I define neoliberalism as political support for economic policy that selects for shareholder primacy culture, which is proxied by rising income inequality. That is, the primary function of neoliberalism is to increase the fraction of income and wealth that go to the top income percentiles at the expense of everyone else. Rising income inequality breeds political instability and possible large-scale violence, higher housing costs, and lofty stock market valuations, leading to possible financial crisis.
The US faces a tremendous challenge to build stuff. Whether it is the need to shift away from CO2-generating energy sources or building the war production necessary for a possible war with a peer nation. Neoliberalism produces an economy poorly suited to building stuff and has required increasing amounts of government life support to keep functioning.
Energy production requires the manipulation of a large amount of physical material and will always have substantial cost inputs unlike non-physical software. It cannot both be cheap and earn the high margins necessary for success under neoliberalism (see below). The same thing is true for things like affordable housing or healthcare. Such things earn low margins, preventing progress. I previously discussed this issue using a different framework but came to the same conclusion. Progress along these lines is not possible under neoliberalism without government intervention, perhaps something along the lines of what Noah suggests here.
But there is an even bigger problem. Some commentators define neoliberalism as having an excessive focus on growth as opposed to meeting human needs. This is flatly wrong. Neoliberalism is about growing financial asset values, Economic growth that happens under neoliberalism is a side effect of the primary pursuit. Figure 1 compares the financial and economic performance of the current Neoliberal Order (1981-present) with its predecessor, the New Deal Order (1937-1981). The data is divided by color into several categories, each explained below:
Shareholder returns (pink): The most salient difference here between the New Deal and Neoliberal Orders is in the balance between returns from dividends and capital gains. Under the New Deal, the bulk of total return came from dividends. Capital gains returns were even negative during the 1970s decline phase. In contrast, capital gains have provided the bulk of total return under the Neoliberal Order.
Capital Allocation (blue): Here we look at the size of dividend payments, share buybacks and retained earnings as a percent of GDP. Dividend payments have been about the same in both orders. The greater returns from dividends during the New Deal Order reflect the lower stock market level when these were paid out. A sharp difference between the two eras has been the amount of stock buybacks. These largely did not happen before 1982, when the Reagan administration made a SEC rule change enabling buybacks.
During the heyday of Neoliberalism (1981-2007) funds equal to 2.5% of GDP per year were injected into a market with an average value of 0.73 of GDP. This would be expected to produce capital gains returns of 3.4% (=2.5%/0.73). Subtracting this from the observed 5.8% capital gains return yields a 2.4% “natural” capital gains return, which is about the same as that seen during the New Deal Order. This suggests that the difference in shareholder returns for the two periods is due to the fact that stock buybacks were used to juice higher capital gains in one of them. Since 2007, the quantity of profit spent on buybacks has been larger, but the market level has also been higher, so the impact on capital gains returns at 3.6% (=4.4%/1.22) has been about the same as before. The high stock price has meant dividend returns have been smaller, leading to lower total returns compared to those during the neoliberal heyday, but still larger than those seen during the New Deal era. Shareholders have done very well under Neoliberalism, which is one reason why I see Neoliberalism as a politics and economic policy that centers the interests of shareholders above all else.
Figure 1. Financial and economic statistics for the New Deal vs. Neoliberal Order
Investment (green): Investment has been stronger throughout the neoliberal period than it was during the New Deal heyday. The way investment has been funded changed under the Neoliberal Order. Investment has increasingly relied on debt, rather than retained profits. Net investment of profits has fallen from about 3½ percent of GDP during the New Deal era to 0.6% during the Neoliberal heyday and to zero since 2007. Profit not invested has been used for stock buybacks in service to shareholder primacy.
Under the New Deal order, business debt relative to GDP grew modestly, while government debt outstanding (measured as cumulative deficits) relative to GDP actually fell. Total business plus government debt relative to GDP fell during the New Deal heyday, and rose by only 0.15 points/year over the New Deal decline phase. In contrast, business plus government debt as a percentage of GDP rose by 1.1 points/year during the neoliberal heyday, and a whopping 3.5 points/year since.
Chronic deficits have reflected tax cuts on higher-income individuals, corporations, and investment income, and since 2008, reduced revenue following the financial crisis, pandemic stimulus, and government effects to subsidize industrial development given lack of business interest in it as unaligned with shareholder interest. These trends all show a bias in favor of the wealthy and the investor class that is at the core of shareholder primacy culture.
Economic outcome (purple): The strongest economic growth was seen during the heyday of the New Deal order. Solid wage1 growth and stock returns were achieved then, demonstrating the stakeholder culture of the time, under which business balanced the interests of employees and consumers equally with those of shareholders. This contrasts with the results during the heyday of neoliberalism. Growth was reasonably strong, shareholder returns were much higher while wage growth was negative, more evidence that the economy was being managed to prioritize shareholder interests.
