Being anti-European Union and pro-Brexit does not make one a nationalist

The European Parliament elections start today and finish at the weekend (May 23-26). The Europe Elects site provides updated information about the opinion polls and seat projections, although given the disastrous showing of the polls in last Saturday’s Australian federal election, one should not take the polling results too seriously. But it is clear that there is an upsurge in the so-called populist parties of the Right at the expense of the traditional core political movements (centre-right and centre-left). It is also easy to dismiss this as a revival of ‘nationalism’ based around concepts of ethnicity and exclusivity and dismiss the legitimacy of these movements along those lines. However, that strategy is failing because the ‘populist’ parties have become more sophisticated and extended their remit to appeal more broadly and make it difficult to relate them to fascist ideologies. The fact that the progressive (particularly Europhile variety) continue to invoke the pejorative ‘nationalist’ whenever anyone begs to differ on Europe and question why they would support a cabal which has embedded neoliberalism and corporatism in its very legal existence (the Treaties) is testament to why the traditional Left parties are showing up so badly in the polls these days. The British Labour Party, for example, should be light years ahead of the Tories, given how appalling the latter have become. But they are not a certainty if a general election was called and the reason is they have not understood the anxieties of the British people and too many of their politicians are happy to dismiss dissent as being motivated by racism. The Brexit outcome so far is a good case study in that folly.

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The Job Guarantee misinformation campaign – UBI style

Apparently the British Left is “fizzing with ideas for a smarter economy” according to the UK Guardian article (May 12, 2019) – The zeitgeist has shifted. Now the left is fizzing with ideas for a smarter economy – written by Will Hutton. I can’t say I sensed an outbreak of fizz. But in the colloquial language from where I come from, the term fizzer means “Something that promised excitement but instead was a disappointment”, Yes, Hutton’s fizzers include promoting the insights of a long-standing (pun intended) critic of employment guarantees, who prefers people to be propped up as consumption units by a UBI, and, yes, surely, if Hutton is involved, reversing the “tragedy” of the democratic choice the British people made to exit the EU. Apparently, “Remain” is the “great progressive social force of the moment” and if Britain was to leave the EU it would “stand in the way of any of it ever being implemented”, where “it” refers to all these ‘left’ fizzers. It is hard getting one’s head around this logic. A restoration of democracy and sovereignty apparently disables the elected government from using its currency-issuing capacity to deliver a progressive program aimed at advancing well-being. But, staying in a corporatist cabal which has embodied neoliberalism in the core legal structure of its existence and allows corporations to sue governments which threaten their profits and is unaccountable to the people is the exemplar of progression. This stuff is in the world of the pixies!

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Marxists getting all tied up on MMT

Its Wednesday and so only a discursive type blog post (that is, very little actual research to report). I have been thinking about the so-called Marxist-inspired critiques of Modern Monetary Theory (MMT) and just the other day another one popped up in the form of the long article by Paul Mason. One of the things that I have noted about these critiques is that they deploy the same sort of attack against MMT that mainstream economics has traditionally deployed against Marxist economics. One would think they would at least be consistent. It won’t take me all that long to explain that.

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Ridiculous MMT critiques distorting Scottish independence debate

In a few weeks I am off to Britain again to participate in a series of events. Two of these events will be in Scotland where we (Warren and I) will discuss, as outsiders, issues pertaining to the monetary arrangements that might accompany a move to Scottish independence. It is a controversial issue in itself, but, unfortunately, is also intertwined with the vexed issue of EU membership. And the complication then becomes that progressives, who might otherwise be attracted to the Modern Monetary Theory (MMT) way of understanding the monetary system, also exhibit the standard misconstrued Europhile view that the EU, neoliberal though it is, can be reformed and that an independent Scotland should be part of that mess. And, in doing so, they then take problematic positions on the currency question. So a sort of ‘nest of vipers’ sort of situation, from the Aesop’s fable – The Farmer and the Viper. As in the Fable, the Europhiles embrace of the EU will always pay them back in grief. Anyway, while I am always cautious discussing the pro and con of situations where I have no direct material stake and a less than full understanding of specific cultural and historical influences that are at work, the Scottish question is interesting and demonstrates many of points that nations should be cogniscant of when discussing monetary sovereignty. And besides I have to get up in Edinburgh and Glasgow in a few weeks so as a researcher I am trained to be prepared and seek the best understanding that I can of the complexity of the situation. I will be writing a few posts on the Scottish issue as I prepare for that speaking tour.

