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 		 [Our era is ripe for change. Neoliberalism is politically and
morally bankrupt, yet a new vision for economic policymaking in the
21st century has yet to be fully articulated, let alone become a
convincing alternative to the neoliberal model.]
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 TOWARD A PROGRESSIVE POLITICAL ECONOMY IN THE AFTERMATH OF
NEOLIBERALISM’S “CREATIVE DESTRUCTION”  
[https://portside.org/2018-08-14/toward-progressive-political-economy-aftermath-neoliberalisms-creative-destruction]


 

 C.J. Polychroniou 
 July 30, 2018
Global Policy Journal
[https://www.globalpolicyjournal.com/articles/world-economy-trade-and-finance/towards-progressive-political-economy-aftermath]


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 _ Our era is ripe for change. Neoliberalism is politically and
morally bankrupt, yet a new vision for economic policymaking in the
21st century has yet to be fully articulated, let alone become a
convincing alternative to the neoliberal model. _ 

 , Anawat Sudchanham/EyeEm/Getty Images 

 

or the past forty-five or so years, progressive economic policy in the
advanced capitalist societies has not only been losing ground steadily
to neoliberal economic actions and outlooks but is in real danger of
becoming a thing of the past. The result – in spite of a strong US
stock market performance and low interest rates — has been anemic
growth (growth rates during the neoliberal era have been cut in half
in comparison to growth rates during the 1950s and 1960s), massive
unemployment in many European countries, huge levels of inequality,
declining standards of living (with the US being very close to the top
of the list) and growing immerization, all of which have provided
fertile ground for the emergence of far-right and extreme nationalist
movements which, interestingly enough, seem to promise voters a return
to the “golden age” of capitalism.

By “progressive economic policy,” I mean those actions aimed at
establishing a regulated and mildly egalitarian form of capitalism
through the use of government power. The ultimate aim of progressive
economics is to provide higher incomes for and better standards of
living for average workers. Progressive economics should not be
conflated with socialism. Progressive economics may be seen as
representing an offshoot of the socialist tradition, but only under
certain sociopolitical settings, as in the case, perhaps, of the
Nordic countries. By “neoliberal economics,” I mean those policies
that promote deregulation of the economy and seek to shift the
orientation of the state as far away as possible from redistribution
and a socially-based agenda, and toward strengthening the interests of
finance capital and the rich.

Having said that, it should also be pointed out that neoliberal
economics should not be seen as a natural offshoot of classical
economics, but rather as a distinct 20th-century movement guided by
antistatist views and an explicitly antilabor outlook. This is the
version of neoliberalism developed by Milton Friedman
[https://press.princeton.edu/titles/9827.html] and the so-called
Chicago School, and is usually associated with the Pinochet regime in
Chile and later on with the free-market policies of Margaret Thatcher
and Ronald Reagan.

In the United States, the adoption of neoliberalism as an economic
model coincides with the deindustrialization period, which undermined
the economy’s industrial base and undercut the power and influence
of the labor movement, and was solidified during Reagan’s years in
power. It can be argued that, in the course of the 20th century, the
United States has had only two administrations that pursued
determinately progressive economic policymaking: those of Franklin
Delano Roosevelt, with the New Deal programs, and of Lyndon Johnson,
with the Great Society programs. In an interesting twist of history,
Richard Nixon was perhaps the last “liberal” US president on the
economic and social front.

In Europe — save England, where Thatcher launched the neoliberal
economic counterrevolution at about the same time Reagan was elected
president — the shift occurs a bit later: around the mid-1980s in
nations like Germany and France, and even a bit later in the
peripheral countries of Europe like Greece and Spain. By the
mid-1990s, most western European societies, with the exception of the
Scandinavian countries, can be roughly characterized as being
neoliberal. The abrupt transition to neoliberal economic policymaking
in Europe is enshrined in the 1992 Treaty of the European Union, also
known as the Maastricht Treaty.