Strong investment has been made under Neoliberalism. It simply has not led to the sort of outcomes that it did under the New Deal Order. There is a reason for this. Stock buybacks are a capital investment like any other. The return on a stock buyback is the capital gains return (dividend return would simply be the company paying itself the money and so is irrelevant). During the Neoliberal heyday capital gains returns of 5.8% were greater than the 4.4% ROC generated during the New Deal era. Investments in capital intensive, industrial, manufacturing and energy sectors that provided that strong wage growth under the New Deal order did not generate a ROC competitive with the return from stock buybacks during the Neoliberal era. Investment in such things was discontinued in favor of the less capital-intensive financial, service and tech sectors that provided higher returns. This trend toward a focus on maximum financial return is as shown by rising ROC over time (see green section in Table 1). Noah Smith gives an example:
I’m guessing it’s all about financial returns. The “Big Tech” companies are absolutely gargantuan — they’re the most valuable companies in the entire world. And yet they didn’t cost a lot of money up front. Amazon is now worth $1.75 trillion, but the total amount it raised from private markets before its IPO was only $8 million, in a single Series A round in 1996. At the time, Amazon was valued at just $60 million. Even accounting for inflation, that’s a return of over a million percent!
How can we restore an economy that works for all of America?
The answer seems simple. We should return to something resembling the New Deal Order in order to select for stakeholder culture. But how do you do you do this? My best guess is to try something like what worked last time. It has been 16 years since the 2008 financial crisis. Major financial crises happened at roughly 18-year intervals before the New Dealers banished them: 1819, 1837, 1857, 1873, 1893, 1907, 1929. Now that the Neoliberals have brought panics back, the old cycle length may reassert itself (or not). If this idea is correct, we should be seeing another one sometime during the second half of this decade. Assuming such a crisis happens, policymakers should take advantage of it to do a second New Deal.
When the first post-New Deal financial crisis hit in 2008 the authorities responded with the TARP program and QE policy that served to stabilize financial markets. The result was neoliberalism was preserved. Top 1% income share that stood at 18.4% in 2007 has continued to rise to just under 21% in 2022 and stock market valuation has increased by over 60% from the precrisis high.
An alternative to this is a riff on the policy called for by Treasury Secretary Andrew Mellon in 1929: “Liquidate crypto, liquidate stocks, liquidate private equity, liquidate real estate." President Hoover recalls in his memoir2 that Mellon
insisted that, when the people get an inflation brainstorm, the only way to get it out of their blood is to let it collapse. He held that even a panic was not altogether a bad thing. He said: "It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people."
Secretary Mellon’s original advice called for liquidation of labor and farmers, which I have replaced with crypto and private equity, but otherwise the advice is unchanged. The reason for the substitution is that the excesses of four decades of neoliberalism have led to excessive speculation (crypto), extreme financial valuations (stocks, real estate) and overemphasis on financial return above all else (private equity). Little of the benefit has gone to labor or farmers.
The main reason for what has been called the “wall street bailout” was the fear of another depression due to massive layoffs resulting from the panic. We now know that the US economy can withstand sudden idling of one-sixth of the workforce without serious harm if it is accompanied by government support payments, as were pursued during the pandemic. Policymakers would repeat this during the liquidation phase.
Commercial banks and other financial institutions undergoing bankruptcy would proceed through a chapter 11 type reorganization process operated by the government (as it would be too much for the courts to manage in a timely fashion). As in normal chapter 11 bankruptcies, the existing shareholders would be wiped out and new equity issued with which to compensate creditors. Here creditors like pension funds who represent many voters would get priority over investment banks, foreign investors, private equity and other entities representing a small number of voters. The idea here is to throw financial backers under the bus in order to pacify angry voters. Government intervention should be restricted to shielding ordinary Americans from the carnage that forty years of economic policy malfeasance did to America. Otherwise, the panic should be allowed to liquidate itself to “purge the rottenness out of the system.” To give an idea of how big of a decline this would entail, the S&P 500 would probably fall into the neighborhood of 1000.
A lot of money would need to be injected by the government to support the economy during the decline and to settle accounts. Such a large injection of funds would create risks for inflation and for a return to neoliberalism as happened in 2008. To avoid this. large increases in tax rates and other policy changes would be necessary. To make large tax increases possible it is crucial that the stock and other financial markets be allowed to find their natural bottom so as to generate the urgency for the government to do something and to reduce the immediate impact of the tax changes (e.g., higher capital gains taxes have no effect on you if all you have is losses) and the political resistance to them.
The 1999 and 2017 tax cuts would be repealed, bringing corporate and capital gains taxes back to where Reagan left them. Dividends would return to being taxed as ordinary income. SEC Rule 10-18b permitting stock buybacks would need to be repealed and additional 50, 60, and 70 percent upper tax brackets would be added. The purpose of these last two policies is to discourage a culture in which the sole criterion of success is shareholder value in favor of one based on a variety of indicators of business success. Much more will obviously be needed to navigate such a tumultuous economic event, but these are key elements.
Even with the higher taxes, deficits will still persist, and it may become necessary to reduce interest payments by minting $1 trillion platinum coins for deposit at the Fed in exchange for $1 trillion. This money will be used to redeem mature Treasuries and to finance operations without incurring new debt, reducing the debt and interest costs. This is a controversial idea that creates a direct link between deficit spending on monetary expansion, but given the rate at which interest payments which serve no public purpose are crowding spending on real needs, drastic action to address this problem will be necessary in the not-too-distant future.
