Remember 'Occupy Wall Street' and all the fuss about the 1 %?
It was bound to fail.
Why?
Prof. John Weeks of SOAS has an interesting theory- Neoliberalism makes US Presidents, whatever their party affiliation or ideological orientation, do bad things to poor people so as to make rich people richer. This causes poor people to vote for Donald Trump because...urm... well, it's all neoliberalism's fault.
Judge for yourself-
Fifty years of democratic capitalism was the historic accomplishment of the New Deal. Relatively low and stable inequality provided the basis for what some call the “Golden Age” of US capitalism. In 1974 under a Republican presidency (Richard Nixon, replaced in mid-year by Gerald Ford) US income inequality dropped to its lowest as measured by the Gini coefficient.
Subsequently, under presidents both Democrat (Jimmy Carter, Bill Clinton, Barack Obama) and Republican (Ronald Reagan, George H W Bush, George W Bush) inequality rose inexorably. Rising inequality revived social divisions subsumed by prosperity during the “Golden Age.” Donald Trump encouraging and exploiting those divisions is the vehicle for a transition to authoritarian capitalism.
With Donald Trump neoliberalism fulfils its logic, destroying even the illusion of a just society.
Weeks is American. He must know the New Deal failed. What got the U.S out of the Great Depression was the Second World War and then high and sustained military expenditure thanks to the Korean War and the formation of what Eisenhower termed the 'Military Industrial Complex'.
Democratic Capitalism never existed. If it had, Weeks wouldn't have imbibed Marxist Economics back in the late Fifties and early Sixties. His life would have taken a very different turn- viz. hot gospelling the magic of markets and the virtues of the ballot box to the developing world.
What did exist, when Weeks was a young man, was high tax rates inherited from the War years. The US decision to finance the Vietnam War by printing money unleashed inflation which in turn pushed working people into higher and higher tax brackets. This is called 'fiscal drag'. At the same time, Welfare payments soared on the excuse of inflation and because the Govt. was awash with cash. By the time tax thresholds were index linked and monetary policy was reconfigured to squeeze inflationary expectations, the damage had been done. Ordinary people didn't trust the tax and welfare system to redistribute income to the poor or deserving. Rather they resented having to pay for 'welfare queens'. Bill Clinton got the message and did a U turn. This had nothing to do with 'neo-liberalism' or any other catch phrase featuring what had become 'the L word' under the first Bush. The fact is, Govts. don't like handing over cash to poor people. They do like taking cash from working people on some excuse or other but working people understand that Govts. waste most of what they take.
What did exist, when Weeks was a young man, was high tax rates inherited from the War years. The US decision to finance the Vietnam War by printing money unleashed inflation which in turn pushed working people into higher and higher tax brackets. This is called 'fiscal drag'. At the same time, Welfare payments soared on the excuse of inflation and because the Govt. was awash with cash. By the time tax thresholds were index linked and monetary policy was reconfigured to squeeze inflationary expectations, the damage had been done. Ordinary people didn't trust the tax and welfare system to redistribute income to the poor or deserving. Rather they resented having to pay for 'welfare queens'. Bill Clinton got the message and did a U turn. This had nothing to do with 'neo-liberalism' or any other catch phrase featuring what had become 'the L word' under the first Bush. The fact is, Govts. don't like handing over cash to poor people. They do like taking cash from working people on some excuse or other but working people understand that Govts. waste most of what they take.
The other big problem was that the elderly were more numerous, more politically active and also much wealthier and smarter than ever before. Being net creditors, they wanted both high real interest rates as well as soaring asset prices. They couldn't have both which is why we now have a liquidity trap.
Perhaps what Prof Weeks means by 'neo-liberalism' is a situation where ordinary working people have to pay Income Tax and thus resent re-distributive fiscal policy- more especially in an increasingly heterogeneous society where people of a different ethnicity are visibly worse off or more deserving of help.
Clinton and Obama- the first and second Black Presidents- were aware that Welfare dependency was considered a curse by African American intellectuals and this view was quite prevalent among other minority communities as well. Thus neither Obama nor Hilary could put fiscal policy at the center of a reflationary policy to compensate for the monetary shock from the Financial sector. But then FDR too had failed with a reflationary Fiscal policy. Indeed, Kennedy wasn't a Keynesian- he cut taxes rather than raise Government expenditure. Nixon was the first and last avowed Keynesian. He was also the only President to try a Prices and Incomes Policy.
Perhaps if the Democrats had put up a proper 'tax and spend' Liberal- say Biden- in 2008, things might have worked out differently. Still, the Republican minority had a strong card- in the shape of a pretended zeal to see a Wall Street shake-out- which they used very effectively against the Democrats. Perhaps a President who came across as a stupid loudmouth could have called their bluff. Neither Hillary nor Obama fit that bill. Worse still, Obama, as a Black man, didn't want to put cash in the hands of poor and needy people because, for well known historical reasons, a lot of such people have darker complexions. If such people get a little more money in their pockets then their rate of incarceration will go down. They will disengage from Govt. bureaucracies. They will shit upon a 'talented tenth' who have built meretricious careers by claiming to represent their surd alterity.
Oddly, things for them might be about to improve.
Unlike Hillary or Obama, Trump can do stupid. He can do it sublimely well. That gives the White House a 'threat point' which the wonkish Obama sadly lacked. The other thing about Trump is that a lot of people think he is racist. Suddenly redistributive fiscal policy doesn't look such a bad thing from the White working class point of view.
Put cash in the hands of the needy while starving penal or paternalistic bureaucracies. Do infrastructure. Ensure regular 'bail-ins' and 'haircuts' to correct incentive incompatiblity in asset markets. That's what Economic theory counsels.
Weeks disagrees. He thinks Americans have less agency than sub-Saharan Africans. Clearly there must be some sort of I.M.F- a secret Masonic Fellowship of the 1%- which imposes a 'neo-liberalism' invented for the Global South upon the richest and most powerful nation in the world. How does it do it? I think it must be the thought control rays emitted by the Television set. Time to put on the tin foil hats sheeple! Or maybe that's what neo-liberalism wants us to do...
No comments:
Post a Comment