This post came from a question asked of me on a below-the-line thread on The Guardian:
I am not an expert in monetary theory (I have a PhD in something else), so my question might sound a bit simplistic, but I hope it’s not.
If government surplus = private deficit, and higher private deficit impacts populations hard, why are the neoliberals running the economy this way? Is it done to further impoverish the poorer actors in society (because the wealthy can obviously deal with debt a lot better than the poor)? Who benefits, if not the rich?
IMHO, I think they are too conniving to be doing this by accident, ie because it’s what the IMF tells them. I think it is to punish people according to some law-of-the-jungle doctrine. For evidence of nastiness, just look at what they are doing with welfare overpayments and refugees.
Don’t they owe us a duty to run government for the benefit of the mostest? And surely they are the trustees of our country and institutions? – Mary
Mary, as I said in another comment, yes exactly. The purpose of government is to maximise the prosperity of the society, by providing the common public goods we require to reach the standard of living we expect, and arrange use of resources in a manner that achieves this public purpose sustainably. In these days of individualism, user-pays and privatisation, that probably sounds like socialism. It isn’t, of course.
The rot set in with the abandonment of full employment as a core government policy goal in the mid-70s. George Monbiot wrote a good piece here on the history of neoliberalism a couple of months ago that’s worth a read. Monetarist Trickle-down theory is an utter failure, it’s just taken a long time for this to really manifest itself, so long that no other school of economic is considered “mainstream” any more. Like the Ministry of Truth, anything else is heresy. All three major parties today ascribe to neoliberal theory, only the depth varies.
Money’s mobility is inexorably upwards: those with very little spend all they have, and each person’s spending is another’s income, until that money comes to rest somewhere in the hands of someone who has no need to spend it, or returns to the government through tax. You certainly don’t need a PhD in economics to see the irrefutability of that. In fact you’re almost certainly better off without one.
You need only look at the relative size of the FIRE (Finance, Insurance, Real Estate) sector today compared to 30 years ago to appreciate the power they wield, which is completely untethered from any production of real output: derivatives, speculative financial gambling and real estate bubbles, rather than investment in capital in the classic sense. They are the sworn enemy of deficit spending, since their profits come from private debt, and their ability to parlay debts into ownership of real resources.
We’ve been hoodwinked into accepting that “the market” is perfect and omnipotent, yet simultaneously so fragile that anything a government might want to do will damage it. It’s bullshit, of course. The market exists because the government allows it to, and has the means to set the rules under which it operates. The neoliberals would have those roles reversed.
Sorry, this answer has meandered a bit, hope it’s helpful.