Readers can reasonably ask whether things can be fixed without a crisis. I used to think so, but no longer do. An economy that works for all is a much less unequal one, which means financial losses for current wealth holders will accompany any return to such an economy. Dealing with the risk of political violence means dealing with the problem of inequality-generated political instability arising from excess numbers of elites. That means large numbers of current elites need to be stripped of their elite status, preferably through peaceful means. Wealthy elites run the country, they would never voluntarily accept to be shorn of much of their wealth and their status as elites. Such a humbling must happen through the natural consequences of their economic policy. What the ordinary people can do, if they are organized and prepared, is to oppose the use of public monies to prevent such a humbling (as happened in after 2008) and to support the use of such monies to shield ordinary people from the harm caused by the collapse of neoliberalism.
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For wages I use the unskilled labor cost series from Measuring Worth adjusted for inflation with the CPI. Some 44% of the workforce falls into this category of labor and I believe it represents the best measure of the effects of economic policy on the labor market.
Mary Douglas was an anthropologist, Catholic and hierarchist (her term) by inclination, and married to an old school economist who quit the Conservatives government thingy he was in, once Thatcherism took over.
This tidbit from Perri 6, and Paul Richards. 2017. Mary Douglas: Understanding Social Thought and Conflict. New York, NY: Berghahn Books.
Amen. Shareholder primacy is literally the mother of all perverse incentives.
As my namesake implies, we need to, at a minimum, restore the Glass-Steagall Act, ban stock buybacks, and restore the high (70%+) top marginal tax rates that prevailed before Reagan. Yesterday.
We absolutely need to implement, at a minimum, a Universal Basic Income (UBI) with no strings attached, period. Any sentence about economic policy going forward that doesn't contain "UBI" is an incomplete and incoherent sentence.
Austerity kills. What we really need is Overt Congressional Financing (OCF) to put the lie to the Big Lie of economics, namely, that federal taxes actually fund federal spending. We need to embrace Monetary Sovereignty.
I assume it is. I have focused on the US since that is where I live and understand the history and politics. More importantly I have a full set of data. I am in pretty good shape for the UK too, except I don't have as full of dataset. Like I cannot determine where there were two or one secular cycles between the Glorious Revolution and WW I.
With the US the data are clear and we even had a civil war plus a mass emancipation that counts as a clearcut example of inequality reduction.
I largely agree with you. However, you do realise you are talking about both a shift towards investment in companies AND and investment in public infrastructure. A lot of the Infrastructure bill was good, but restoring SALT deductions was the biggest single ticket item of all. There also needs to be a shift away from needless bureaucracy. One of the basic imbalances of Peter Turchin's thesis of Elite Overproduction is that it creates a stimulus for undergrad female employment, at the expense of male employment in the infrastructural economy.
The UK is indicative here. Sure, we've been running a shareholder primacy model the same as you, but we've also been neglecting public investment for decades. It shows. Visitors to the UK see the difference- we are a rundown country. But it's not as though the Western Europeans haven't been running neoliberalism as well, but they have been applying the public purse to things like social housing, when in the UK the kneejerk response is to increase structural public employment or shift a government call centre to an economically deprived area.
It's the wrong type of labour to reverse a decline.
The Europeans have been running at about 3% for decades on infrastructure, the difference shows on both sides of the Pond.
By my definition Germany, France and Sweden have not been running neoliberalism because their income inequality has not risen all that much. Their executives don’t get paid near as much as those in the US do.
For me, neoliberalism is not about free market, business-friendly policies. but rather a business culture
Sweden is like another world, mate. Their government is efficient. Their stronger worker protections are a bit overbearing, but they've produced a hell of a lot of IP, without it being stolen out from them. Plus, they've recently had a couple of heavy finds on mining. They've found an incredibly good balance, but it's not a government imposed business culture.
Germany is dying. One in three manufacturing firms are considering offshoring. A sad end to a giant, which since the 1890s was a manufacturing export economy- all because of their obsession with green energy.
France is neoliberal but with a better degree of protection. Their government fears their citizens! Vive la France!
I agree with you in many ways. But the whole nice guys finish last thing was both morally abominable and predictable, given 60s culture split liberty into freedom and duty.
I guess what I'm saying is have you considered that most of the behaviour you've observed might be particular to the USA?
I took two business trips to Sweden. It was a trip, everyone speaks English it seemed. The professions were super fluent in spoken and written English. We were writing regulatory documentation in English. I learned there system which was marvelouslt logical and I used it for years after I got back to the states.
It's a country that has its head screwed on right, though their trains got stuck in the snow 😉
It’s not surprising at all. When was the high point of the New Deal order, the economically left system under FDR? In the 1950’s. What is the time that social conservatives like to look back to? The 1950’s.
In a democratic polity no party or faction has a monopoly on all aspects of life. The dominant one will choose to occupy what FDR called the “high seats of our civilization” that is have a bigger say on the big issues economics and foreign policy (war vs peace). This cedes the smaller social/cultural issues to the opposition.
So, when the left of center holds the high seats they will not put energy into pushing a left framework into the smaller social issues for fear of losing the narrative on the big ones. The result is a more social conservative culture.
