The tax extreme wealth to increase funds for government spending narrative just reinforces neoliberal framing
Despite the rabble on the Right of politics that marches around driven by conspiracies about…
This is the final part of my three-part series on the why I have confidence in the primacy of fiscal policy over monetary policy and eschew any proposals, by other Modern Monetary Theory (MMT) advocates or others, to replace the so-called ‘independent’ central bank, with an ‘independent’ fiscal authority, which they seem to think would take the ‘politics’ out of fiscal policy decision-making and focus it on advancing the well-being of the people. Such a proposal is not core MMT. It is an opinion that, in my view, is based on deeply flawed logic and would would constitute the continuation of the neoliberal practice of depoliticisation and further increase the democratic deficit that is common in our nations these days. In this final part, I extend the reasons that progressives should oppose such outsourced decision-making and, instead, advocate the introduction of processes that always make our elected politicians fully responsible for the decisions they take on our behalf. Our polity should be always be held accountable for those decisions and not be allowed to defer responsibility to an external source (like an ‘independent’ central bank or fiscal authority).
Part 2 of this series ended with a criticism of the overall concept of independent central banks.
The point was that the calls for an independent fiscal authority seem to be based on the idea that if monetary policy is now administered by so-called ‘independent’ central banks, then if we reinstate the primacy of fiscal policy, we can achieve the same political separation from economic policy decision-making by creating an ‘independent’ fiscal authority.
The problem I indicated was that the whole claim about central bank independence is a neoliberal sham to allow elected politicians to depoliticise economic policy. Our central banks are anything but independent of the political process.
We now continue.
Second, who would appoint such a fiscal authority? Who would ensure its non-partisanship?
I often read that bodies such as the British Office of Budget Responsibility or the US Congressional Budget Office are non-partisan, because they are seemingly separate from the politicians.
But when you realise that they are stacked with mainstream macroeconomics, who push that distorted and erroneous view of the operations of the monetary system, you realise that they are not non-partisan at all, but rather, bastions of neoliberalism.
They also display a rigid Groupthink and generate biased and typically systematically wrong forecasts as a result.
So how would that be better than having the politicians taking responsibility for the policy stance?
Obviously, politicians have to take advice from its bureaucracy. A progressive government would need to ensure that the technical advice they received was pluralistic in origin and not dominated by mainstream macroeconomists.
Economic policy has to be informed by sociologists, psychologists, historians, heterodox economists and statisticians. None of those are likely to be appointed to a fiscal authority under current practices, especially given the dominance of mainstream New Keynesian economics in graduate programs.
Third, building on the last point, progressives who claim to prioritise democratic values, should never advocate establishing institutional structures that undermine those values and allow the elected politicians to avoid taking direct responsibility for the economics policies in place at any point in time.
I have written about this topic before and in my recent book with Thomas Fazi – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) – we devoted some time to developing the argument against depoliticisation.
It will also feature in the followup book we are currently working on and hope to have out by the end of this year or early 2020. Hope springs eternal!
Depoliticisation has been a hallmark feature in the growing dominance of neoliberalism.
Dennis Healey, the Chancellor in the Wilson/Callaghan British Labour government used the ploy that the government had run out of money and had to go to the IMF successfully to effectively end the ‘Keynesian’ era in Britain and pave the way for Margaret Thatcher’s Monetarist purge on the public sector.
In his 2009 article – The Politics of Economic Policy Making in Britain: A Re-assessment of the 1976 IMF Crisis – Chris Rogers argued that governments that become co-opted by capital and seek to engender policy environments that provide a stable environment for private profits face a dilemma.
On the one hand, they want to appease capital. But, on the other hand, they need to stay popular to remain in power.
The contradiction here is that to appease capital, they sometimes have to introduce “policies likely to have social consequences for the labour movement – most obviously lower wages”, which undermines their broad popularity and their claims to be advancing the well-being of all.
The solution that neoliberalism invoked was to “to depoliticise difficult aspects of policy in order to shift any blame for their social consequences”.
The claim that the IMF was forcing Britain to introduce austerity in 1976 was a classic, early case, of this dishonest tactic to preserve political hegemony while ensuring policies that undermined the well-being of the majority were introduced.
Depoliticisation is about reducing the resistance of trade unions and social interest groups. It gives these groups no target to put pressure on.
It is part of a process to redefine the concept of the public sector.
It was accompanied by neoliberal constructs such as user pays that was situated within the broader practice of the so-called – New Public Management.
NPM saw the public bureaucracy abandoning responsibility for service delivery, and instead, became ‘contract brokers and managers’ for outsourced services, concepts such as social benefits (and policy targets) were subjugated to ‘business-type’ objectives like Key Performance Indicators (KPIs).
These KPIs tended to construct the government as a ‘business’ with customers receiving public services delivered by privatised or outsourced non-government organisations.
For example, the unemployed became ‘customers’ of privatised, former public employment service agencies.
The trend to depoliticisation was accelerated under so-called progressive governments such as the Blair Labour government in the UK and the Hawke-Keating Labor government in Australia.
In his 2001 article – New Labour and the Politics of Depoliticisation – Peter Burnham defined depoliticisation as (p.128):
… the range of tools, mechanisms and institutions through which politicians can attempt to move to an indirect governing relationship and/or seek to persuade the demos that they can no longer be reasonably held responsible for a certain issue, policy field or specific decision.
[Reference: Burnham, P. (2001) ‘New Labour and the Politics of Depoliticisation’, British Journal of Politics
and International Relations, 3 (2), 127-149 – https://onlinelibrary.wiley.com/doi/pdf/10.1111/1467-856X.00054 (library subscription required)].
He noted that the British Blair Labour Government fell prey to the narrative that social democratic governments (“Old Labour”) could not longer:
… meet the high expectations of its traditional supporters and trade union militants or convince financial capital of the probity of its economic policies.
