Here is my take from today’s Economy Lab in the Globe.
To expand a bit on alternatives, my take is that the neo liberal turn at the end of the 1970s was one possible response to the stagflation crisis, which found mainstream Keynesian economics wanting.
Left Keynesians such as Kalecki had long recognized that full employment capitalism with strong unions could lead to low profits, low growth and inflation, and the argument vis a vis the UK was advanced by Marxists such as Glyn and Sutcliffe.
The answer – as in the Meidner Plan in Sweden and the Alternative Economic Strategy put forward by Benn and the left of the Labour Party in Britain – was to go beyond conventional counter cyclical macro policy and to socialize the investment process, either by creating worker owned investment funds, or by greatly expanding the state role in industry beyond the traditional nationalized sectors. That way,Â union discipline on wages would effectively raise investment rather than just result in higher profits and increased inequality. Keynes himself had something like that in mind when he spoke of the need to euthanize the rentier.
Of course, the left failed in the 1980s to mount a credible political economic alternative to neo liberalism. And again the response to stagnation today is to demand sacrifice by workers to solve the problems of an economy still dependent upon private investment for profit.
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