In America, after the Democrats mismanaged the New Deal order by letting the inflation genie out of its bottle. What they did was drink from the same bottle that intoxicated George W Bush and cut taxes in the same year as they started a large scale war of choice. (Bush went above and beyond doing this twice). They also passed civil rights legislation and expanded the welfare state.
This is a lot, much of it unpopular with some portion of the electorate. As the left party they had nothing to gain from the war against communism or the tax cut for the rich. Had they nixed this, cut defense spending by a fourth (which was running at 8% during peacetime!) they could have their Great Society programs and still maintain budget balance. Without the war Johnson would have won re-election and the Bretton Woods system would not have collapsed in 1971.
But they did not do that. Instead, they lost the high seats to the Republicans in 1980 and since then it has been on the social/cultural “small issue” on which Democrats have pursued a left agenda.
My post is a call for Democrats to reclaim the high seats from the Republicans and to focus on economic issues and not the social ones.
I’ve often thought there should be a place somewhere for retired military and feds- a special place where they get to serve one last time and call bullshit. The budgetary expenses rarely meet the needs on the ground,
Sack DEI for a start- the military is rare instance of forging an entirely new ingroup. I’ve looked at the data- that team ‘spirit’ is about the only thing which over-writes everything else- and some Hormone Replacement apparatchik with an axe to grind is only ever going to serve the brass,
Also, bring an end to the Dep. of Ed. whilst protecting pensions. Here in the UK we’ve closed the racial attainment/exam gap. You won’t find anything anywhere about how they borrowed from Northern Ireland (other than PISA). People don’t celebrate their utter failures. The Northern Irish Catholics reversed the socioeconomics with little more than discipline and setting high standards.
There is no reason for any unemployment after any government dictated fiscal or monetary adjustments. It'd just be a policy mistake. Just institute a full employment policy (increase public sector hiring where work is needed, and add a job guarantee for local community needs, eliminate "volunteerism", all volunteers should be paid a decent wage (and allowed to refuse it! (Some will!))). Settling of accounts cannot create inflation risk, people have insatiable desires to save. The QTM theory of inflation has proven wrong under floating exchange rates time and time again. So no need to fear monger about inflation. The monopoly issuer of the currency tells you what their tax credit is worth and how to get it. If they want to keep devaluing the currency by issuing interest-income via bonds to people who already have money in proportion to how much money they already have, then that's on them for being idiots, vote them out of office.
If QTM considerations are invalid then why would there be taxes at all? The coin option I inserted in there is essentially unlimited money printing. If we can mint as many coins as we want, then why tax? Why not provide a job guarantee, Medicare for all and UBI?
The reason why I think you can’t do all that without inflation is based on quantity-type arguments, though not classical QTM. I have not idea of what the validity of this approach may be, I am currently testing it.
Your ideas are not without merit but need refinement. I wouldn't ban volunteers, but how about shifting welfare into a monthly or weekly NIT payment and then pay a bit more for volunteering! That way it would actually transition people into the value economy.
Here's how it would work. The three main constituents of basic welfare equate to around $7K a year, excluding housing and child allowances. Drop that to $6K a year, $500 dollar a month, but pay people $4 an hour for volunteering, even if it's self-employed recycling. After the $6K a year, plus the $160 maximum a week, for every three dollars you earn, you get taxed back a dollar. This would be particularly important for childcare. Studies shows that long-term outcomes decline if adult-to-child ratios are less than 1:3. Why not pay mothers to be part-time classroom assistants? It's the only way to make universal pre-school childcare a reality without crippling expense. I'm not saying that their shouldn't be credentialed pre-school class teachers (my brother's Swedish wife is one), or fully paid and unionised classroom assistants- just a lot more volunteering class helpers.
Here in the UK 9.4 million people are claiming welfare, of some form or another. One of the most common complaints amongst universal credit claimants is that they don't want to have to go through the rigmarole of applying again if they take on a job which only lasts a couple of months. It's also completely unfair to working mothers who drive minicabs part-time. There is absolutely no provision for people, who through personal preference and home needs, only want to work 20 hours a week.
Your quote on QTM doesn't deal with the meat of the issue. It's not about whether fiscal stimulus is a good thing or not, but more about what's it for, by how much and for how long? People forget that inflation was running a little hot in the Biden economy before Ukraine.
And let's not forget that one of the main results of Ben Benanke's QE to prop up the stock market, was useless digital media companies which were over-valued, nobody wanted and created using an obsolete corporatist model for media.
Yeah, your ideas have merit too! I'd say take the path of least resistance to get better macroeconomic policy, and focus on full employment in non-bullshit jobs. So start with increased hiring in the public sector, plus a buffer of a Job Guarantee. Policy for volunteerism can be as you suggest, but I'd like it to be whatever is fair and can get through the vote in parliament! There is enough room in "what is fair" I think to get some majority support.
When the job guarantee is framed as a more efficient employed buffer of labour rather than a wasted unemployed buffer, it gets support form all sides of the aisle.
I note what Mike wrote that some of my points are orthogonal to his article, so I apologize for that, but I had to let off some steam the other day.