The story of the rise of neoliberalism has been told in countless ways
and from myriad points of view in the course of the last forty-five or
so years. Still, oversimplifications of the actual meaning of
neoliberalism abound and ideological biases often enough get in the
way of lucid and dispassionate analyses. In a way, this is because
neoliberalism itself is more of an ideological construct than a
solidly grounded theoretical approach or an empirically derived
methodology. In fact, the intellectual foundations of neoliberal
discourse are couched in profusely vague claims and ahistorical terms.
Notions such as “free markets,” “economic efficiency,” and
“perfect competition” are so devoid of any empirical reference
that they belong to a discourse on metaphysics, not economics.
Essentially, neoliberalism reflects the rise of a global economic
elite and is used mostly as an ideological tool to defend the
interests of a particular faction of the capitalist class: that of
finance capital.

The neoliberal transition in the world economy is associated, then,
with the rise to dominance of financial capital and the sharp changes
that occur in the social structure of capital accumulation, with
developments in the US economy leading the way among advanced
capitalist economies. Indeed, financialization
[https://truthout.org/articles/a-progressive-political-economy-in-the-aftermath-of-neoliberalisms-destruction/::www.peri.umass.edu:publication:item:684-financialization-there-s-something-happening-here],
although not synonymous with neoliberalism, is a key feature of the
latter.

The economic slowdown in the 1970s and the inflationary pressures that
went along with the first major postwar systemic capitalist crisis
created a window of opportunity for antistatist economic thinking,
which had been around since the 1920s but was spending most of its
time hibernating because it lacked support among government and
policymaking circles and had very few followers among the members of
the chattering classes. The postwar capitalist era was dominated by
the belief that the government had a crucial role to play in economic
and societal development. This was part of the Keynesian legacy, even
though Keynesian economics was never fully and consistently applied in
any capitalist country.

Industrial capitalism, the production of real goods and services for
the benefit of all members of a society, required extensive government
intervention; both as a means to sustain capital accumulation and as a
way to ensure that the toiling population improved its standard of
living so it could purchase the goods and services that its own
members produced in the great factories of the Western industrial
corporations. The rise of the middle class in the West took place
predominantly in the first fifteen years or so after World War II and
was an outcome brought about by the combination of a thriving Western
capitalist industrial base and interventionist government policies.
Governments and the industrial capitalist classes understood only too
well that economic growth and social prosperity had to go hand in hand
if the system of industrial capitalism was to survive. Maintaining
“social peace,” a long sought after objective of governments and
economic elites throughout the world, mandated that the wealth of a
nation actually trickled down to the members of the toiling
population. The improvement of the working class’s standard of
living was essential to the further growth of industrial capital
accumulation.

To be sure, it took at least a couple of centuries before industrial
capitalism reached a stage where its own survival and future growth
were predicated on a steady increase of living standards among a
nation’s general population. In postwar capitalist economies,
providing the working class with the means for their reproduction
meant increasingly improving their economic purchasing power and
providing them with access to educational opportunities, so they could
make a substantially greater contribution to productivity while also
being turned into potential consumers. In all this, the government had
a key role to play as it was the only agent with the capability of
providing the opportunities and the resources needed for the
materialization of a society of plenty; a society in which the fruits
of labor were not the exclusive domain of the class that owned the
means of production.

All this came to a rather abrupt end sometime around the mid-to-late
1970s, when advanced capitalism found itself in the grips of a major
systemic crisis brought about by new technological innovations and
declining rates of profit. The social structures of accumulation that
had emerged after the Second World War began to dissolve. Policy
shifted in the direction of unregulated markets as a means of
overcoming the declining rate of profit, while the “welfare state”
was in the process of being dismantled. In this context, the postwar
regime of “managed capitalism” gave way to “unfettered
markets,” and a capital globalization process ensued that today
encompasses virtually all economies in the world.

The Neoliberal Nightmare and Thinking Our Way Out of It

At the heart of the neoliberal vision is a societal and world order
based on the prioritization of corporate power and free markets and
the privatization of public services. The neoliberal claim is that
economies would perform more effectively, producing greater wealth and
economic prosperity for all, if markets were allowed to perform their
functions without government intervention. This claim is predicated on
the idea that free markets are inherently just and can create
effective low-cost ways to produce consumer goods and services. By
extension, an interventionist or state-managed economy is regarded as
wasteful and inefficient, choking off growth and expansion by
constraining innovation and the entrepreneurial spirit.

