ONCE AGAIN America is leading the way. The direct income support stimulus packages are piling up, indirect tax incentives are also accumulating. Biden isn’t stopping, and apparently won’t stop before getting the country out of crisis for good and maybe even provide a welfare buffer zone ahead of his one-term service time. Good, but is America also leading the way out of neoliberalism? Is it leading the way, just as it did 40-45 years ago, calling off the Roosevelt social contract c. 1975, and spreading the twin beliefs of excessive reliance on markets and irrational exuberance in financial hypertrophy? Otherwise put, is the current move a complete course reversal – after almost half a century? Is this a tacit admission that neoliberal ideology – yes it is nothing but an ideology covered with fundamentalist market efficiency myths – didn’t work? Will Biden surpass expectations and become a memorable president in one term (four years) alone? More specifically, can Biden really address healthcare, the nightmare of many an American, and change the rules therein? Because it is obvious that mostly the poor have died, not the rich, in the pandemic and the outbreak has shown how salient an issue class can be. Has COVID-19 not demonstrated to the world that class (still) matters? Other questions abound. Can Biden tax the rich? If yes, is Biden set to become a second Roosevelt?
WHAT IS AMERICA?
Consider Killing Them Softly, a 2012 movie that made into film dialogue history when Jackie Cogan speaks to the driver in the final act: “… I am living in America, and in America, you’re on your own. America’s not a country. It’s just a business. Now f—ing pay me.” This cynical view wouldn’t appear realistic to many who have lived in the U.S. for a couple of years had it not been for the last 40 years of extreme and rising inequality, although of course Cogan also says even Jefferson wasn’t the ideal person he was portrayed to be. But let’s not go that far back in history. What is America anyway except being a superpower – an “imperialist” power some would say but then there are many definitions of imperialism- and an economic-technological warehouse? And it is exactly where Trump made a colossal mistake: he didn’t take the COVID-19 outbreak seriously. He lost mostly because of that.
And Biden started exactly from there, knowing that the pandemic is currently an economic factor itself. It is like capital, labor, technological innovation, human capital and suchlike. The first and foremost priority is to address this reality and protect people from the pandemic. Then, and only after that, one can look at other economic woes. As economic theory would put it, COVID-19 imposes a lexicographic ordering; the pandemic first, then the rest if resources are left, and not the other way around. This should be the correct order of things today. Or else there are people like Modi in India who create a disaster out of a tamed phase-1 outbreak simply because he didn’t understand how serious and precarious the situation was.
END OF NEOLIBERALISM?
At long last, maybe, hopefully, for the sake of humanity’s destiny, the answer ought to be a clear and resounding ‘yes’. What is called neoliberalism has been nothing but a recipe for disaster. Neoliberalism has led to consequences of inequality, immorality, and inefficiency. For one thing, contrary to the belief that private businesses are indomitable juggernauts and state enterprises emaciated weaklings, have not most giant private businesses been bailed out more than twice in just four decades? Is it not true that in the advanced world, where neoliberalism was gospel, government debt-to-GDP ratios are muc h higher than they were in 1980? Blaming ghosts from the past and referring to the failures of Soviet-style economies can’t pass for proper arguments in current market economies. These arguments are and were irrelevant from day one because nobody suggested they were any kind of solution. It has never been true that if you don’t privatize your health system, you are automatically a socialist, as some on the American right argue today.
YES, TAX THE RICH IF YOU DON’T ALREADY TAX THEM ENOUGH
If, as French economists Dominique Levy and Gerard Dumenil argued 17 years ago, neoliberalism was a planned effort to replace Keynesianism and promote the interests of financial capital, then there can be another ‘planned effort’ to replace it.Neoliberalism meant overarching privatization, liberalization of world trade, and reduction in state welfare benefits – and of course an excessive reliance on the virtues of the market. I admit that markets function, and that an economy without markets is unthinkable after the Soviet and Chinese experiences, but I also think without regulation, markets can rarely function properly. Even if they do, the market or bourgeois virtues lack justice and a notion of fairness as equality. After some 40 years and a sequence of market failures and crises, these premises have been strongly challenged – and not for the first time in recent history.
The ideas that resemble the old Laffer curve – don’t tax the rich because they will accumulate profits and then they will invest failed miserably. In many parts of the globe wealth accumulation didn’t automatically imply capital accumulation, more investments and more jobs. Rather it simply meant capital hoarding, i.e. wealth either lying idle in the form of property and such or in the form of nominal assets that circulate worldwide. The ideas of the heyday of neoliberalism – for instance the claim the French Economist Christophe Chamley had put forward in 1985 to the effect that the optimal capital tax is zero – have also been challenged. Scandinavian experiences demonstrate that on the contrary it is positive and quite high at times.
HUMAN CAPITAL IS MORE IMPORTANT
The scandalous event of the last 40 years has been the constant fall in the labor share. I think that too has come to an end because with 8 billion people on earth you need some decent earnings so the products of ever-expanding technology can be sold to somebody. You can’t think of new products as luxury goods to be bought by the rich only, and you certainly can’t think in the old Cambridge style of the 1920s that workers spend all of what they get and only capitalists can save. Nevertheless, decent earnings and ‘good jobs’ don’t fall freely from the sky; one needs modern education, human capital formation and all that. It takes time. Alas, a good part of humanity is drifting further away from modern values and state of the art education models. They will suffer tremendously in the decades to come.
CAN BIDEN DO THE TRICK?
Roosevelt was no left-wing politician. Yet he understood his times, and was able to strike a bargain, a social compromise. The New Deal went on for almost 40 years until c. 1975 it fell apart. Well, since the advent of neoliberalism proper, another 40 years have elapsed. Symmetry isn’t required for change but this suggests neoliberalism may have run its course just as the New Deal did. This time around a social contract based on redistribution issues won’ suffice. We should note that neither exuberant financialization nor globalization are new: they happened after the 1873 Long Depression and extended well into the 20th Century. In the end, it’s better to see those events as sequential ones. Before 1929, the 1873 depression was the Great Depression; but 1929 was so huge a blow that 1873 was re-labelled “Long” instead of “Great” because the epithet “Great” would be reserved for 1929. Then there was also WWI in between.
So there is perhaps kind of a cyclical pattern in the way capitalism is managed or regulated – or unregulated. Globalization and financialization Mark I/Crisis Mark I (1929-1940); new regulation (New Deal); globalizati on and financialization Mark II/Crisis Mark II (2008-2020); new regulation (New Deal Mark II). It would take an incessant effort for Biden, should he intend to become a new Roosevelt, not only in terms of economic policy, but also in terms of economic ideology. Individual values will have to be altered so as to include the virtue of economic fairness as a sine qua non in their preferences.