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Ideas, interests and capital

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One of the problems with being a Marxist is one so rarely gets intelligent criticism. So I was delighted to see Eric Lonergan’s thoughtful reply to my review of Angrynomics. In many ways. I agree with him. He’s right that there is a “vacuum of thought” about economics – a vacuum filled by snake-oil peddlers of nationalism. But this vacuum is much more evident in politics & the MSM than it is among economics. Angrynomics itself is a treasure trove of policy ideas. If we add the work of people such as Diane Coyle, Ian Mulheirn, Geoff Mulgan, Radix, Stian Westlake and Sam Bowman (among others) we are struck by the almighty chasm between the intellectual heft of centrists outside of politics with the vacuity of centrists within politics. This surely warns us that there are powerful filters

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One of the problems with being a Marxist is one so rarely gets intelligent criticism. So I was delighted to see Eric Lonergan’s thoughtful reply to my review of Angrynomics.

In many ways. I agree with him. He’s right that there is a “vacuum of thought” about economics – a vacuum filled by snake-oil peddlers of nationalism. But this vacuum is much more evident in politics & the MSM than it is among economics. Angrynomics itself is a treasure trove of policy ideas. If we add the work of people such as Diane Coyle, Ian Mulheirn, Geoff Mulgan, Radix, Stian Westlake and Sam Bowman (among others) we are struck by the almighty chasm between the intellectual heft of centrists outside of politics with the vacuity of centrists within politics. This surely warns us that there are powerful filters which select against good ideas. Keynes

Eric’s also right that there is no equivalent today of Keynes or Friedman, men who provoked revolutions in economic policy. But this reflects the general decline of the public intellectual – a decline we can at least partially attribute to the neoliberalization of academia and the media. If there were an equivalent today of Keynes, he would be snowed under by bureaucracy and under pressure to publish journal articles nobody would read except to show that their findings were unreplicable. And he certainly wouldn’t get a multi-part TV series to promote his ideas, as Milton Friedman got.

But, but, but. Whilst I welcome new thinking such as Eric’s, this under-rates the utility of good old ideas, many of which are excluded by political forces. Take four examples:

 - The case for higher bank capital ratios (supported by Eric) was made convincingly by Anat Admati and Martin Hellwig. It’s not been adopted because of lobbying by bank executives.

 - Even mainstream economists (most obviously Simon Wren-Lewis) knew that post-2010 fiscal austerity was a stinking idea. Their thought did not gain sufficient political traction, in part because of the influence of what Simon calls mediamacro.

 - You can’t walk out of your house without tripping over somebody advocating a universal basic income. But we’re stuck with the cruel and inadequate Universal Credit.

 - We have strong evidence that greater worker ownership and control can often raise productivity. But – despite the efforts of John McDonnell – this remains marginalized by the MSM.

There is one point where I think Eric hits the nail of the head. It’s that “the specific interests of ‘capital’ at the current juncture of history are very unclear.”

This is right in two senses, on top of the fact that (as Eric says) there can be a conflict between the interests of bosses and shareholders.

First, what policies and institutions best increase profit rates?

From 1945 to the 1970s, the answer was full employment and wage-led growth. The promise of high demand encouraged investment in capital and innovation. But this broke down in the 70s, to be replaced by profit-led growth, characterised by efforts to raise profit margins by weakening labour. But as Michael Roberts shows, this did little to restore aggregate profit rates.

So what’s the answer? Fordist mass-market capital might require wage-led growth. But extractive financialized capital would prefer low interest rates. What’s the balance of influence between the two? Does capital require low taxes and small government, or does it need bigger investment in infrastructure? Does it require deficit financing to produce high and stable growth, or does it (as Kalecki thought (pdf)) require “sound finance” to ensure that governments are dependent upon business confidence?

Secondly, to what extent does capital need greater legitimacy? One reason for high top taxes and full employment after 1945 was that governments thought they needed to inoculate capitalism against the threat of revolution – a threat that faded as the USSR weakened and collapsed.

It is now, though, an open question how much legitimacy now needs shoring up. (You can read Brexit as a project of legitimation at the expense of accumulation.) The fact that some companies are keen to greenwash or to pay lip-service to the BLM movement suggest many feel the need to appease their critics. But how much further does capital need to grow? Would more redistributive taxes raise legitimacy and help stabilize demand, or would they reduce incentives to invest and capitalists’ sense of their own entitlements? Does a big state help stabilize demand and provide legitimacy, or does the need for profits require privatization – what David Harvey has called “accumulation by dispossession”?

This are all open questions. Which is where there might be reasons for optimism. It might be possible to build an alliance of social democracy with the more progressive elements of capital to advance the sort of agenda Eric and I would both support. And I’d add that this would be something the left should also support, as the transition to socialism will come via social democracy. But that’s another argument…

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