However, the facts say otherwise. During the period known as
“state-managed capitalism” (roughly from 1945–73, and otherwise
known as the classical Keynesian era), the Western capitalist
economies were growing faster than at any other time in the 20th
century and wealth was reaching those at the bottom of the social
pyramid more effectively than ever before
[http://www.newleftproject.org/index.php/site/article_comments/a_short_history_of_neoliberalism_and_how_we_can_fix_it].
Convergence was also far greater during this period than it has been
during the last forty-five or so years of neoliberal policies.
Moreover, under the neoliberal economic order, Western capitalist
economies have not only failed to match the trends, growth patterns,
and distributional effects experienced under “managed capitalism,”
but the “free-market” orthodoxy has produced a series of
never-ending financial crises, distorted developments in the real
economy, elevated inequality to new historical heights, and eroded
civic virtues and democratic values. In fact, neoliberalism has turned
out to be the new dystopia of the contemporary world.

Our era is ripe for change. Neoliberalism is politically and morally
bankrupt, yet a new vision for economic policymaking in the 21st
century has yet to be fully articulated, let alone become a convincing
alternative to the neoliberal model. In this regard, progressive
economics that go beyond the policies advocated by Keynes himself,
particularly ideas such as workers’ participation, income
distribution, sustainable development, and environmentally friendly
policies, can be of vital importance in galvanizing public support for
a new socioeconomic order. Contrary to radical neoliberal political
discourse, the state has not disappeared under the process of
globalization; nor has it become weaker. It has merely been refocused
so it can perform activities more amenable to the needs and demands of
the global financial elite. The state, as a social institution, does
retain a certain degree of relative autonomy, and thus it can be
recaptured by progressive forces determined enough to work toward the
realization of a just and decent society, instead of standing idly by
and watching elected public officials squander the common good
(officials eager to get into office in order to serve big business
interests so they can later pursue lucrative private sector roles).

The most critical issues facing advanced industrialized societies
today are the power that finance capital exerts over the domestic
economy and the social ills it frequently causes due to financial
busts, financial scandals, and plain untamed greed. Finance capital is
economically anti-productive (it does not create real wealth as such),
socially parasitic (it lives off revenues produced in other sectors of
the economy), and politically antidemocratic (it places constraints on
the distribution of wealth, creates unparalleled inequality, and
strives for exclusive privileges).

The future of Western liberal societies may very well depend on
radical changes regarding the relationship between government and
finance capital, government and the military-industrial complex, and
the ways through which the public sector approaches development and
employment. State power needs to be reaffirmed from the perspective of
the advancement of a nation’s general welfare, and thus must cease
being a tool of finance capital and of the global economic elite. In
order for that to happen, public discourse needs to be energized and
involve the widespread participation of citizens and communities.

In this regard, a progressive political economy to economic and social
problems facing the 21st century must entail the utilization of
participatory democracy as an essential and irreducible factor in the
design and materialization of a new socioeconomic order beyond global
neoliberalism. For the truth of the matter is that the dominance of
finance capital has caused severe blows
[https://press.princeton.edu/titles/9836.html] not only to economic
development as such but to democratic political culture and society as
a whole. Democracy is at a stage of steep and long-term decline and,
as political scientist Larry Bartels argues
[https://academic.oup.com/poq/article-abstract/73/1/226/1867618], the
“general will” has been transformed into an exclusive privilege of
the superrich and powerful among us.

Finance capital should no longer be allowed to define the terms of the
game on the basis of its own needs and interests, and should retreat
into serving the needs of the real economy. The current levels of
public and private debt are too big for a recovery to take place, and
all future policies aimed at sustainable development are certain to
fail if the issue of debt is not addressed, mainly through a huge
write-down. Under the current levels of debt accumulated by most
advanced industrialized societies, austerity will be increasingly seen
as a necessary condition for economic stabilization, causing further
economic decline and greater debt-to-GDP ratios in the end. In this
manner, a major debt restructuring plan should be put on the public
agenda of all industrialized economies around the world, along with
the design of a new global financial architecture in the interests of
the real economies and the economics of environmental sustainability
and social development. What is required is a vision of a humane
socio-economic order and the subsequent taming of the aggressive,
socially destructive pursuit of private interests. For that to happen,
the Left must restore a sense of the common good on the basis of an
unashamedly declared progressive economic policy, with class at its
core, and return to the principles and values of universal human
rights.