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IMF changes tune on industry policy – shamelessly – Part 2

In Part 1, I introduced the discussion about the use of industry policies in the Keynesian period after World War 2. Most nations adopted a mixed planning-market based system for allocating productive resources and the state was always central in setting out planning parameters, direct ownership and employment, and regulation. It was a system that researchers described as being “highly successful”. Two approaches to industrialisation were taken: (a) export-oriented (for example, South Korea); and (b) import-substitution (for example, India), although in most cases, nations used both strategies. As neoliberalism emerged and the fixed exchange rate system broke down in the early 1970s, the IMF, whose purpose was intrinsically tied to providing foreign reserves to nations under the fixed exchange rate system, no longer had a purpose. They reinvented themselves as the neoliberal attack dog for corporations and global capital. They also provided cover for governments who were embracing the Monetarist ideas of Milton Friedman and intent on imposing fiscal austerity. These governments had become captured by corporate interests and by appealing to external demands from bodies such as the IMF, these governments could depoliticise harsh policy shifts away from Keynesian full employment. I used Britain as an example. Tony Benn, a Left Labour member in the British Parliament and Secretary for Industry, proposed an alternative industrial plan to revitalise British industry in 1975. It was rejected at the time by Harold Wilson and Denis Healey, who were intent on imposing fiscal austerity and deregulating. They used the scare that the IMF would have to bailout Britain as a ruse to force their Monetarist ideology onto the British Labour Party. It was no surprise that in an era where governments started abandoning fiscal support to maintain full employment, deregulated labour and financial markets, and abandoned domestic protections for their industries, many industries would go to the wall. The IMF claimed that this shows industry policy focused on import-substitution can never work. But the culprit was not flawed industry policy. Rather, it was the withdrawal of all the accompanying support structures that made it work, but which ran counter to the neoliberal ideology of ‘free markets’. Now the IMF is having a rethink based on the devastation that neoliberalism has caused. On March 26, 2019, the IMF published a new working paper (19/74) – The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy. Now, we are reading that the IMF has conceded that industry policy interventions that were the basis of economic planning in the Keynesian era were highly successful and only stopped being so, in some cases, when fiscal austerity was imposed and trade controls were abandoned in the 1970s. This is Part 2 of the two-part series on this topic.

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IMF changes tune on industry policy – shamelessly – Part 1

In 1975, Tony Benn, a Left Labour member in the British Parliament and Secretary for Industry, proposed an alternative industrial plan to revitalise British industry. At the time, the Prime Minister and Chancellor were becoming attracted to Monetarism and started framing and implementing the austerity-type fiscal strategies that are common today. Benn opposed this approach, and, instead proposed a far-reaching alternative economic strategy that involved increased industrial planning to revitalise British industry. The growing ‘free market’ orthodoxy at the time, spearheaded by the IMF and the World Bank, which had transformed into neoliberal enforcement agencies, were vehemently opposed to any form of industry policies or state intervention. As a result, Benn was basically shut out of the debate and this helped transform social democratic politics into the mess it is today. Ironically, now the IMF is changing its tune. It has recently rediscovered how effective industry policies of the type Benn was proposed actually can be if supported by coherent policy structures. Irony two is that these supportive policy structures are the opposite to those typically proposed by the IMF. At the time, there were economists (such as yours truly) who knew that the descent into neoliberalism would be a disaster and hamper growth and more equal distributions of wealth and income. But that view was also shut out. Now, without shame, the IMF are basically admitting the decades of insufferable neoliberal policies that they forced onto nations may have been wrong. Industry policy is back in focus. Imagine if they never had seduced the world with their snake oil. British politics, for one, would have been quite different. Brexit could very well happened in 1975 under a Labour government. And more. This is Part 1 of a two-part series which will finish tomorrow.