Provided there are no jobs for the technocratic class. We're supposed to learn shit like engineering and criminology, to be useful- rather than offer nothing more than fine word and parsnips. The real magic with economics and criminology is raising opportunity costs BTW. Scottish Public Health Policing.
I called the Tory Party racist for that one. Got an apology from someone who disagreed, and then 50 retired senior police officers wrote a letter to The Times. Said the Tories were too dumb to see that there had to be a path for Youth Reform, for kids who had been told all their lives that they were thick. High proles are trade professionals BTW- they earn good money- that's a decent alternative to making money from nosebag.
Labour are as bad. Beyond a certain age, criminals are trouble- but less so once they get past 34.
A great many young folks of all races ARE thick. Does that mean we should just let them rot? That seems to be the stance of the elite Right with all their focus on IQ.
As for the Left, they tend to patronize the lower class, saying its OK when they act out. This isn't any better.
No, but heterodox economics offers a better vision for their futures than the type of blank slatism which categorises the Left. Sure, tertiary education helps, but it's all a matter of how much and for whom- a lot of the envisaged jobs for the future which the left has predicted for the past thirty years or so were only really achievable for people towards the tail end of the curve.
Germany probably got the 30% of the population going for tertiary correct, but it's worth noting that they encompassed a whole lot of more technical jobs trained in university settings than most university systems in the Anglosphere.
More generally, we need to concede we've essentially shaped the West into a cognitive hierarchy. We've constructed a unidimensional picture of merit which is fundamentally mechanistic rather than organic- in nature heterodox rocks, as it does in the system of heterodox economics which works so well precisely because it mirrors natural organic systems.
I can remember sitting in Clearwater Bay, Hong Kong back in the early nineties listening to a Philosophy Professor espouse the viewpoint that the West was going to sell the Chinese marketing, PR, financial services and innovation. It sounded hubristic even then, based on the foolish notion that just because the average Chinese Philosophy students couldn't write an essay discussing the ethics of tipping, they wouldn't be much good at the 'creative' economics upon which we prided ourselves.
Never mind that we can't teach kids to be creative, entrepreneurial, or magically confer high IQ.
Johanson write "we need to concede we've essentially shaped the West into a cognitive hierarchy"
I don't think we need to throw our hands up and say nothing can be done. Thai is bollocks.
Capitalism is fundamentally about the accumulation of capital. Today the capital being accumulated is financial, market capitalization. An extreme example is Bitcoin, a trillion-dollar financial enterprise that performs mathematical calculations, the product of which is plowed directing into the financial product whose market capitalization rises with time. It creates nothing tangible.
In a world where the intangible, the abstract, is most highly valued. This puts a premium on those good at this sort of thing (hi-IQ folks). Now suppose we actually did what I call for in the post. Market capitalization was fall and not recover. Bitcoin would crater and never recover. Trillions of dollars of financial "wealth" would be "destroyed" and yet no real tangible wealth will have disappeared. Existing executives would retire, unwilling to work for less, but there are always those who want to be in charge, for whom the prestige from just being the boss in enough and do not need hundreds of millions or billions of dollars they will never spend to feel like a winner.
Life would go on and we would do more real stuff and need people to do real stuff. Wage levels and career prospects would reflect that and the market will redirect human resources in new directions achieving a number of societal benefits as a side effect.
Yeah. Thing is, we are *all of us* THICK about something. Even in my specialty of theoretical physics there are works I cannot make any sense of, and do not even wish to grok.
The public sector hiring should be for skilled useful work, and there I'd 100% agree with Geary. The thought also occurs that Libertarians often complain a bureaucracy is waste, but if it is effectively policing white collar crime it is a net benefit (the tax only generates a demand for police work, not the funds for the work). Think of the recent anti-trust cases. There is a lot more low hanging fruit in white collar crime prevention to be had, a lot more, tonnes, and it'd all benefit law abiding firms (their taxes are not paying for the enforcement).
BTW, the Job Guarantee is for anyone wanting work so their lives are not wasted, a good JG policy would permit people to do anything they want to do which their local community can see to getting done, it does not have to be efficient, it only has to be of some public good, however small.
Astute point on the white collar crime thing- few people realise what a debt we owe to the FBI financial crimes unit, in terms of rolling up Al-Qaeda through the Saudi Group.
Quantity of money does not determine inflation (essentially b.c. savings desires are insatiable). It is *rate* of spending/investment that *causes* inflation pressure, and even then only to first order the relative price adjustments, not necessarily the absolute price level. The price level is determined by government policy, whether they know it or not. Specific price adjustment for specific goods is not inflation, and is more often due to mark-up adjustments and changes in relative value at the margins. Then there is the foreign monopolist setting price for energy, a huge component, and that's not real inflation, the government can, and should, re-gauge the currency as the appropriate fiscal adjustment. If it is a one-time re-gauge in response to a foreign monopolist setting price upwards then it is not inflation. Inflation is a continuous rate of change of the price level. At least that's the proper language frame progressive aught to be using, if they regard themselves as responsibly informed about macroeconomics..
you may find my recent post of interest, about Homo economus a zombie or npc among other missing souls,
https://whyweshould.loofs-samorzewski.com/missing-institutions/
Mary Douglas was an anthropologist, Catholic and hierarchist (her term) by inclination, and married to an old school economist who quit the Conservatives government thingy he was in, once Thatcherism took over.
