‘liberal’ is often used in common parlance to describe actions which are socially progressive. Here, however, the term ‘liberal’ describes the liberalisation of the conditions under which capital is able to operate and profit seeking facilitated. When applied to policy, it has commonly proved to possess highly negative consequences for labour.

There remains considerable disagreement as to what should be understood as neoliberalism, ranging from its conception as an omnipresent hegemonic force to an unstable contextually specific hybrid (see Brenner et al., 2012). Neoliberalism does not comprise a specific range of policies, a particular strategy or agenda. Within varying geographical and temporal circumstances, it characterises policies which draw upon fundamental general principles which are then applied to specific economic conditions and social problems. The form and content of neoliberalism is therefore quite varied, such policies having been applied with equal enthusiasm by Republican and Democrat administrations in the United States, by Conservative and Labour governments in the United Kingdom and in countries as diverse as Australia, New Zealand, South Africa and Mexico. It is therefore especially useful to examine in a single volume the manner in which ‘actually existing’ neoliberalism (Brenner and Theodore, 2002) has been effected within a single jurisdiction (Ireland) and the impacts that the local application of such policies have had on a single city.

The modern origins of neoliberalism can be traced to the writings of the Austrian political philosopher Friedrich von Hayek who, in 1947, established the Mont Pelerin Society, of which Milton Friedman was an associate. Believing markets to be the most appropriate way to ensure the efficient allocation of resources, the Society was committed to free-market principles of neo-classical economics and vehemently opposed state interventionism and regulation as had been advocated by the UK economist John Maynard Keynes and which typified government policy in many countries in the post-Second World War years. Friedrich von Hayek was awarded the Nobel Prize for Economics in 1974 and Milton Friedman received it two years later.

To neoliberals, the state’s fundamental role was to guarantee the quality and integrity of money (that is, its value by controlling inflation), securing private rights in property, by force if necessary, and to create markets or market relationships where they hitherto had not existed (see Harvey, 2005). Naturally, these ideas attracted ready support from wealthy individuals and businesses who would benefit from such arrangements as markets serve primarily the interests of those with market power – the wealthy. Indeed, mainstream neo-classical economics generally ignores the importance of human need by instead focusing attention on demand, defined as desires backed by money. ‘Demand’ is therefore conveniently assumed to be non-existent if there is no money to support it, even if considerable social needs still exist. The danger of relying upon the market for the distribution of social resources and for dictating policy should therefore be evident where state functions are accorded such a limited role as conceptualised under neoliberalism.

The history of the penetration of political thinking by neoliberalism has been well documented (see Larner, 2000; Jessop, 2002; Harvey, 2005; Peck, 2008, 2013) and needs only to be briefly addressed here. Gradually, the advocates of neoliberal ideas became dominant not only among newly appearing and well-funded ‘think tanks’ and in private-sector financial institutions, which had much to gain from the implementation of such ideas, but also in university economics departments and in key state institutions, especially finance ministries and central banks. It also became a dominant ideology within international organisations such as the International Monetary Fund (IMF) and the World Bank, which ‘became centres for the propagation and enforcement of free market fundamentalism and neoliberal orthodoxy’ (Harvey, 2005, p. 29; see also Peet, 2009). In the developing world, countries seeking the assistance of the IMF and the World Bank were thus required to pursue policies conforming to the new neoliberal orthodoxy. This commonly included the ‘fire-sale’ of public-sector assets, the opening up of their domestic markets to foreign competitors and permitting the free international flow of capital (Klein, 2007). It was a treatment that was later to be applied in first-world countries, such as Ireland, which sought assistance from the IMF in 2010 to cope with the consequences arising from the deregulated operations of finance capital which had brought down the financial system and virtually bankrupted the state itself (Fraser et al., 2013).

A key event in the infusion of neoliberal thinking into the corridors of national government decision making was Paul Volcker’s appointment in July 1979 to the post of Chairman of the US Federal Reserve by Democratic Party President Carter. Volcker was committed to fight inflation, whatever the social cost or unemployment consequences. The so-called Volcker Shock was notably associated with the raising of interest rates. Whereas the real rate of interest had previously been negative, by July 1981 it stood at 20 per cent. It created a deep recession and large-scale unemployment in the United States which effectively broke labour trade-union power (Harvey, 2005).

