Neoliberalism... probably not what you think - Sm Posted: Jan 5th, 2019 - 9:00 am
I used to think this was a liberal insult. Now, I know it is as descroption of both parties' leadership and playbook.
Ending the Gold Standard altered the way the macroeconomy operates. Since the end of the gold standard, a study of how macroeconomics operates has been developed. It is called Modern Monetary Theory (MMT). As opposed to Neoliberalism which is a set of policy choices, MMT describes how an economy operates on a macro or aggregate level. The US chose when it ended the Gold Standard to adopt a sovereign fiat floating currency, where all federal spending and collections can only be denominated in dollars. This has since become common throughout the world, with other nations such as the United Kingdom, China, Russia, Canada, Japan, and Australia chose the same monetary regime in their own currencies. The most critical difference that occurs when an economy adopts a sovereign fiat currency instead of a commodity-based currency is that the constraint on spending changes from the total value of gold on hand (or whatever the commodity is) to the total productive capacity of the nation where the government is the monopoly issuer of the currency. All other economy participants are currency users, including cities and states. In the US, our productive capacity far outstrips the value of gold reserves it holds now or when the Gold Standard was in place. That means that the US has had the capacity to spend more into the economy than it did under a Gold Standard regime. Neoliberalism operates under the assumption that the increased spending capacity must be spent towards advancing the wealth of the wealthy, instead of on the General welfare as prescribed in the US Constitution.
The most important component that keeps Neoliberalism in place and prevents the American populace from searching elsewhere is fear. Before Winter set in under Clinton, Reagan began employing Neoliberalism throughout the economy. He and the Fed Chairman Volker set about reining in inflation by dramatically reducing jobs, a process begun by Volcker during the Carter administration. Inflation was the first bugaboo Neoliberal advocates used to place fear into people. Ever since the high inflation of the 70’s people reflexively fear inflation. The next manufactured fear was unemployment strengthened by Volker’s intentionally harsh solution to inflation. Intentional, because any other solution would have infringed on profits of businesses, a Neoliberal no-no. After that, Reagan himself weakened labor unions firing striking air traffic controllers. A symbolic gesture that served notice to the unions that their power in America’s future was uncertain. Over the years the items to fear that fly in the face of what the macroeconomic realities of a sovereign fiat currency offer have been served up as things to fear. The deficit, the debt, foreign debt, government “expansion”, government regulation, the media, obligations of the US to individual Americans such as Social Security, Medicare, Food Stamps, Unemployment compensation, and public education. All have been framed as harmful to the financial stability of the United States. Presently in each one of these categories, funding is cut, regulations are dismantled, and corporations take over the tasks formerly performed by government. Their profits are greater than ever before, while wages relative to inflation have decreased. And the narratives of fear are pushed out from the very institutions that Powell described.
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