This tidbit from Perri 6, and Paul Richards. 2017. Mary Douglas: Understanding Social Thought and Conflict. New York, NY: Berghahn Books.
Amen. Shareholder primacy is literally the mother of all perverse incentives.
As my namesake implies, we need to, at a minimum, restore the Glass-Steagall Act, ban stock buybacks, and restore the high (70%+) top marginal tax rates that prevailed before Reagan. Yesterday.
We absolutely need to implement, at a minimum, a Universal Basic Income (UBI) with no strings attached, period. Any sentence about economic policy going forward that doesn't contain "UBI" is an incomplete and incoherent sentence.
My comment to Noah:
Austerity kills. What we really need is Overt Congressional Financing (OCF) to put the lie to the Big Lie of economics, namely, that federal taxes actually fund federal spending. We need to embrace Monetary Sovereignty.
https://www.josephmfirestone.com/
Paging Dr. Firestone! Literally. And Rodger Malcolm Mitchell as well.
https://mythfighter.com/
(Mic drop)
I assume it is. I have focused on the US since that is where I live and understand the history and politics. More importantly I have a full set of data. I am in pretty good shape for the UK too, except I don't have as full of dataset. Like I cannot determine where there were two or one secular cycles between the Glorious Revolution and WW I.
With the US the data are clear and we even had a civil war plus a mass emancipation that counts as a clearcut example of inequality reduction.
I largely agree with you. However, you do realise you are talking about both a shift towards investment in companies AND and investment in public infrastructure. A lot of the Infrastructure bill was good, but restoring SALT deductions was the biggest single ticket item of all. There also needs to be a shift away from needless bureaucracy. One of the basic imbalances of Peter Turchin's thesis of Elite Overproduction is that it creates a stimulus for undergrad female employment, at the expense of male employment in the infrastructural economy.
The UK is indicative here. Sure, we've been running a shareholder primacy model the same as you, but we've also been neglecting public investment for decades. It shows. Visitors to the UK see the difference- we are a rundown country. But it's not as though the Western Europeans haven't been running neoliberalism as well, but they have been applying the public purse to things like social housing, when in the UK the kneejerk response is to increase structural public employment or shift a government call centre to an economically deprived area.
It's the wrong type of labour to reverse a decline.
The Europeans have been running at about 3% for decades on infrastructure, the difference shows on both sides of the Pond.
By my definition Germany, France and Sweden have not been running neoliberalism because their income inequality has not risen all that much. Their executives don’t get paid near as much as those in the US do.
For me, neoliberalism is not about free market, business-friendly policies. but rather a business culture
I explain this in more detail here.
https://mikealexander.substack.com/p/why-i-dont-think-neoliberalism-is
Also I have no idea to what you are referring to here:
One of the basic imbalances of Peter Turchin's thesis of Elite Overproduction is that it creates a stimulus for undergrad female employment
Sweden is like another world, mate. Their government is efficient. Their stronger worker protections are a bit overbearing, but they've produced a hell of a lot of IP, without it being stolen out from them. Plus, they've recently had a couple of heavy finds on mining. They've found an incredibly good balance, but it's not a government imposed business culture.
Germany is dying. One in three manufacturing firms are considering offshoring. A sad end to a giant, which since the 1890s was a manufacturing export economy- all because of their obsession with green energy.
France is neoliberal but with a better degree of protection. Their government fears their citizens! Vive la France!
I agree with you in many ways. But the whole nice guys finish last thing was both morally abominable and predictable, given 60s culture split liberty into freedom and duty.
I guess what I'm saying is have you considered that most of the behaviour you've observed might be particular to the USA?
I took two business trips to Sweden. It was a trip, everyone speaks English it seemed. The professions were super fluent in spoken and written English. We were writing regulatory documentation in English. I learned there system which was marvelouslt logical and I used it for years after I got back to the states.
It's a country that has its head screwed on right, though their trains got stuck in the snow 😉
You know what an awful policy wonk I am by now? I'm sick to death of Christian (my bro) saying to me, yeah- we've already got that in Sweden!
It's surprising such a politically Left country can be so socially conservative.
They really don't do small talk.
The one standard that always needs lifting is the electrical code- ask the firefighters, it bloody saves lives.
It’s not surprising at all. When was the high point of the New Deal order, the economically left system under FDR? In the 1950’s. What is the time that social conservatives like to look back to? The 1950’s.
In a democratic polity no party or faction has a monopoly on all aspects of life. The dominant one will choose to occupy what FDR called the “high seats of our civilization” that is have a bigger say on the big issues economics and foreign policy (war vs peace). This cedes the smaller social/cultural issues to the opposition.
So, when the left of center holds the high seats they will not put energy into pushing a left framework into the smaller social issues for fear of losing the narrative on the big ones. The result is a more social conservative culture.
In America, after the Democrats mismanaged the New Deal order by letting the inflation genie out of its bottle. What they did was drink from the same bottle that intoxicated George W Bush and cut taxes in the same year as they started a large scale war of choice. (Bush went above and beyond doing this twice). They also passed civil rights legislation and expanded the welfare state.