The rise of neoliberal ideas to the position in which they became forcefully adopted in public policy in the United Kingdom occurred against a background of seemingly intractable economic problems during the 1970s. These included economic stagnation and general price inflation (so-called stagflation), labour militancy and unrest, unemployment, high levels of personal taxation, the cost of ‘underperforming’ nationalised industries and the ever-increasing cost of the welfare state. Born into a wealthy family, the owners of one of Britain’s largest construction companies (Bovis), it was Keith Joseph who was the architect of Britain’s interpretation of neoliberalism. At a time when the underlying ideas of the mixed economy, embracing Keynesian ideas of planning and social engineering, went largely unchallenged, it was Keith Joseph who put together a heterogeneous range of free-market-based ideas into a political strategy which was to become known as Thatcherism and it was he who acted as the driving force for their adoption (Yergin and Stanislaw, 1998).

Since the 1960s, Joseph had been linked to the Institute of Economic Affairs, an offshoot of the Mont Pelerin Society which had provided a platform for Hayek and Friedman. Typical of neoliberal thinking, its agenda involved the achievement of economic goals by setting free the power of capital. Through the 1970s, Joseph became increasingly deeply affected by neoliberal ideas and aimed to convert the Conservative party to its free-market principles. He became intent on exposing the contradictions of the mixed economy and ending the ‘one-nation Conservatism’ which dominated the party’s policies during the years of the post-Second World War social compact or settlement. He regarded that consensus and the activities of the interventionist state as the source of Britain’s post-war woes. Thus, consensus politics was to be replaced by conviction politics. He established the Centre for Policy Studies, a think tank to promote the implementation of policies for free-market Conservatism, and it was he who persuaded Margaret Thatcher to espouse the monetarist ideas of Milton Friedman. Joseph did not advocate a free-for-all, but the role of the state was conceived of as making and enforcing ‘rules to ensure the security of human life, protection against force or fraud, and the protection of those values and standards – social, economic and ecological – which represent the accumulated and current aspirations of our community’ (Yergin and Stanislaw, 1998, p. 103).

The general election of 1979 brought to power a Conservative-party government led by Margaret Thatcher. Taking over from a Labour-party government which had been on the verge of calling in the IMF to oversee the running of the UK economy, the new government vowed to end trade-union power and put an end to the years of stagflation. Thatcher was convinced of the need to abandon Keynesianism, in which the state would actively intervene to smooth out booms and slumps in the economic cycle. Instead, the government was to encourage entrepreneurial initiatives by creating a favourable business climate for private-sector expansion and the inflow of global capital. This would be facilitated by the deregulation of the business environment, notably financial operations, by reducing taxes to promote initiative, entrepreneurialism and risk taking, by privatising public enterprises, by directly confronting trade unions and the power of organised labour and by ‘rolling back’ the welfare state, which was viewed as being largely parasitic on the productive private sector of the economy (Peck and Tickell, 2007).

Subsequently, in January 1981, Ronald Reagan was sworn in as President of the United States. His conception of the role of the state was succinctly encapsulated in his inaugural address when he stated that ‘[g]overnment is not the solution to our problem; Government is the problem’. Reagan confirmed Volcker in position as Chair of the Federal Reserve, his approach to economic problems having been favourably received by the new Republican administration which, like Thatcher’s, was dedicated to cutting taxes, trimming public-sector spending, curbing the power of labour, deregulating industry and liberating the power of American finance capital. The failure of the American air traffic controllers’ strike in 1981 and the summary dismissal of the striking workers heralded a long decline in US salaries and wages (see Harvey, 2005). The Federal minimum wage fell from having been equal to the poverty line in 1980 to just 70 per cent of it by 1990, while the share of National Income going to the top 1 per cent rose to comprise 15 per cent of the total by the year 2000. The income of company chief executive officers (CEOs) in the United States, which in 1970 had stood at a ratio of 30:1 compared to the median income of workers, rose rapidly to 500:1 by the year 2000. Meanwhile, US corporate taxes were reduced from 70 per cent to 28 per cent and the highest tax rate for individuals dropped from 78 per cent to 28 per cent (Harvey, 2005). Similar shifts in the distribution of income occurred in the United Kingdom, where the share taken by the top 1 per cent of income earners rose from 6.5 per cent in 1982 to 13 per cent by 2005, while the poverty rate increased to nearly 16 per cent.

