By Thomas Palley
TPMCafe Book Club
August 13, 2008
Most of the time I find myself positioned in the complicated center where the logic is radical but excitement is tempered. Jamie Galbraith usually occupies a space too my left that seems way more fun. That makes it a pleasant opportunity to outflank him regarding the intellectual perpetrators of the corporate predator state.
In my view, Jamie is far too light in his assessment of the intellectuals who fashioned conservative economics, and he is especially light on the economics profession. He writes of these intellectuals becoming his friends, pities them for their current forlorn abandonment, and essentially invokes the nice guy defense to shield them from more trenchant criticism. For a while George W. Bush benefitted from this line, and I have even heard Dick Cheney defended on similar grounds (apparently Cheney has personal charm).
The point is intellectuals should be judged by the content of their ideas, just as politicians should be judged by the impact of their actions on society. And the conservative intellectuals who brought about Reaganomics pushed a nasty social and economic program. For thirty years that program has attacked working families and the New Deal arrangements that worked on their behalf. And it has been doing this with ever more ferocious intensity.
George W. Bush and Dick Cheney are the direct political heirs of Ronald Reagan, and their policies are a logical evolution given the collapsed state of progressive economic thought. Ronald Reagan ran record budget deficits, spent huge sums on useless weaponry, and thought ketchup qualified as a vegetable in school lunches. As conservatives discovered how intellectually feeble Democrats and unions had become, they simply pushed harder. Where we stand now is no surprise.
Today's disenchanted so-called "principled" conservatives collaborated every inch of the way. It was they who invented the "starve the beast" metaphor. The idea was to cut taxes, run huge budget deficits, and thereby load up government with debt that would financially constrain it.
What could not be achieved by honest open democratic politics was to be achieved by bankrupting government. Future tax revenues would be pre-committed as interest payments, and with people unwilling to pay higher taxes, programs would have to be cut.
Looting and destroying, to borrow the phraseology of Ayn Rand's Atlas Shrugged (1957), is also okay. Thus, it is fine to sabotage the effectiveness of government since that also undermines its popularity. That makes it harder to defend government, and easier to shrink it.
The godfather of the conservative economics movement, Milton Friedman, advocated this strategy. For him, every tax cut was desirable no matter how inefficient it was since sooner or later it would be fixed and made permanent.
Academic economists also contributed importantly to spreading and instilling conservative economics. Every year they indoctrinate thousands of college students who later become the governing elite and chattering class. No wonder op-ed pages endorse corporate globalization, while Congressional staffers are a hard sell even when they have genuine progressive values.
This condition was recognized long ago by Keynes who wrote in his General Theory (1936):
(T)he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slave of some defunct economist.
A deeper analysis was provided by the tabooed Karl Marx who wrote in The German Ideology (1845)
The ideas of the ruling class are in every epoch the ruling ideas, i.e. the class which is the ruling material force of society, is at the same time its ruling intellectual force. The class which has the means of material production at its disposal, has control at the same time over the mental means of production, so that thereby, generally speaking, those who lack the means of mental production are subject to it.
This logic applies as much to economics as it does to the interpretation of history.
The economics profession's fingerprints are all over the policies that have produced the corporate predator state. Thus, the main body of the profession strongly supported the core tenets of so-called "principled conservatism" - beneficial supply-side effects of tax cuts, the existence of a "natural" rate of unemployment, the unemployment increasing effects of unions and the minimum wage, and large benefits from free trade and international mobility of money (i.e. corporate globalization).
Economists also directly fostered predator economics. Thus, they supported outsourcing of government that has spawned an industry of bandits, epitomized by Halliburton; supported the erosion of financial regulation that is a big part of the story behind the current financial crisis; persistently denigrated unions, thereby undercutting a principal countervailing force against corporate predation; and argued for tax preferred savings accounts and investing Social Security funds in equities -- proposals also pushed by Big Finance which licks its lips at the prospect of rich management fees.
In developing countries economists pushed shock therapy and privatization. Shock therapy gave us the Russian oligarchs and destroyed Russia's chance for democracy. Ill-considered privatization exacerbated existing cultures of corruption and further widened yawning income inequality.
This is a ghastly record. Though the profession is now more reticent as it tries to escape responsibility, the wellsprings of its analysis remain unchanged. And that is a formidable social problem because the academy is a club that is enormously difficult to change once ideologues are in charge.