Bill Mitchell’s optimism

I’ve just finished Bill Mitchell’s Full Employment Abandoned. This is a very relevant read if one aims to understand the ravages of neo-liberal ideology and – even more importantly – why that approach is not inevitable. Mitchell shows very nicely how there is no good theoretical justification for neo-liberalism, how empirical data proves it wrong, and that alternative policies were used after World War II and delivered superior outcomes. If you get the opportunity, read it!

There’s a puzzling section towards the end, however, which in my opinion lays out the main problem with getting Mitchell’s (and Wray’s and Mosler’s and the others’ that I don’t know yet) recommendations accepted. Mitchell defends his approach against arguments based on Kalecki and focusses on Kalecki assuming erroneously that a Job Guarantee will lead to inflation.
The passages he quotes, however, make me believe that Kalecki had something else in mind (and I have to admit that I haven’t read his works so I can go only by what Mitchell quotes):

It is pretty obvious even to the non-macroeconomist that firing people to increase profits is a self-defeating idea in the long run. Years ago, without any economic training, just a bit of logical thinking at my disposal, I reasoned that this kind of corporate “strategy” meant that the corporation at work undermined their own markets since unemployed people could probably not afford their products. That strategy relies heavily on other companies not using this approach, and profit maximization and take-overs pretty much require of all companies to follow the same predator-capitalistic path. The only companies that are shielded from this are state-supported ones. By now I have, thanks to Mitchell and the understanding he gave me of Keynes (and Marx), the economic reasoning to back this up.

Once one has reached this point, the question is why capitalists would still follow an approach that will undermine their profits (while increasing their profit margins): a number of people buying one’s product at 3/4 price will still generate more profit than half that number buying the same product at full price. Mitchell himself has a recent post about this where he asks similar questions about the troika executives.

A potential answer to this is that capitalists are willing to sacrifice profits to retain power. And if this is the motivation, then they will oppose any attempt to reduce their power by state intervention, decreasing income/wealth distribution, and empowered labor. Which also means that as sensible and well-meaning as MMT proposals are, only rarely will there be people in power who will actually implement them. We can see this in the US where a president who is very much pro-capitalist, and even an adherent to many of the neo-liberal follies, is opposed by large segments of the power elites because he would reduce, not neutralize, just reduce, their power in society.

And in my opinion, this is why Kalecki and the ones that follow him have a problem with social-democract projects of redistribution and reduced inequality, because in the end, these are policies that are not in the power elites’ interests and they will therefore do everything, especially political manipulation, to stop those policies in their tracks. They have done this successfully since the late 70s – the neo-liberal project. Mitchell seems to be too much of an idealist to see that the powers-that-be will keep voters miseducated, buy off politicians, and in general use all means at their disposal to make sure that a society of unequal power distributions remains in placeā€¦even if they have to sacrifice some profits to do so.

This entry was posted in developed countries, economic policy, macroeconomics, neo-liberalism, oligarchy, standards of living, wealth distribution. Bookmark the permalink.

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