The Thatcher-Reagan neoliberal revolution brought an explicit new approach to incentives to rich and poor: the latter saw their state-subsidised incomes eroded, while tax cuts and deregulation handed the wealthy loads more money.
Meanwhile, public services were subject to stricter spending controls and subsidies to state industries were cut or withdrawn under a British version of the structural adjustments meted out around the world by the IMF.
And we were told at the time that the lady was not for turning because there was no alternative. Or, at least, the alternative would be economic decline and relative poverty.
But a growing network of economists vocally debunk the neoliberal model, claiming it is only tenuously connected with economic reality.
The ghost of Keynes
Among them are the proponents of Modern Monetary Theory (MMT), which is essentially an updated version of Keynesian theory.
Writing about MMT for New Economic Perspectives, Dale Pierce argues that, far from heralding a new age of modern capitalist democracy, Margaret Thatcher’s and Ronald Reagan’s neoliberalism has inflected on us policy by masochists and sadists. He said:
“The public policy reversal that began with Margaret Thatcher and Ronald Reagan promised that the deregulation of capitalism would lead to greater shared prosperity for everyone.
“Today, even though the falsehood of this claim is brutally obvious, the same economic nostrums and stupidities that were used to justify it in the first place continue to be trotted out and paid homage to by a class of financial-media personalities who equate making a lot of money with understanding money. It does not seem to occur to them that financial criminals and practitioners of bank-fraud can get rich through sociopathy alone.”
From this perspective, the coalition government’s attacks on the welfare state could be seen as merely an extension of that sociopathic approach to public policy, particularly as the view grows that the coalition’s overall economic strategy lacks merit.
Ever decreasing circles
Indeed, George Osborne represents an increasingly small minority of pundits and economists who believe austerity has worked as intended. Even the IMF, not hitherto known for its leftist tendencies, has warned the government that it needs to change course.
Given the pain that the coalition’s welfare and NHS reforms are likely to cause, along with the drive to ‘make work pay’, this debate is central to the quality of millions of people’s lives.
The discussion about MMT, therefore, is well timed. Here’s Dale Pierce’s full article to help set the scene.