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Another fictional characterisation of MMT finishes in total confusion

I am travelling across Europe today and so am just writing this in between various commitments. I will soon be back home in Australia and have received a lot of E-mails about the way the Australian media has been treating the recent upsurge in attention about Modern Monetary Theory (MMT). The short description is appalling – one-sided, no balance and hardly about MMT at all, despite dismissing our work as garbage. So par for the course really. While most of the articles have just been syndicated hashes of the foreign criticisms that have been published elsewhere from Krugman, Rogoff, Summers and others. But there was one article by a local journalist who tried to predict which side of history would end up looking good in all this and chose, wrongly I think, to throw his cap in with the New Keynesians. More alarmingly though is that this local effort clearly followed the international trend by setting out a fiction and then tearing into that fiction claiming to his readers that this was about MMT. He missed the mark and ended up totally confusing himself. So par for the course.

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Britain’s austerity costs are larger than any predicted Brexit losses

On February 21, 2019, the British Office of National Statistics (ONS) released the latest fiscal data for the British government – Public sector finances, UK: January 2019. There was a lot of press reaction applauding the result and even progressive writers found it possible to misrepresent what the data actually is telling us has been happening. The fact that the British government recorded a fiscal surplus of £14.9 billion in January 2019 was touted in terms of creating a ‘war chest’ that the Government will be able to delve into when the next crisis arrives (which might be soon if the current Brexit mishaps continue). The reality, is, of course, totally different. There is no stored up spending capacity (stock) created when a government runs a surplus. What is actually happening is that the net flows out of the economy to the government squeeze an already over-indebted non-government sector for liquidity and destroy that much of its wealth portfolio. Moreover, while all and sundry, including the Euro-leaning Left are frothing at the mouth over Brexit, new data now allows us to compute the losses arising from the deliberate strategy of fiscal austerity that the Government has pursued. Guess what? They appear to dwarf all the Project Fear estimates of losses arising from Brexit (notwithstanding the flaky nature of those estimates). Where is the Guardian’s column Austerity Watch to match its hapless Brexit Watch column? Where is the relentless stream of articles from Guardian journalists and Op Writers about austerity? Sorry, that would take up space which is occupied by the relentless stream of articles about Brexit?

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A progressive European superstate will never come to pass

The increasing uprising against Modern Monetary Theory (MMT) in the media is salutory because it means our ideas are now considered to be a threat to the mainstream economics (for example, Paul Krugman now buying into the carping) and to the heterodox tradition (for example, the British economists who self-identify with that tradition). The high profile debate around the Green New Deal has been associated with MMT and this has brought all sort of crazy attacks on MMT from those who think they are ‘green’ but haven’t traversed out of ‘Monetarist-type’ economics thinking. And then I note that apparently the Green New Deal is being expropriated by Europhiles to wedge those who consider Lexit and Brexit to be the only way to re-establish progressive society and politics. Apparently, the Europhiles are arguing that you cannot be both Lexit/Brexit and support the Green New Deal. Curious logic. And, of course, a desperate attempt by the Europhiles to grasp at anything to discredit both Brexit and MMT, given that there is a high proportion of MMTers who prefer Britain leave the EU and that the EU disappears in its current form. And so it goes. Wolfgang Streek recently published an interesting academic article that bears on this discussion. That is what this blog post is about.

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The brainwashing of economics graduate students

I was reminded this week of an interesting studies published in 1987 by Arjo Klamer and David Colander on the influences that go into the training of a professional economist. This study was repeated by Colander in 2005. The results are rather disturbing although obviously I am an ‘insider’ in the sense I went through the process in one way or another myself (although not in a US graduate program). They demonstrate how far removed graduate students are from learning or being interested in the real world. They compete among each other for ‘technical excellence’ in mathematics so they can solve tricky technical problems but do not think it is important to know anything much about the real world economy nor about the economics literature and history of the discipline that has gone before them. They adopt classic Groupthink characteristics as they are moulded (socialised, brainwashed, choose your own word) by their professors (who then feed them into their own networks for employment etc). There is little wonder the profession has very little to say that makes any sense about the real world. It is largely a disgrace.

