We used to link to the Boston Review with some regularity until last December when they published and we linked to "To Save the Climate, Give Up the Demand for Constant Electricity" which not only dismissed one of the most attractive features of current {!} electrical systems and grids: being available when you want it, but was also a bit boring in its lack of creativity in addressing the intermittency problem with renewable sources o'leccy.
However
The article before us raises the very interesting point that the Western economies could use a whole lot more of Schumpeter's creative destruction and a whole lot less of the politico-corporatism exemplified by the first inductee into the Climateer Hall of Fame:
The 26th Secretary of War, the Democrat and Republican (!) Senator from Pennsylvania, Simon Cameron
Our Hero
"The honest politician is one who
when he is bought, will stay bought."
So, although we disagree with the ultimate policy recommendation, the authors have Minsky doing a drive-by and it's hard to go too far wrong with the good Professor and expositor of stability/fragility/speculation and crisis making the arguments.
From The Boston Review, June 24:
Mainstream economics ignores the massive government interventions that “free market” capitalism requires.
The most basic tenet undergirding neoliberal economics is that free market capitalism—or at least some close approximation to it—is the only effective framework for delivering widely shared economic well-being. On this view, only free markets can increase productivity and average living standards while delivering high levels of individual freedom and fair social outcomes: big government spending and heavy regulations are simply less effective.
The CARES and COVID Relief Acts amounted to about 14 percent of U.S. GDP in 2020. But the government spent more—nearly 20 percent of U.S. GDP—to keep Wall Street afloat.
These neoliberal premises have dominated economic policymaking both in the United States and around the world for the past forty years, beginning with the elections of Margaret Thatcher in the United Kingdom and Ronald Reagan in the States. Thatcher’s dictum that “there is no alternative” to neoliberalism became a rallying cry, supplanting what had been, since the end of World War II, the dominance of Keynesianism in global economic policymaking, which instead viewed large-scale government interventions as necessary for stability and a reasonable degree of fairness under capitalism. This neoliberal ascendency has been undergirded by the full-throated support of the overwhelming majority of professional economists, including such luminaries as Nobel Laureates Milton Friedman and Robert Lucas.
In reality neoliberalism has depended on huge levels of government support for its entire existence. The global neoliberal economic order could easily have collapsed into a 1930s-level Great Depression multiple times over in the absence of massive government interventions. Especially central to its survival have been government bailouts, including emergency government spending injections financed by borrowing—that is, deficit spending—as well as central bank actions to prop up financial institutions and markets teetering on the verge of ruin.
Bailouts have therefore not only repeatedly rescued neoliberal capitalism during periods of crisis, but they have also, as a result, reinforced neoliberalism’s most malignant tendencies. In 1978, just prior to neoliberalism’s rise, the CEOs of the largest 350 U.S. corporations earned $1.7 million, 33 times the $51,200 earned by the average private-sector non-supervisory worker. As of 2019 the CEOs were earning 366 times more than the average worker, $21.3 million versus $58,200. Under neoliberalism, in other words, the pay for big corporate U.S. CEOs increased more than ten-fold relative to the average U.S. worker. This curious conjunction—theoretical disdain for government alongside practical reliance on it—has amounted to champagne socialism for big corporations, Wall Street, and the rich and “let-them-eat-cake” capitalism for most everyone else.
This represents a curious conjunction: theoretical disdain for government alongside practical reliance on it.
The COVID-19 pandemic and recession powerfully illustrated how neoliberalism works in practice. During the pandemic, employment and overall economic activity throughout the world fell precipitously, as major sections of the global economy were forced into lockdown mode. According to the International Monetary Fund, overall economic activity (GDP) contracted by 3.5 percent in 2020 in a “severe collapse . . . that has had acute adverse impacts on women, youth, the poor, the informally employed and those who work in contact-intensive sectors.” But during the same period, global markets soared. In the United States, nearly 50 percent of the entire labor force filed for unemployment benefits between March 2020 and February 2021. However, over this same period, the prices of Wall Street stocks—as measured, for example, by the Standard and Poor’s 500 index, a broad market indicator—rose by 46 percent, one of the sharpest one-year increases on record. Moreover, this increase did not simply reflect the U.S. stock market recovering from the pandemic and lockdown. As of February 2021, the Standard and Poor’s 500 index was also 38 percent higher than two years prior, in March 2019, nine months before COVID-19 had been recognized as a human pathogen. And the 2020 stock market ascent began months before there was any clear evidence that the economy was recovering from the lockdown. All these gains are the result of large-scale government interventions: bailouts were given, first and foremost, to boost financial markets and to help the rich.
Textbook Neoliberalism vs. Bailouts 101
In textbook economics the movements of financial markets are supposed to reflect underlying conditions in the real economy where goods and services are produced, workers are hired and paid, and companies profit or don’t in attempting to sell their products. In this scenario, when companies lay off workers, workers lose income and cut back on spending, which means companies are likely to face difficulties selling their products. Their profits should fall as a result. As unemployment rises and profits fall, the value of these companies, as expressed in their stock market prices, should decrease. This has not been the case over the past year—as disparities grew between conditions in the real economy and financial markets—because governments undertook massive bailout operations in the face of the COVID-19 pandemic....
....MUCH MORE