This is a lot, much of it unpopular with some portion of the electorate. As the left party they had nothing to gain from the war against communism or the tax cut for the rich. Had they nixed this, cut defense spending by a fourth (which was running at 8% during peacetime!) they could have their Great Society programs and still maintain budget balance. Without the war Johnson would have won re-election and the Bretton Woods system would not have collapsed in 1971.
But they did not do that. Instead, they lost the high seats to the Republicans in 1980 and since then it has been on the social/cultural “small issue” on which Democrats have pursued a left agenda.
My post is a call for Democrats to reclaim the high seats from the Republicans and to focus on economic issues and not the social ones.
I’ve often thought there should be a place somewhere for retired military and feds- a special place where they get to serve one last time and call bullshit. The budgetary expenses rarely meet the needs on the ground,
Sack DEI for a start- the military is rare instance of forging an entirely new ingroup. I’ve looked at the data- that team ‘spirit’ is about the only thing which over-writes everything else- and some Hormone Replacement apparatchik with an axe to grind is only ever going to serve the brass,
Also, bring an end to the Dep. of Ed. whilst protecting pensions. Here in the UK we’ve closed the racial attainment/exam gap. You won’t find anything anywhere about how they borrowed from Northern Ireland (other than PISA). People don’t celebrate their utter failures. The Northern Irish Catholics reversed the socioeconomics with little more than discipline and setting high standards.
Thus it has always been.
https://www.mylondon.news/news/east-london-news/pupils-6am-detentions-being-minute-21285918
There is no reason for any unemployment after any government dictated fiscal or monetary adjustments. It'd just be a policy mistake. Just institute a full employment policy (increase public sector hiring where work is needed, and add a job guarantee for local community needs, eliminate "volunteerism", all volunteers should be paid a decent wage (and allowed to refuse it! (Some will!))). Settling of accounts cannot create inflation risk, people have insatiable desires to save. The QTM theory of inflation has proven wrong under floating exchange rates time and time again. So no need to fear monger about inflation. The monopoly issuer of the currency tells you what their tax credit is worth and how to get it. If they want to keep devaluing the currency by issuing interest-income via bonds to people who already have money in proportion to how much money they already have, then that's on them for being idiots, vote them out of office.
If QTM considerations are invalid then why would there be taxes at all? The coin option I inserted in there is essentially unlimited money printing. If we can mint as many coins as we want, then why tax? Why not provide a job guarantee, Medicare for all and UBI?
The reason why I think you can’t do all that without inflation is based on quantity-type arguments, though not classical QTM. I have not idea of what the validity of this approach may be, I am currently testing it.
https://mikealexander.substack.com/p/a-new-way-to-look-at-inflation-revised
Your ideas are not without merit but need refinement. I wouldn't ban volunteers, but how about shifting welfare into a monthly or weekly NIT payment and then pay a bit more for volunteering! That way it would actually transition people into the value economy.
Here's how it would work. The three main constituents of basic welfare equate to around $7K a year, excluding housing and child allowances. Drop that to $6K a year, $500 dollar a month, but pay people $4 an hour for volunteering, even if it's self-employed recycling. After the $6K a year, plus the $160 maximum a week, for every three dollars you earn, you get taxed back a dollar. This would be particularly important for childcare. Studies shows that long-term outcomes decline if adult-to-child ratios are less than 1:3. Why not pay mothers to be part-time classroom assistants? It's the only way to make universal pre-school childcare a reality without crippling expense. I'm not saying that their shouldn't be credentialed pre-school class teachers (my brother's Swedish wife is one), or fully paid and unionised classroom assistants- just a lot more volunteering class helpers.
Here in the UK 9.4 million people are claiming welfare, of some form or another. One of the most common complaints amongst universal credit claimants is that they don't want to have to go through the rigmarole of applying again if they take on a job which only lasts a couple of months. It's also completely unfair to working mothers who drive minicabs part-time. There is absolutely no provision for people, who through personal preference and home needs, only want to work 20 hours a week.
Your quote on QTM doesn't deal with the meat of the issue. It's not about whether fiscal stimulus is a good thing or not, but more about what's it for, by how much and for how long? People forget that inflation was running a little hot in the Biden economy before Ukraine.
And let's not forget that one of the main results of Ben Benanke's QE to prop up the stock market, was useless digital media companies which were over-valued, nobody wanted and created using an obsolete corporatist model for media.
Yeah, your ideas have merit too! I'd say take the path of least resistance to get better macroeconomic policy, and focus on full employment in non-bullshit jobs. So start with increased hiring in the public sector, plus a buffer of a Job Guarantee. Policy for volunteerism can be as you suggest, but I'd like it to be whatever is fair and can get through the vote in parliament! There is enough room in "what is fair" I think to get some majority support.
When the job guarantee is framed as a more efficient employed buffer of labour rather than a wasted unemployed buffer, it gets support form all sides of the aisle.
I note what Mike wrote that some of my points are orthogonal to his article, so I apologize for that, but I had to let off some steam the other day.