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US labour market continues to improve but ‘middle class’ jobs disappearing

Last week’s (February 1, 2019) release by the US Bureau of Labor Statistics (BLS) of their latest labour market data – Employment Situation Summary – January 2019 – showed that total non-farm payroll employment rose by 304,000 and the unemployment rate rose by 0.1 points to 4 per cent on the back of a 0.1 points rise in the participation rate. The labour force survey estimates were significantly impacted by changes in population benchmarks (an annual occurrence). However, all indications are that the labour market continues to improve. We will see in the next few months whether the strong January payroll employment growth was a one-off blip or a sustained trend. While the US labour market is looking fairly robust there is still a substantial jobs deficit remaining which tells us that it remains some distance from full employment. And, my latest analysis on which occupations are enjoying the employment growth shows that there has been a distinct hollowing out of median pay jobs (the so-called ‘middle class’ jobs), which helps to explain the sharp increases in income inequality.

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The conflicting concepts of cosmopolitan within Europe – Part 2

In the blog post earlier this week – The conflicting concepts of cosmopolitan within Europe – Part 1 (January 29, 2019) – I juxtaposed two concepts of ‘cosmopolitanism’ which appeared to be part of the early moves to achieve European integration. On the one hand, there was a Kantian-style desire to create, through cooperation between previously warring states, a peaceful and prosperous future for a ‘one’ Europe. This construct would be welcoming to outsiders, progressive, and celebrate ethnic and cultural diversity. It was a rights-based conception of citizenship and democracy, which closely aligned with the growing popularity of the social democratic polity. On the other hand, the early moves to overcome the resistance to creating a supranational entity that would increasingly compromise national sovereignty – the so-called “functionalist” approach of Jean Monnet and Robert Schuman, created a pragmatic, free market-based cosmopolitanism, which set the Member States against each other as competitors. As I demonstrated, over time, the economic cosmopolitanism channeled the burgeoning neoliberalism of the 1980s and compromised the rights-based, political cosmopolitanism, to the end that we now talk about democratic deficits as the European Commission and its unelected allies such as the IMF trample over the rights of citizens across the geographic spread of Europe. Europhile progressives hanker for the first conception of European cosmopolitanism and proffer various reform proposals, which they claim will tame the economic dimensions and restore the ‘European Project’ as a progressive force in the world. In this second part of the series I will argue that from the outset the cosmopolitanism embedded in the ‘Project’ was deeply flawed and it is no surprise that democracy is now compromised in the European Union. I argue that reform is not possible such is the extent of the failures.

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The Australian Labor Party is still stuck in its neoliberal denial stage

Yesterday, the Federal government released their so-called – Mid-Year Economic and Fiscal Outlook (MYEFO) – which is their half-yearly review of the fiscal policy settings. Unsurprisingly, the Treasurer was crowing about the shift towards surplus with booming company tax revenue. With a federal election coming in the next 4-5 months, the Government will now offer tax cuts to entice people to vote for what has been one of the worst governments in our history. The fiscal contraction that is going on at present is totally unwarranted from an economic perspective. The problem for Australians is that the other side of politics – the Labor Party – is no better. It is a sad state of affairs when a political system is dominated by two neoliberal parties. One of them claims to be progressive but every day just reinforces the conservative myths about the fiscal capacities of government. Welcome to Australia.

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The Job Guarantee is more than a Green New Deal job creation policy

Everywhere I read it seems, the ‘Green New Deal’ appears. I wrote a bit about it last week in my evaluation of the latest US job numbers – US labour market moderated in November and considerable slack remains (December 11, 2018). The point I made there was that a shift to a green economy would possibly generate around 21 million jobs (14 per cent of total US employment), which given reasonable estimates of excess capacity would require a huge shift in the employment structure and multiples of the available idle labour supply. Of course, that is the objective – to shift workers from fossil fuel, carbon intensive industries into sustainable activities. That is no easy task and would require a fundamental shift in the government-market balance in terms of resource allocation. The market alone will not accomplish that shift in a desirable manner. Cue – more regional and occupation planning. I have also been seeing an increasing number of Tweets talking about a ‘Just Transition’ framework, something I have written about in the past. And there are now Tweets out there equating that with a Job Guarantee. At that point, we get ahead of ourselves. We must see the Job Guarantee in perspective and not ask it to do too much. That is what this blog post is about.