Neoliberalism involved disparate components, not all of which were present in all countries following the new economic path. Neoliberal economic policy became commonly associated with the deregulation of markets, the privatisation of public-sector assets, by the withdrawal of the state from the direct provision of many aspects of social services, either through selling off those operations to private-sector interests or by ‘outsourcing’ such functions to the private sector. This enabled the creation of new avenues for profitable capital investment, affecting the supply of water, electricity, gas, telecommunications, health care, education and even prisons. In later years, increasing use was made of private finance initiatives (PFI), or public–private partnerships (PPPs), to develop infrastructure such as toll roads, light-rail systems and the building and management of schools and hospitals (see Chapter 10). Commonly pursued under the belief that the private sector was more adept at assessing and dealing with risk, this allowed new projects to be developed but to keep those sums off the public-sector accounts. However, as governments can normally borrow more cheaply than the private sector, the latter would therefore need to be highly efficient to make up for the difference in borrowing rates and justify a PFI-based solution (Rogers and Ball, 2012). Moreover, with regard to the transfer of risk to the private sector, if the private-sector partner got into difficulty and had to withdraw, it was normally the state and ultimately the taxpayer that had to pick up the bill. ¹

A key step in the advance of neoliberalism occurred in 1987 when President Reagan appointed Alan Greenspan as Chairman of the Federal Reserve. Greenspan served under several administrations, including that of Democratic President Clinton,² until 2006. Greenspan was an interesting appointment as a Federal regulator because he was an almost Darwinian proponent of the free market. He had been greatly influenced by the libertarian philosopher Ayn Rand, who ardently believed that government was a destructive force and that ‘each man must live as an end in himself and follow his own rational self interest’ (Rand, 1959). She opposed all forms of government control, favouring an absolute laissez faire, free and unregulated economy and the complete separation of the state and economics (Rand, 1959).³ In his autobiography, Greenspan states that ‘Ayn Rand became a stabilizing force in my life. It hadn’t taken long for us to have a meeting of the minds – mostly my mind meeting hers’ (Greenspan, 2007, p. 51). By 1968, Greenspan had ‘long since decided to engage in efforts to advance free-market capitalism as an insider, rather than as a critical pamphleteer’ and, in agreeing to accept the nomination as chairman of the president’s Council of Economic Advisers, he realised that he ‘would have to pledge to uphold not only the Constitution but also the laws of the land, many of which I thought were wrong’ (Greenspan, 2007, p. 52). As Chair of the Federal Reserve for nearly 20 years, he held a profound belief that markets would regulate themselves and that regulation would merely hinder their efficiency.

‘Neoliberalisation’ also came to mean the ‘financialisation’ of everything, a movement of policy away from a concern with the world of production to that of the world of finance (see Chapters 3 and 8). Robin Blackburn’s (2006, p. 39) simple definition of financialisation as ‘the growing and systemic power of finance and financial engineering’, while brief, certainly has strong resonance in the continuing financial crisis where the influence of those engaged in financial activities has strengthened. Neoliberalism became associated with a deepening control by finance capital over all aspects of the economy, over the state (requiring the state to guarantee the financial system itself as a fundamental policy goal) and over daily life itself. Thus, while withdrawing from welfare spending, when the financial sector faced serious problems, the state was expected to bail it out. For example, the US Savings and Loans crisis of the late 1980s, which resulted in the liquidation of 747 such institutions, was estimated to have cost American taxpayers US$124bn (US General Accounting Office, 1996).

Towards ideological hegemony and its consequences

By the 1980s, the intellectual dominance of neoliberal ideas among economists, politicians and the business sector was virtually complete, expressed by Margaret Thatcher’s dictum that ‘There Is No Alternative’ (TINA). ...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• Preface
• Acknowledgements
• List of Abbreviations and Acronyms
• Notes on Contributors
• Part I: Setting the Context
• Part II: The Property Boom and Its Legacy
• Part III: Reshaping Urban Policy and Reshaping the City
• Part IV: Considerations and Conclusions
• Index