Sunday, October 22, 2017

Bill Mitchell and Thomas Fazi — Everything You Know About Neoliberalism Is Wrong

Some falsely assume that as a result of neoliberal globalization the national state has largely been superseded by transnational capitalism to the degree that national sovereignty no long matters very much. International liberals think that this is a good thing, since competition among nation states has led to conflicts and conflagration.

Bill Mitchell and Thomas Fazi argue otherwise. What has taken place rather is state capture.
...core capitalist countries have not been characterised by a withering away of the state. Quite the contrary, in fact. Even though neoliberalism as an ideology springs from a desire to curtail the state’s role, neoliberalism as a political-economic reality has produced increasingly powerful, interventionist and ever-reaching – even authoritarian – state apparatuses. 
The process of neoliberalisation has entailed extensive and permanent state intervention, including: the liberalisation of goods and capital markets; the privatisation of resources and social services; the deregulation of business, and financial markets in particular; the reduction of workers’ rights (first and foremost, the right to collective bargaining) and more in general the repression of labour activism; the lowering of taxes on wealth and capital, at the expense of the middle and working classes; the slashing of social programmes, and so on. These policies were systemically pursued throughout the West (and imposed on developing countries) with unprecedented determination, and with the support of all the major international institutions and political parties. In this sense, neoliberal ideology, at least in its official anti-state guise, should be considered little more than a convenient alibi for what has been and is essentially a political and state-driven project, aimed at placing the commanding heights of economic policy ‘in the hands of capital, and primarily financial interests’, as Stephen Gill writes. Capital remains as dependent on the state today as it did in under ‘Keynesianism’ – to police the working classes, bail out large firms that would otherwise go bankrupt, open up markets abroad, etc. 
In the months and years that followed the financial crash of 2007-9, capital’s – and capitalism’s – continued dependency on the state in the age of neoliberalism became glaringly obvious, as the governments of the US and Europe and elsewhere bailed out their respective financial institutions to the tune of trillions of euros/dollars. In Europe, following the outbreak of the so-called ‘euro crisis’ in 2010, this was accompanied by a multi-level assault on the post-war European social and economic model aimed at restructuring and re-engineering European societies and economies along lines more favourable to capital....
Social Europe
Everything You Know About Neoliberalism Is Wrong
William Mitchell, professor of economics at the University of Newcastle, New South Wales, Australia and Thomas Fazi, journalist, writer, filmmaker, and translator.

3 comments:

Bob Roddis said...

Libertarianism ≠ state control.

Laissez faire ≠ state control.

I know! To be fair and precise, let’s call both sides by the SAME NAME, “capitalism”.

Thus, a regime where bank and big business bailouts are impossible and never occur will be described by the SAME TERM as a regime where bank and big business bailouts are ubiquitous.

If anything goes wrong, blame it all on the libertarian influence. That’s fair. And precise.

AXEC / E.K-H said...

Everything you know about MMT is wrong
Comment on Bill Mitchell and Thomas Fazi on ‘Everything You Know About Neoliberalism Is Wrong’

There is the political sphere and there is the scientific sphere. It is quite obvious that both are fundamentally different and because of this, it is of utmost importance to radically separate the two. The mixing of the two has been the crippling defect of economics since the founding fathers propagated Political Economy.

The goal of political economics is to successfully push an agenda, the goal of theoretical economics (= science) is to successfully explain how the actual economy works. In political economics anything goes; in theoretical economics the scientific standards of material and formal consistency are observed.

Fact is that the political agenda pushers have hijacked economics and messed it up. Political economics has produced nothing of scientific value in the past 200+ years.

MMT, too, violates the first rule of science, i.e., the strict separation of politics and science. This rule is known since J. S. Mill: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

Needless to emphasize that all economic schools violate this rule and are in the business of agenda pushing. This is why economics is a failed science or what Feynman called a cargo cult science.

So, it is not the question whether what Mitchell/Fazi say about sovereignty and the role of the nation-state is convincing or not. The point is that all questions about the realization of the Good Society have to be discussed and decided in the political sphere. When economists start to talk about liberty and democracy and liberalism and free markets and state intervention and the road to serfdom/freedom they are exceeding their scientific authority and become clowns in the Circus Maximus.

The really bad fact of the matter is that economists should be able to tell how the actual economy works, yet they are not. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and ALL got the foundational concept of the subject matter ― profit ― wrong. MMT is no exception.

See part 2

AXEC / E.K-H said...

Part 2

MMT claims on Wikipedia: “Therefore, budget deficits add net financial assets to the private sector; whereas budget surpluses remove financial assets from the private sector. This is widely represented in macroeconomic theory by the national income identity: G−T=S−I−NX where G is government spending, T is taxes, S is savings, I is investment and NX is net exports.”#1

For G, T, NX=0 this equation boils down to Keynes’ famous I=S. The remarkable fact is that neither MMT’s national income identity nor Keynes’ basic formalism says anything about the pivotal economic magnitude profit.#2 It should be obvious that a model/theory which does not explicitly contain the variable profit is a priori false. After all, the concept of profit is for economics what the concept of energy is for physics. So, there is no need at all to occupy oneself with the rest of the theoretical superstructure of MMT. The fundamental methodological rule says, if there is an inconsistency in the premises/axioms the whole theory is scientifically worthless.

The correct balances equation reads Qm=G−T+I−S+NX with Qm as monetary profit. And from it follows directly Public Deficit = Private Profit. The preferred policy measure of MMT, i.e. deficit spending, is in effect a profit booster program.

Exactly at this point, political agenda pushing sets in. MMT never talks about the profit of the business sector but says “budget deficits add net financial assets to the private sector” suggesting that private sector = household sector = ninety-nine percenters.#3 In fact private sector = business sector = one-percenters.

With the argument that deficit spending in the form of a Job Guarantee or other social benefits “add net financial assets to the private sector” MMT tries to sell its policy to socialist movements like Sanders/Corbyn.

MMT is NOT a new economic paradigm but political agenda pushing for the one-percenters in a social bluff package.#4 This holds for all of economics: when profit is false the whole theoretical superstructure is false and economic policy guidance has NO sound scientific foundations. MMT is political economics = proto-scientific garbage.

Egmont Kakarot-Handtke

#1 Wikipedia, Modern Monetary Theory
https://en.wikipedia.org/wiki/Modern_Monetary_Theory

#2 How Keynes got macro wrong and Allais got it right
https://axecorg.blogspot.de/2016/09/how-keynes-got-macro-wrong-and-allais.html

#3 MMT and the magical profit disappearance
https://axecorg.blogspot.de/2017/08/mmt-and-magical-profit-disappearance.html

#4 For the full-spectrum refutation see cross-references MMT
http://axecorg.blogspot.de/2017/07/mmt-cross-references.html