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IMF Euro hitman in denial of the reality that the monetary union has become

The IMF hitman in Europe, one Poul Thomsem recently published a European Money and Finance Forum (SUERF) Policy Note (October 2018) – A Financial Union for the Euro Area – where he basically told us that any changes that the IMF will allow to occur in the Eurozone architecture will be minimal and will not stop Member States “from being forced to undertake large pro-cyclical fiscal adjustments when the next shock or major downturn hits”. The term “large pro-cyclical fiscal adjustments” means harsh fiscal austerity at the same time as the non-government sector spending in those Member States is collapsing. Fiscal policy thus reinforces the non-government spending withdrawal and worsens the outcome for employment, growth, income generation etc. Why? Because “all member countries” must “respect the Stability and Growth Pact”. End of story. Welcome to the Eurozone dystopia – the world where governments must follow rules set by technocrats which are incapable of delivering sustained prosperity for all but clearly suit the top-end-of-town. He then waxed lyrical about a whole set of neoliberal financial market reforms that the IMF is proposing which will further diminish the capacity of the Member States. But, at that point, he just starts to dream. The Member States are already deeply suspicious of the financial reforms that have been introduced to date, ineffective as they are. They are not about to cede more power to Brussels and Frankfurt any time soon.

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The ‘fiscal contraction expansion’ lie lives on – now playing in Italy – Part 2

This is the second and final part in my discussion about the latest attempts by the IMF and notable New Keynesian macroeconomists to keep the ‘fiscal contraction expansion’ lie alive. The crisis in Italy is once again giving these characters a ‘playing field’ to rehearse their destructive ideas that rose to prominence during the worst days of the GFC, when the European Commission and the IMF (along with the OECD and other groups) touted the idea of ‘growth friendly’ austerity. Nations were told that if they savagely cut public spending their economies would grow because interest rates would be lower and private investment would more than fill the gap left by the spending cuts. History tells us that the application of this nonsense caused devastation throughout, with Greece being the showcase nation. The damage and carnage left by the application of these mainstream New Keynesian ideas are still reverberating in elevated unemployment rates, high poverty rates, broken communities and increased suicide rates, to name a few of the pathologies it engendered. In their article – The Italian Budget: A Case of Contractionary Fiscal Expansion? – Olivier Blanchard and Jeromin Zettlemeyer, from the Peter Peterson Institute for International Economics continue to argue the case for austerity in Italy as the only way to engender growth. In this second part of my analysis of their argument I show that there is little evidential basis for concluding that Italy is a special case. I argue that imposing fiscal austerity on Italy will turn out badly. The broader conclusion is that the mainstream economics profession has learned very little from the GFC. For them the story stays the same. It is one that we should reject in every circle it arises.

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Financial services agreements – the EU as a neoliberal, corporatist project

I have been reading the new book by Costas Lapavitsas – ‘The Left Case Against the EU’ – which has been recently published. It is solid and clearly explains why the EU is not an institution or structure than anyone on the progressive Left should support or think is capable of reform any time soon. It has become a neoliberal, corporatist state and hierarchical in operation, with Germany at the apex bullying the weaker states into submission. Divergence in outcomes across the geographic spread is the norm. It is also the anathema of our concepts of democracy both in concept and operation. It is more like a cabal of elites who are unelected and, largely unaccountable. By giving their support to this monstrosity, the traditional Left political parties (social democrats, socialists etc) have been increasingly wiped out such is the anger of voters to what has become a massive coup by capital against labour. These are the themes that Thomas Fazi and I also explored in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). I also just finished reading an interesting report – Financial Regulation challenged by European Trade Policy – published by the Veblen Institute and Finance Watch (October 2, 2018), which examines “the impact of European trade policy on financial regulation”. It is essential reading for those progressives who still think that Britain should remain in the EU. If they understand the research findings they would change their minds.

