- 18 Oct 2018 07:42
#14954588
Beyond Austerity in The Nation
Deficit mania is built on a series of destructive neoliberal myths.
By William Mitchell
MARCH 16, 2011
https://www.thenation.com/article/beyond-austerity/
". . .
"How Did We Get Here?
"The Great Depression taught us that without government intervention, capitalism is inherently unstable and prone to delivering lengthy periods of unemployment. The Hooverian orthodoxy of balanced budgets, tried during the 1930s, failed. Full employment came only with the onset of World War II, as governments used deficit spending to prosecute the war effort. The challenge was how to maintain this full employment during peacetime.
"Western governments realized that with deficit spending supplementing private demand, they could ensure that all workers who wanted to work could find jobs. All political persuasions accepted this commitment to full employment as the collective responsibility of society. As a result, very low levels of unemployment in most Western nations persisted until the mid-1970s. While private employment growth was relatively strong during this period, governments maintained a buffer of jobs for the least-skilled workers. These jobs were found in the major utilities, the railways, local public services and major infrastructure functions of government. By absorbing workers who lost jobs when private investment declined, governments acted as an economic safety valve. In addition, welfare systems provided income support and other public services (such as health and education) to citizens in need. While there were significant differences across nations in the scope of these systems, they all shared the view that the state had a role to play in providing economic security to citizens.
"However, conservative resistance to the use of budget deficits [to maintain fullish employment] grew in the late ’60s, particularly in the United States, as inflationary pressures mounted because of spending associated with the Vietnam War. And conservatives believed that trade unions had become too powerful. But the full-employment consensus didn’t collapse until the escalating inflation that followed the OPEC oil-price hikes of the ’70s. This marked the beginning of the neoliberal era, which has dominated the political debate ever since.
..."
The mid-70s also marks the separation of the lines on the graph of real wages and productivity. Real wages became flat for the next 40 years and productivity continued to go up at just about the same rate for those same 40 years.
.
Deficit mania is built on a series of destructive neoliberal myths.
By William Mitchell
MARCH 16, 2011
https://www.thenation.com/article/beyond-austerity/
". . .
"How Did We Get Here?
"The Great Depression taught us that without government intervention, capitalism is inherently unstable and prone to delivering lengthy periods of unemployment. The Hooverian orthodoxy of balanced budgets, tried during the 1930s, failed. Full employment came only with the onset of World War II, as governments used deficit spending to prosecute the war effort. The challenge was how to maintain this full employment during peacetime.
"Western governments realized that with deficit spending supplementing private demand, they could ensure that all workers who wanted to work could find jobs. All political persuasions accepted this commitment to full employment as the collective responsibility of society. As a result, very low levels of unemployment in most Western nations persisted until the mid-1970s. While private employment growth was relatively strong during this period, governments maintained a buffer of jobs for the least-skilled workers. These jobs were found in the major utilities, the railways, local public services and major infrastructure functions of government. By absorbing workers who lost jobs when private investment declined, governments acted as an economic safety valve. In addition, welfare systems provided income support and other public services (such as health and education) to citizens in need. While there were significant differences across nations in the scope of these systems, they all shared the view that the state had a role to play in providing economic security to citizens.
"However, conservative resistance to the use of budget deficits [to maintain fullish employment] grew in the late ’60s, particularly in the United States, as inflationary pressures mounted because of spending associated with the Vietnam War. And conservatives believed that trade unions had become too powerful. But the full-employment consensus didn’t collapse until the escalating inflation that followed the OPEC oil-price hikes of the ’70s. This marked the beginning of the neoliberal era, which has dominated the political debate ever since.
..."
The mid-70s also marks the separation of the lines on the graph of real wages and productivity. Real wages became flat for the next 40 years and productivity continued to go up at just about the same rate for those same 40 years.
.