Provided there are no jobs for the technocratic class. We're supposed to learn shit like engineering and criminology, to be useful- rather than offer nothing more than fine word and parsnips. The real magic with economics and criminology is raising opportunity costs BTW. Scottish Public Health Policing.
I called the Tory Party racist for that one. Got an apology from someone who disagreed, and then 50 retired senior police officers wrote a letter to The Times. Said the Tories were too dumb to see that there had to be a path for Youth Reform, for kids who had been told all their lives that they were thick. High proles are trade professionals BTW- they earn good money- that's a decent alternative to making money from nosebag.
Labour are as bad. Beyond a certain age, criminals are trouble- but less so once they get past 34.
A great many young folks of all races ARE thick. Does that mean we should just let them rot? That seems to be the stance of the elite Right with all their focus on IQ.
As for the Left, they tend to patronize the lower class, saying its OK when they act out. This isn't any better.
No, but heterodox economics offers a better vision for their futures than the type of blank slatism which categorises the Left. Sure, tertiary education helps, but it's all a matter of how much and for whom- a lot of the envisaged jobs for the future which the left has predicted for the past thirty years or so were only really achievable for people towards the tail end of the curve.
Germany probably got the 30% of the population going for tertiary correct, but it's worth noting that they encompassed a whole lot of more technical jobs trained in university settings than most university systems in the Anglosphere.
More generally, we need to concede we've essentially shaped the West into a cognitive hierarchy. We've constructed a unidimensional picture of merit which is fundamentally mechanistic rather than organic- in nature heterodox rocks, as it does in the system of heterodox economics which works so well precisely because it mirrors natural organic systems.
I can remember sitting in Clearwater Bay, Hong Kong back in the early nineties listening to a Philosophy Professor espouse the viewpoint that the West was going to sell the Chinese marketing, PR, financial services and innovation. It sounded hubristic even then, based on the foolish notion that just because the average Chinese Philosophy students couldn't write an essay discussing the ethics of tipping, they wouldn't be much good at the 'creative' economics upon which we prided ourselves.
Never mind that we can't teach kids to be creative, entrepreneurial, or magically confer high IQ.
Johanson write "we need to concede we've essentially shaped the West into a cognitive hierarchy"
I don't think we need to throw our hands up and say nothing can be done. Thai is bollocks.
Capitalism is fundamentally about the accumulation of capital. Today the capital being accumulated is financial, market capitalization. An extreme example is Bitcoin, a trillion-dollar financial enterprise that performs mathematical calculations, the product of which is plowed directing into the financial product whose market capitalization rises with time. It creates nothing tangible.
In a world where the intangible, the abstract, is most highly valued. This puts a premium on those good at this sort of thing (hi-IQ folks). Now suppose we actually did what I call for in the post. Market capitalization was fall and not recover. Bitcoin would crater and never recover. Trillions of dollars of financial "wealth" would be "destroyed" and yet no real tangible wealth will have disappeared. Existing executives would retire, unwilling to work for less, but there are always those who want to be in charge, for whom the prestige from just being the boss in enough and do not need hundreds of millions or billions of dollars they will never spend to feel like a winner.
Life would go on and we would do more real stuff and need people to do real stuff. Wage levels and career prospects would reflect that and the market will redirect human resources in new directions achieving a number of societal benefits as a side effect.
Yeah. Thing is, we are *all of us* THICK about something. Even in my specialty of theoretical physics there are works I cannot make any sense of, and do not even wish to grok.
The public sector hiring should be for skilled useful work, and there I'd 100% agree with Geary. The thought also occurs that Libertarians often complain a bureaucracy is waste, but if it is effectively policing white collar crime it is a net benefit (the tax only generates a demand for police work, not the funds for the work). Think of the recent anti-trust cases. There is a lot more low hanging fruit in white collar crime prevention to be had, a lot more, tonnes, and it'd all benefit law abiding firms (their taxes are not paying for the enforcement).
BTW, the Job Guarantee is for anyone wanting work so their lives are not wasted, a good JG policy would permit people to do anything they want to do which their local community can see to getting done, it does not have to be efficient, it only has to be of some public good, however small.
Astute point on the white collar crime thing- few people realise what a debt we owe to the FBI financial crimes unit, in terms of rolling up Al-Qaeda through the Saudi Group.
There was nothing in the article about welfare, NIT or other social welfare programs. They are orthogonal to the thrust of the argument.
Also, I am not sure exactly to what you are referring by "quote on QTM"
Quantity of money does not determine inflation (essentially b.c. savings desires are insatiable). It is *rate* of spending/investment that *causes* inflation pressure, and even then only to first order the relative price adjustments, not necessarily the absolute price level. The price level is determined by government policy, whether they know it or not. Specific price adjustment for specific goods is not inflation, and is more often due to mark-up adjustments and changes in relative value at the margins. Then there is the foreign monopolist setting price for energy, a huge component, and that's not real inflation, the government can, and should, re-gauge the currency as the appropriate fiscal adjustment. If it is a one-time re-gauge in response to a foreign monopolist setting price upwards then it is not inflation. Inflation is a continuous rate of change of the price level. At least that's the proper language frame progressive aught to be using, if they regard themselves as responsibly informed about macroeconomics..