As things stand, the global capitalist economy and contemporary
western societies in general function in a very asymmetrical and
dangerous manner: the rich get richer and the poor get poorer. Global
neoliberalism suppresses wages, increases inequality, and destroys the
social fabric. Capitalism is a socioeconomic system in dire need of a
replacement, and a new social order
[https://truthout.org/articles/imagining-a-new-social-order-noam-chomsky-and-robert-pollin-in-conversation/]
is very much needed. In this manner, the responsibility falls clearly
on progressive political economy to chart a full-fledged alternative
course, with UNCTAD’s 2017 Trade and Development Report, titled
_Beyond Austerity_: _Towards a Global New Deal, _providing a possible
starting point.

Policy Recommendations

Going forward, here are the principles and priorities that could
provide the framework for the implementation of transformative
progressive economic policies.

	* Capitalism is an inherently unstable socioeconomic system with a
natural tendency toward crises, and thus must be regulated; especially
the financial sector, which constitutes the most dynamic and
potentially destructive aspect of capital accumulation.
 	* Banks, as critical entities of the financial sector of the
economy, are in essence social institutions and their main role or
function should be to accept deposits by the public and issue loans.
When banks and other financial institutions fail, they should be
nationalized without any hesitation and all attempts to socialize
losses should be immediately seen for what they are: unethical and
undemocratic undertakings brought about by tight-knit linkages between
governments and private interests. In periods of crisis, the
recapitalization of banks with public funds must be accompanied by the
state’s participation in banks’ equity capital.
 	* Markets are socially designed institutions, and as such, the idea
of the “free market” represents one of the most pervasive and
dangerous myths of contemporary capitalism. From antiquity to the
present, trade was based on contracts and agreement between government
authorities and was spread through the direct intervention of the
state. Human societies without markets cannot thrive. However, markets
often enough function inefficiently (they create oligopolies, give
rise to undesirable incentives and cause externalities), and they
cannot produce public goods in sufficiently large quantities to
satisfy societal needs. Therefore, state intervention into markets is
both a social need and a necessary moral obligation.
 	* The economic sphere does not represent an opposite pole from the
social sphere. The aim of the economy is to improve the human
condition, a principle that mandates that the process of wealth
creation in any given society should not be purely for private gain
but, first and foremost, for the support and enhancement of economic
infrastructure and social institutions for further economic and social
development; with the ultimate goal being the attainment of a decent
standard of living for all citizens. Free education and health care
should be accessible to everyone, along with the right to a job.
Indeed, full employment (See Pollin, 2012) must become a key pillar of
a progressive economic policy in the 21st century.
 	* Workplaces with a human-centered design must replace the current
authoritarian trends embodied in most capitalist enterprises, and
participatory economics (social ownership, self-managing workers,
etc.,) should be highly encouraged and supported.
 	* The improvement of the quality of the environment (with key
priorities being the protection and preservation of ecosystems in
oceans and seas and the protection of forests and natural wealth, in
combination with policies seeking to address the phenomenon of climate
change) ought to be a strategic aim of a progressive economic policy,
realizing that the urgency of environmental issues concerns, in the
final analysis, the very survival of our own species.

_NOTE: __This article is a revised version of a policy paper that
originally appeared as a Levy Institute publication._

_C.J. Polychroniou is a political economist/political scientist who
has taught and worked in universities and research centers in Europe
and the United States. His main research interests are in European
economic integration, globalization, the political economy of the
United States and the deconstruction of neoliberalism's
politico-economic project. He is a regular contributor to Truthout as
well as a member of Truthout's Public Intellectual Project. He has
published several books and his articles have appeared in a variety of
journals, magazines, newspapers and popular news websites. Many of his
publications have been translated into several foreign languages,
including Croatian, French, Greek, Italian, Portuguese, Spanish and
Turkish. He is the author of Optimism Over Despair: Noam Chomsky On
Capitalism, Empire, and Social Change
[https://org2.salsalabs.com/o/6694/t/17304/shop/item.jsp?storefront_KEY=661&t=&store_item_KEY=3567],
an anthology of interviews with Chomsky originally published at
Truthout and collected by Haymarket Books. _

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