Margaret Thatcher’s Economic Legacy
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.
I am not sure that everybody on the left would agree that it was exclusively a profit squeeze that led to the end of the post war era. I think some such as Baran and Sweezy would argue it was more to do with stagnation and capital’s natural tendency to become crisis oriented after the large gexpansion after the war. There is a strong argument that indeed many of the post war compromises and the Keynesian based mechanisms were not enough to keep capital from it’s stagnation tendencies, and it was that and not labour that squeezed profits. I am not sure if you recall the summer of political economy in the 90’s where Andrew Martin was at Carleton, but I recall those debates quite well.
Good article though I am just tending more towards the Baran and Sweezy approach these days.
Just wanted to say, I know you know this argument Andrew and I am sure some of it is represented in your article, as I wanted to make my statement clearer. The weight placed on labour nuns causing the wage pressures and hence the profits squeeze and the neo con attack on labour is not in m y view the largest factor in the keynesian breakdown. It was more to do with the post war stimulus rebuilding stimiukus, the cold war expansion and spending dynamics, and breakdown inthe power sharing of the new deal, the crisis based growth model tendency of capital, and finally the industrial organization and oligopoly tendencies that brought about the stagnation and the resulting inability of the economy to grow tomeet the inherent ratcheting expectations of labour demands. I am not saying there was no component of wage pressure that contributed, I am merely stating it was a secondary factor.
Also wanted to say that given the losses occurring in the commodity sell off yesterday, we again see the crisis prone raw neo liberal approach to financialization that has pervaded the economy in the replacement of Keynesianism, which is producing far more instability than what ever occurred under the post war Keynesian period.
It is amazing watching all that surplus value stored away in gold melt into nothing yesterday. Imagine if our governments would have instead decided to raise taxes on all that dead money instead of letting it chase such risk in these very unstable times. Society would have been much better off with expending that surplus on some new schools, healthcare etc, instead of just watching all that value melt in a negative sum game of financialization of the economic surplus. It truly is a brutish way to run the economy.
By the way, I am embarking on a new project with my studies. I am embedding myself within the Chinese economy forthe next few months. I think it is time to slay his unknown dragon within my economic thoughts. I have to say after spending a couple weeks collecting all things to do with the China economy, there is so much massive change ongoing with the Chinese economy as it wrestles with its future. A new Variety of capitalism (VOC) is on the rise and given that this experiment in a Polanyi and Marxian extent has the potential to become quite destructive, I have concluded one thing so far about China, this grand experiment unfolding has the fate of the world wrapped up in China. Truly the planet is at stake here in this grand experiment, as stated yesterday by the PRC representative, China has gone to far too fast, and some of the experiments, especially in growth have been unstable from many perspectives.
The is no doubt some many gains for china, a new fast growing and burgeoning middle class estimated at over 200 million. Some new quite productive cities such as Shenzhen and the Guangdong proviince with its spill overs from Hong Kong. Some the highest counts of PHDs in the world in ShenZhen and a very high standard of living for many of its urban dwellers, in fact one could argue higher than most Canadians. But there is a whole lot of polarization and the poverty that that wealth is embedded within, is truly unstable, especially with a seeming lack of voice and effe give means for change. Hard to say where the politics are heading and how much neo liberalism embeds itself. It is fascinating though and quite the massive labour markets. Unfreaking real the size of the statistics, I am blown away but invigorated by the challenge.
Letter in Vancouver Sun, Canada, April 13, 2013
Margaret Thatcher\â€™s economic legacy disputed
Re: Thatcher inspired because she led from principle, Column, April 8
Despite her noble intentions and principles, the legacies of Margaret Thatcher include a deregulated financial sector prone to criminality and instability, and giveaway privatizations that have made Britain the highest-priced economy in the world with an enormous financial and real estate overhead.
The 99 per cent in Britain may be experiencing higher prices, a higher poverty rate and greater unemployment, but at least all can agree that Thatcher broke the unions and improved the quality of life for the rest of the population.
Larry Kazdan Vancouver
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