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Progressive political leadership is absent but required

One of the themes that has emerged in the discussions of the British Labour Party Fiscal Credibility Rule (which should be renamed the Fiscal Incredulous Rule) is when is the right time for a political party to show leadership and start educating the public on new ideas. The Modern Monetary Theory (MMT) project has been, in part, about educating people even if our ideas have been strongly resisted by the mainstream. The mainstream (New Keynesian) paradigm in economics is degenerative (meaning it has little empirical validation) and eventually it will fade into historical obscurity. For many of us that cannot come quickly enough. The defenders of the Rule argue that progressive politicians have to tread carefully or else the amorphous financial markets will turn on them and destroy their initiatives. The problem is that by kowtowing to the City or Wall Street, the progressive political forces become captured and redundant. Witness the electoral demise of social democratic parties over the last several decades. The conditions are ripe (see below) for a courageous head-on attack on these financial market elites and educate the public so that they allow elected governments to legislate for all rather than serving the interests of the elites, which has become the norm over the last several decades. The problem is that progressive political forces are also taking advice from mainstream economists who use the tools of neoliberalism. The upshot is that progressive political leadership is absent but desperately required.

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The conservative polity is fracturing – an opportunity for the Left

Regular readers will know that I have spent a lot of time writing about the demise of the Left political parties as they became subsumed with neoliberal economic ideology, which blurred the political landscape as the ‘centre’ moved to the Right. That topic was the focus of our current book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017). The neoliberal infestation has left these parties with declining electoral support, fractured internal organisations and cultures, and a seeming inability to abandon their flawed economic narratives. But there is a mirror image to this demise and that is playing out on the conservative side of politics. In Australia in the last week (but building for years) the far right conservative elements from within the government have brought down their own leader and our Prime Minister in a spiteful clash of ideologies between the more moderate elements in their party and the extremes out on the right. The internal tensions that drove this suicidal mission are being played out around the world. Think about the way that Trump is compromising the Republican party. Think about how Brexit is splitting Tory ranks in Britain. And so on. The problem for the conservatives is that citizens are realising that the neoliberal economic approach has failed to deliver on its promises. And that economic model is ‘owned’ by the conservatives. The adoption of neoliberal economics by social democratic parties is not part of their DNA. It is largely because their ranks have been infested by careerists who have come from the ‘elites’ and have little resonance with workers. The gaps in the policy space that these fractures have created is being occupied by extremist groups. It will be much easier for progressive parties to reclaim that space than it will be for the conservatives who are in the process of a death spiral. But to do that, the social democratic movements has to abandon every vestige of neoliberal economics – the concepts, policies and language and framing. That is the challenge.

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Public infrastructure investment must privilege public well-being over profit

One of the principle ways in which so-called progressive political parties (particularly those in the social democratic tradition) seek to differentiate themselves from conservatives is to advocate large-scale public infrastructure investment as a way of advancing public good. You can see evidence of that in most nations. Nation-building initiatives tend to be popular and also are less sensitive to the usual attacks that are made on public spending when income support and other welfare-type programs are debated. Capital worked out long ago that public spending on infrastructure provided untold benefits by way of profits and influence. In the neoliberal era, the bias towards ‘competitive tendering’ and public-private partnerships has meant that private profit tends to dictate where and what public infrastructure is built. The problem is that large-scale projects tend to become objects of capture for the top-end-of-town. Research shows that these ‘megaprojects’ typically deliver massive cost overruns and significantly lower benefits than are first estimated when decisions are being made about what large projects to fund. Further, evidence suggests that this is due to corrupt and incompetent behaviour by private project managers (representing their companies) and empire-building public officials. They lie about the costs and benefits so as to distort the decision-making processes in their favour. Any progressive government thus must be mindful of these tendencies and behaviours. A progressive policy agenda needs to be more than just outlining a whole lot of nice sounding public infrastructure projects that the government will pursue. The whole machinery of public procurement that has emerged in this neoliberal era needs to be abandoned and replaced with decision-making processes and rules that privilege the advancement of public well-being over profit.

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