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Upending old orthodoxies: meet the new economists

by | Jul 17, 2020 | The Agenda

“Public opinion is the work of men like ourselves”. So said Austrian economist Friedrich Hayek, addressing the 1947 inaugural meeting of the Mont Pelerin Society, the organization he founded to develop and propagate a doctrine we have come to know as neoliberalism. When he said ‘men,’ he meant men – the 39 delegates present included one woman – and there was no doubt that his intention was the management of how ordinary people would respond as he and his colleagues gained traction in their bid to control government policy.

It took a while, but for half a century now, their doctrine has held sway in Britain, the United States and Australia. It is sometimes mistakenly described as a “free market” policy frame, but with neoliberalism, everything is about control: the markets control us and our economy, while the makers of public opinion use media channels to ensure that governments are elected to control market conditions so that they favour those already in command of the nation’s wealth.

This is the third in a short series of articles in which I am focusing on the work of female political economists who challenge this orthodoxy. They also have in common a commitment to public communication – not with the aim of manipulating opinion, but with a determination to promote genuine understanding of how doctrinal economic principles influence the policies that determine the conditions in which we live.

Pettifor and Blakeley are skeptical of MMT, and offer a different analysis of how monetary systems work.

Pavlina Tcherneva, in her early forties and Grace Blakeley, who is just 27, represent a second generation in this movement: Tcherneva is aligned with the school of Modern Monetary Theory (MMT) championed by Stephanie Kelton, and Blakeley acknowledges Ann Pettifor as a principle mentor. These alignments also signal divergences. Pettifor and Blakeley are skeptical of MMT, and offer a different analysis of how monetary systems work, but all four of these women are working for economic transformation in the interests of the citizenry.

Blakeley supports Pettifor’s case for a Green New Deal. She has a high public profile as a journalist and is a regularly commentator on television. Her recent book Stolen: How to save the world from financialisation tracks the history of financial capitalism and the rise of global markets, seeking to explain how the division between “those who live off work and those who live off wealth” has widened relentlessly since Margaret Thatcher’s rise to power in the late 1970s.

Rebalancing the increasingly stark inequalities, Blakeley insists, should be a primary objective in finding a way forward from the present crisis-ridden economic environment. Her central argument is that a process of “financialisation” – progressive dominance of markets by trading in money itself – has driven the inequality to extremes. In response, she proposes a raft of measures to increase the social stake in the financial system and restore public ownership of national assets.

Like Pettifor, she wants to see moves to “bring capital back onshore”. No more hiding of accumulated wealth in tax havens. Going further, she envisages ways to socialise the financial system. The establishment of a national investment bank and the appointment of a “People’s Asset Manager” would create a foundation for new and more effective investments in the public interest. The bank could buy equities, manage pension funds (at present in a parlous state of depletion in Britain), and make investments for the common good, giving priority to ecological initiatives.

Along with this radical change to the monetary system, there should be social measures to counter the effects of austerity policies and prevent their return. Here she gives some consideration to “universal basic services,” which would involve the provision of health care, childcare, school meals, transport, crisis accommodation, disability assistance and other essentials free of charge. But Blakeley is critical of what she calls “solutionism” – dependence on a single idea or principle to create pervasive change. Universal Basic Services, Modern Monetary Theory (MMT) and Universal Basic Income (UBI) are also forms of solutionism in her view.

One person’s argument for a complex new measure, though, may be another person’s “solutionism”.

One person’s argument for a complex new measure, though, may be another person’s “solutionism”. Blakeley’s vision for a national investment bank, for example, might be dismissed as solutionism by someone interested in very different strategies. Arguments for large-scale economic transformation are beset by this problem because there is so little public discussion around them and insufficient attention has been given to specific ways of modelling them.

This is where Pavlina Tcherneva excels. A warm and engaging public communicator, she exudes a spontaneous sense of concern for the actual situations to which changes in policy must be addressed. As part of team of leading advocates for MMT, she has made it her business to create well-researched and carefully devised models for a job creation scheme, which is the principle means by which MMT economists seek to implement their “bottom up” approach to radical change.

220720 Pavlina

Pavlina Tcherneva.

Tcherneva’s proposals are staked out in her new book The Case for a Job Guarantee, published last month.  Her way of describing the effects of unemployment seems to anticipate the pandemic crisis, which occurred when the book was almost finished. “Unemployment behaves like a silent pandemic,” she writes, “from the way it spreads, to its virulent nature, to the enormous social costs it inflicts.”

The case she presents acquires new urgency as the COVID epidemic converges with an already escalating epidemic of unemployment, threatening to gain a stranglehold. We can only prevent this by treating both at once. Paradoxically, governments balk at the cost of job creation in the public sector when, she argues, unemployment is paid over many times, through its impact on child welfare, mental health, family dysfunction, rates of addiction and homelessness.

And so, as she puts it, “we are paying to maintain an ongoing problem”.

As part of the Green New Deal, the job guarantee would operate in accord with a National Care Act with the work provided being concentrated on care of communities and environments. In this way, it would pick up a sector of the current economy that is currently unrecognised as employment, and unpaid. This is the unpaid work not counted in the employment figures, work mostly done by women, caring for children and elderly or disabled family members, or in volunteer-based community services. Under the job guarantee, it would become part of the employment base, and paid accordingly.

Surveys conducted in recent years show that the Green New Deal has support from 63% of the US electorate, across party lines. Support for the job guarantee runs as high as 70%. Why, instead of moving in this direction, do we have governments shamelessly announcing that “the economy will recover strongly, but wages and jobs will not”? It is not – as our Prime Minister Scott Morrison and Treasurer Josh Fydenberg have insisted – the government that faces a fiscal cliff as we attempt a “return to normal” with the end of the JobKeeper scheme and JobSeeker subsidy. It is the people.

If our present government is the “better economic manager” it claims to be, it is time for it to prove it with some truly courageous policy innovations.

Arguments for a citizen-focused economy, rather than one that is run in the interests of corporations and financiers, are generally assumed to belong to the “left” side of politics. Actually neither of the major parties in Australia has really taken on the challenge of spearheading the increasingly urgent fundamental policy shift required to save us from another Great Depression. If our present government is the “better economic manager” it claims to be, it is time for it to prove it with some truly courageous policy innovations, some strong, fresh thinking, and a willingness to listen to different voices.

“Cloud cuckoo land!” I hear some people say.

But, if the government were to do this, electoral support could be overwhelming. Right wing governments would never abandon their billionaire backers or go against dictates of media organisations which manage their electoral fortunes.

Think again.

Following the pandemic, many of those corporate moguls are struggling, and themselves seeking government handouts.  The press and news media are barely surviving under a failed business model. Oppositions, having lost election after election in a propaganda-ridden environment, lack nerve. It’s time for governments of whatever persuasion to step up to the challenges we face and do what is best for everyone.

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