A Pithy Rendering of the New Political Economy
I remember reading Raymond Geuss’s The Idea of a Critical Theory in graduate school and finding it a clear, compelling work. Geuss reflects on the book in a recent essay, offering the following summation of our economic predicament:
What the 1980s and 1990s had in store for us. . . was the successive implementation of a series of financial gimmicks which created financial bubbles and allowed the illusion of increasing growth for the majority of the population to be maintained for a while. . . . [T]he system began to collapse in 2007 and 2008. Catastrophe was averted only by a bizarre . . . set of political interventions in the Western economies–interventions that have correctly been described as “socialism for the rich”: defaulting banks and failing industries were propped up by huge public subsidies, private debts were taken over by the state and profits continued to flow to private investors. This structure, which certainly bears no similarity whatsoever to the ways in which proponents of “capitalism” have described their favored arrangements, seems to give us the worst of all available worlds. . . .
[T]he forms of economic regulation that had been introduced during the Great Depression of the 1930s and had stood the West in good stead for over forty years were gradually relaxed or abolished during the 1980s. Social welfare systems that had gradually been developed came under pressure and began to be dismantled; public services were reduced or “privatized”; infrastructure began to crumble. Inequality, poverty and homelessness grew.
Thus the current trend of corporate profits without widespread prosperity.
One of the very few contemporary economists up to responding to these trends is Mariana Mazzucato, who teaches that any account of value extraction has to be premised on an account of value creation. I’ll be blogging on her work’s relevance to IP, tax, and other policy over the rest of the month. For now, I highly recommend her contribution to the panel “How to Change the Post-Crash Economy,” at the RSA.