Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World Hardcover – 20 Sept. 2017
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About the Author
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Part 2 suggests a "progressive strategy" (aka political programme) to fix the problems in the modern era. A quick critique of the two main suggestions:
- Overt Monetary Financing (OMF, aka debasing a sovereign currency from external or voluntary control) has been a catastrophic failure for centuries in multiple countries (as currently being seen in Venezuela). This is highlighted by the authors' inability to find any "success" other than the case studies of (Imperial) Japan and (Nazi) Germany in the 1930s (page 187), examples I hope no country every attempts to copy!
- Job Guarantee (JG) is effectively state-run workhouses and the author's admit the jobs would have to be low skilled, effectively trapping the worker out of the skilled jobs market. With unemployment rates extremely low in UK and USA the argument for full employment seems to be being met, albeit often with low skilled private sector jobs (obviously not the case in the peripheral EU countries who have abandoned their own currencies to join the Euro and the monetary and fiscal straight jacket that comes with that decision). A Training Guarantee (TG) for all unemployed would avoid this trap and is close to what is currently offered in most countries. Labour today is also very mobile (more so than the 1970s-80s) and it is unclear how a country that unilaterally adopted the author's strategy would avoid a massive "brain drain".
However, the book is certainly worth reading for those not from the far-left in order to see the challenge that lies ahead for moderate politicians to come up with a post neo-liberalism plan that reigns in the corporate-national-supranational excesses of capitalism and returns more power to the people (without returning to the dark days of authoritarian states).
In this excellent book, the authors refute the conventional rationale for austerity, that governments must prioritise the reduction of public debt. They stress that “monetarily sovereign (or currency-issuing governments – which nowadays include most governments – are never revenue-constrained because they issue their own currency by legislative fiat and always have the means to achieve and sustain full employment and social justice.”
They show that the Treasury is consistently wrong because it bases all its forecasts on the neoliberal assumption that governments cannot use fiscal policy and currency sovereignty to compensate for the free market’s failings. “If, on the other hand, the government chooses to use its regained currency and fiscal sovereignty to bring idle resources (including the unemployed) back into productive use – while at the same time re-establishing a degree of control over capital, trade and labour flows as well as over the national financial sector and other key sectors of the economy – full employment and economic growth could be achieved relatively swiftly - without the country in question necessarily incurring disastrous balance-of-payments or inflationary problems.”
Even the Deutsche Bank acknowledges, “Unlike any corporate, government or household, a central bank has no reason to be bound by its balance sheet or income statement. It can simply create money out of thin air (a liability) and buy an asset or give the liability (money) out for free.”
Williams and Fazi note that “the Labour-led British government of the mid-1970s was the first government effectively to break with the Keynesian consensus (excluding Germany, which never really subscribed to Keynesianism in the first place) and embrace monetarism-morphing-into-neoliberalism, not due to outside imposition or external constraints, but of its own volition. This, in turn, paved the way for Thatcher.”
In 1981 François Mitterand was elected on a platform of Keynesian reflation and redistribution. His win inspired the hope that a radical break with capitalism was possible.
But in 1983 the Mitterand government made its infamous tournant de la rigueur – U-turn to austerity. As Rawi Abdelal wrote, “Mitterand had succeeded only in destroying Keynesian reflation and redistribution as a legitimate alternative once and for all, or so it has seemed since then.” Mitchell and Fazi comment, “For the left, this has essentially meant giving up on the notion of achieving any form of meaningful change at the national level, and accepting the idea that true change can only come at the supranational (and ideally global) level.”
In 1985 Jacques Delors, who had been Mitterand’s finance minister, became President of the European Commission. He pushed through the 1992 Treaty of Maastricht. As Mitchell and Fazi explain, Delors “succeeded in persuading EU members to introduce full capital mobility by 1992, effectively making the free movement of capital a central tenet of the emerging European single market. This was a binding obligation not only among EU members but also between EU members and third countries. The consequence of this was a European financial system ‘that was in principle the most liberal the world had ever known’, according to Rawi E. Abdelal. The global implications of this counter-revolution are well explained by Abdelal: ‘This new definition of the European [was] itself the engine of free capital’s spread on the world stage. … Global financial markets are global primarily because the processes of European financial integration became open and uniformly liberal.’”
The IMF’s austerity programmes drove living standards down and poverty up. By the mid-1990s, 57 developing countries had lower income per head than they had 15 years before. Unemployment, inequality and instability increased, workers’ rights worsened. In 2003 the IMF’s own Independent Evaluation Office analysed 133 IMF-backed austerity programmes and admitted that they had underestimated their disastrous effects.
The EU’s austerity policies had similar effects. The European Trade Union Institute found that between 2009 and 2012 the EU’s increasing influence on national wage policies resulted in falling real wages in most EU member countries.
The authors sum up: “in all these cases, supposedly pro-market policies did not lead to the emergence of a mythical ‘free market’ in the concerned countries but, on the contrary, resulted in the concentration of vast amounts of wealth and power into the hands of a small political-corporate elite, often leading to the emergence of monopolies and oligopolies, at the expense even of local business interests …”
So, 147 transnational corporations now control 40 per cent of the world economy. 45 of the top 50 companies are financial firms. Capital, primarily financial capital, increasingly runs economic policy. By 2012 the profits of the 100 largest corporations in the USA and Europe had grown by 18 per cent from pre-crisis levels.
Capitalism now threatens the very existence of independent democratic nation states. As the authors point out, “if we want global capital to have no limits whatsoever, then nation states have to disappear as legislative vehicles with enforceable jurisdictions (and confine themselves to being servants of global profit-making) and/or citizens must lose their democratic political rights.”
So, peoples must defend their nations: “History attests to the fact that national sovereignty and national self-determination are not intrinsically reactionary or jingoistic concepts … virtually all the major social, economic and political advancements of the past centuries were achieved through the institutions of the democratic nation state, not through international, multilateral or supranational institutions, which in a number of ways have been used to roll back those very achievements …”
So, the EU has become a threat to nations, to democracy and to sovereignty. As Mitchell and Fazi conclude, “a progressive reform of the EU/EMU is not only impossible in practical terms -as acknowledged by a growing number of mainstream economists such as Joseph Stiglitz, Paul de Grauwe and others – but also undesirable in popular-democratic terms.” People will choose national democracy, however imperfect, over the fantasy of a democratic global or supranational society.
Top international reviews
Because this book is not trying to conform and confirm mainstream economic myths, that can lead an intelligent person to have a headache trying to reconcile the contradiction in mainstream economics , it is a satisfying read that provides logical interpretation and explanations of historical economic and political events.
This book provided me with many aha moments that revealed why things are how they are that I have not read or heard elsewhere. Truly fascinating.
Rather than lamenting how bad things are and how wicked the world is the last part of the book offers a workable solution to how it could be fixed.