The solution for Blair was to “build on the on the experience of the Major administration” by “placing at one remove the political character of decision-making”.
This is where the Labour Party’s obsession with ‘credible rules’ really became entrenched in social democratic practice.
And, unfortunately, they persist in the current British Labour Party’s Fiscal Credibility Rule, which I have written extensively about in the past.
British Labour and social democratic parties everywhere introduced (p.129):
… a form of technocratic managerialism emphasising the constraints imposed by ‘global capital’ …
The ‘constraints’ were unquestioned and these governments were willing to subjugate the interests of workers and general well-being to satisfy the unspecified demands of the amorphous financial markets.
So this move to ‘rules-based’ economic policy-making where technocratic managers are privileged over the discretion of elected politicians, was part of the general neoliberal narrative that the nation state was powerless in the face of the global capital.
We analysed that myth in detail in – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World.
Proposals to place fiscal policy decision-making into the hands of these depoliticised organisations are thus part of the core neoliberal attack on government discretion and policies designed to advance the interests of workers in general.
Of course, the proponents of these depoliticised arrangements do not blink when, in times of emergency, governments quickly intervene to prevent corporate losses, such as the large bailouts in the early days of the GFC.
Then, discretionary fiscal policy is just fine. Hypocrites.
The other point worth emphasising is that there is a deep literature that argues that these shifts under the neoliberal era have compromised our democracies.
For example, I can recommend the 2013 book by Wolfgang Streeck and Armin Schäfer – Politics in the Age of Austerity – which provides ample evidence that these depoliticised trends have reduced:
… the responsiveness of governments to voters.
The articles in the book argue that:
… democracy depends on choice. Citizens must be able to influence the course of government through elections and if a change in government cannot translate into different policies, democracy is incapacitated.
The way citizens have responded to this democratic deficit is to “turn away from party politics” and embrace extreme-type political movements.
Further, there is a robust literature in political science now that traces the way that these neoliberal processes have alienated citizens from the political process and have increased their distrust of politicians.
American sociologist Mabel Berezin’s chapter in Wolfgang Streeck and Armin Schäfer’s book draws a convincing link between depoliticisation, the demise of social democratic parties and the rise of right-wing populist movements.
[Reference: Berezin, M. (2013) ‘The Normalization of the Right in Post-Security Europe’, Politics in the Age of Austerity, Wolfgang Streeck and Armin Schäfer (eds), pp. 239-261.]
In his 2016 article, Colin Crouch (which is extends the analysis presented in his 2004 book – Post-democracy) argues that while “contemporary western societies” are different from the “world’s many dictatorships”, it remains true that the trend in these post-industrial societies is towards “post-democracy” where “the small circles of overlapping business lobbyists and a politico-economic elites” dominate the decision-making with limited accountability.
[Reference: Crouch, C. (2016) ‘The March Towards Post-Democracy, Ten Years On’, The Political Quarterly, 87(1): 71-75.]
He argues that depoliticisation has allowed the financial:
… institutions, and a few giant firms in a number of other economic sectors … [to] … become so great that they are subject to the rules of neither the market economy nor the democratic polity.
The operations of the European Union, in concert with the ECB and the IMF during the crisis was an advanced expression of this anti-democratic shift.
Sure enough, the “the deals were democratically ‘ratified’ by national parliaments, which also legitimated the temporary appointment of extra-parliamentary heads of government” but under threat of insolvency or some other form of technocratic takeover under the terms of the neoliberal Treaties.
Meanwhile the citizens become dislocated from the mainstream political process which not only gives the corporate interests are freer rein but also channels anxiety into extreme movements that are the anathema of progressive ideals.
Finally, depoliticisation is justified or advanced by appeal to the argument that we can no longer trust our politicians to do the right thing by the people. This ‘trust’ conjecture permeates the earlier points above.
There are several points that can be made and that would require a separate post.
But, briefly, we must develop institutions that ensure that those who enter politics are not just self-serving but rather committed to public service.
There are a lot of initiatives that could be thought of here.
For example, we must stop the growing ‘revolving door’ where corporate elites moves seamlessly into key political positions and then, when they become unpopular or otherwise, transit back into private positions and take their public knowledge and influence to advance the corporate interests ahead of the general well-being.
There are also many initiatives about funding of parties that will improve the quality of our polity.
To reiterate, the idea of creating outsourced fiscal authorities that are outside of the political process, is not a core MMT proposition.
I oppose the idea because I believe it is part of the neoliberal depoliticisation that has reduced our capacity to make informed judgements about the effectiveness of our governments.
It has given our elected officials cover to divert their own culpability in implementing policies that undermine our well-being and advance narrow corporate interests.
Progressives should never support such tendencies.
By forcing politicians to take direct and transparent responsibility for all economic decisions, we at least get a clear signal which we can deliver judgement on at the next election.
This event is being organised by GIMMS and will run from 14:00 to 17:00.
The event will be held in – The Library of Birmingham, The ICC, Broad Street, Birmingham.
Following the launch in March of the textbook ‘Macroeconomics’ and in anticipation of the inauguration of the MMT training college later this year, the event will focus on giving academics, teachers and the wider public the tools with which they can take a more critical approach to the subject by comparing and contrasting heterodox and orthodox approaches to theory and policy.
Join us for what will, without doubt, be an informative event aiming to challenge our preconceptions about how money works and how such an understanding offers a lens through which we can develop solutions to the pressing economic, social and ecological issues we face.
Tickets are £11.25 (including Eventbrite fee) and can be purchased HERE.
Tickets are going quickly.
Note: Neither Warren nor myself are receiving any payment for our presentations. The tickets go to cover the venue costs.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.