Deceit and concealment in neoliberalism

Could governments that explicit that their policies and executive acts defend minority interests instead of the general wellbeing and the protection of the environment remain in power? If they did not turn to deceit and concealment there would be no dams to contain popular outcry for transforming a situation that hurts and submits large majorities. Swindles are needed for neoliberalism as well as other governmental regimes to function and reproduce over time.


The context

Neoliberal governments make tough adjustments generating increasing unemployment and loss of purchasing power of middle and popular sectors’ income: salaries, gigs or odd jobs and retirement pensions are on decline, while there is an ongoing increase in the prices of basic goods such as food, medications, and public utility charges (gas, electricity, transportation, and water, among others). The result is an accelerated concentration of wealth in the hands of a powerful minority that controls public policies with the complicity of some sectors of politics, media, and the judiciary. The flip side of this concentration is the increase in inequality, poverty, and indigence together with a growing loss in citizen rights; on top of that there is the repression of the consequent social protest.

Neoliberal policies dramatically contract effective demand making domestic market collapse while increasing external public indebtedness and that of broad sectors of the population who cannot provide for themselves with meager incomes. The situation becomes even more complex for local enterprises, especially small and medium size ones, when the entrance of imported products from countries with competitive advantages is unrestrictedly opened[1]. What happens is an asphyxiation of domestic production for the triple impact of downsize of domestic market, increase in production costs, and the displacement of purchases towards imported goods.

In this context, to justify the imposed course economic models presented as hard truths are used when, in reality, they are ideological constructions that support biased interpretations, theoretical elaborations that serve certain interests. When data from reality contradict their premises and conclusions, favored sectors resort to a variety of modalities to conceal what is occurring and deceit those who are being harmed. We present a couple of concrete cases to illustrate this affirmation.

Swindles regarding imports

Based on statistics that show an avalanche of imports and the closing of large quantity of productive ventures that fail to survive, small and medium enterprises ask the government to take measures to restrain imports. In light of those demands, government officials deny reality and they also present statistics that show a decrease in imports instead of an increase. What a surprise and hypocrisy!

What is happening? When considering the value of imports, there is in fact a decrease in 56% of the items during the last year and an increase in the remaining 44%; these are the stats used by government officials. However, when imports are measured in terms of physical quantities that entered the country, it turns out that 82% of the items grew, some of them quite significantly. What happened is that, on the one side, prices of imports decreased to aggressively enter a new market and, additionally, because the rest of the world is oversupplied (more production than what can be allocated at regular prices) and to “shake off” this oversupply it reduces the sale prices of its products. We should add the unregistered and illegal imports that enter the country as smuggling favored by poor customs controls and corruption.

Reality shows that in addition to the decrease in domestic consumption and the frenzied increase in the costs of energy inputs that already compromises the viability of local producers, there is the displacement of domestic production done by the avalanche of imported goods. This triple bottleneck leads to dramatic productive setbacks, company shutdowns, layoffs and suspensions of workers, reduction and loss of income, a sharp drop in tax revenues, all this accentuating regressive spirals of the economy and the general wellbeing. A situation that the government would like to keep on concealing, cycle after cycle, insisting on and renovating the deceits and misinforming the population.

Swindle to favor banks

 Neoliberal governments use a variety of instruments to favor the financial system, including reducing regulations, freeing capital flows, waving criminal behaviors, pretending not having seen illegal activities, up to the biased management of classical instruments of monetary policy, particularly interest rates and legal banking reserve systems.

In this section and based on the excellent and well-documented recent article by Federico Kucher, we analyze the case of the manipulation of the legal banking reserves; i.e., that part of the deposits the banks accept from the public and must keep immobilized in their reserves without being allowed to use it in loans or in speculation through the acquisition of financial papers.

In the context described above, the Central Bank, in its condition as monetary authority, decided to reduce the amount of such legal banking reserves. The argument used to support this decision is that such reduction in reserves will allow the banks to pay a better interest rate to those who deposit their savings with them. The Central Bank explains “the legal reserve acts as a tax to bank deposits and when it is reduced it makes more attractive for the banks to take deposits, thus, they become willing to pay higher interest rates to attract deposits in fixed-term certificates.” That is, small and medium savers that make certificates of deposit in the banks will be favored. However, things did not happened that way.

Kucher shows that banks did not improve the interest rates that they paid for deposits; rather, as they always try to maximize their profit, they placed the resources liberated by the decrease in legal banking-reserves into financial activities with higher yields of return bagging significant figures to swell their assets and profitability.

Indeed, the management of monetary policies should not be orientated towards securing higher returns for the banks, but rather to contribute to a fair and sustainable domestic development. This way, in a recessionary context the reduction of legal bank reserves thus liberated should be conditioned to be applied not to financial speculation but rather to funding activities of the real economy.

Governing with deceit and concealment

 It is not surprising that neoliberal governments, as well as others of different orientation, must draw on deceit and concealment to govern. In this way they manipulate citizens who do not have reliable information regarding what is really happening in their countries and in the world at large; who are not a few.

Indeed, could governments that disclose that their policies and executive acts defend minority interests, not the general wellbeing and the protection of the environment, remain in power? If they did it, or if information on the acceleration of inequality everywhere were to be leaked, it would be hard if not impossible for them to govern. Swindles are needed to function and reproduce over time. If they did not use them, clarification regarding how our minds have been colonized would grow. If they did not draw on deceit and concealment, there would be no dams to hold the popular outcry for transforming a situation that hurts and submits large majorities.

Therefore, the evaluation of a neoliberal government, as with any type of government, should not be based on what they state but rather on the impacts and effects of their actions.


[1] . This could be the case because of having mature industries that were protected in the past and now have an aggressive management to conquer emergent markets based on commercial and productive expertise, modern technologies, and profuse funding; or because they poorly pay their workers and they assault nature without caring for and even less assuming any of the huge environmental costs they generate.

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