Is democratic Keynesianism possible?

Simon calls for fiscal policy to be set independently of government, to prevent it "being corrupted by politics and ideology." This might seem like pointy-headed technocracy. In fact, it is more radical than that.

To see why, consider why we cannot rely upon government to pursue an intelligent fiscal policy at the zero bound.

One reason is that the media promotes economic illiteracy through mediamacro and bubblethink.

Another reason was, of course, pointed out by Michal Kalecki back in 1943. "The assumption that a government will maintain full employment in a capitalist economy if it only knows how to do it is fallacious" he said. Business does not want fiscal policy to create full employment because this would deprive it of political power:

Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence.  If this deteriorates, private investment declines, which results in a fall of output and employment..This gives the capitalists a powerful indirect control over government policy...But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness.  Hence budget deficits necessary to carry out government intervention must be regarded as perilous.  The social function of the doctrine of 'sound finance' is to make the level of employment dependent on the state of confidence.

There can be little doubt that business has captured government.We saw an example of this yesterday. Stefano Pessina's claim that a Labour victory would be "catastrophic" was reported as if it were news that a billionaire isn't keen on leftish governments; I doubt that a benefit claimant's view that a Tory victory would be "catastrophic" would get so much attention.This is just on example of how the rich have disproportionate political influence.

In this sense, I read Simon as making a very radical claim - one which is more Marxian than Keynesian. "Democratic" policy-making cannot serve the public interest, because it is subverted by capitalists' interests. This represents a challenge to naive social democracy, which thinks that governments can do the right thing if only they have the will and courage.

Comments

[Ralph Musgrave]

Conspiracy theories are usually wrong. It’s cock-up theories that usually explain what happens in this World. And that applies here. Kaleki’s idea that employers will magically increase their confidence or reduce it so as to control government is the barmiest conspiracy theory I’ve ever heard.

The real reason employers oppose fiscal stimulus because the average employer (and the average politician) is economically illiterate. The typical employer (and politician) buys into macromedia’s deficit and debt phobia.

[e]

I think you let ‘our’ media off far too lightly here: The Telegraph ‘reports’ and the BBC disseminates. Notions of potential ruin get aligned to a potential Labour Administration for the average fair minded punter to pick up on. Beyond a simplistic well, ‘they’ would say that – feeding all business is bad cynicism – any question of whose agenda is being manufactured here is, of course, outside everybody’s remit.

[Deviation From The Mean]

"Simon calls for fiscal policy to be set independently of government, to prevent it "being corrupted by politics and ideology.""

But we still have capitalism right? So we have a system that is controlled and works for the owners of capital and we think by having 'independent' fiscal policy this changes anything fundamental?

In some ways in a capitalist system the views of the head of boots do matter more than the person on benefits or even the worker at boots. One more reason to simply overthrow the system rather than calling for fiscal independence, whatever the hell that means!

[UberLibertarian]

Deviant makes a good point here - you can only redistribute an already-produced economic surplus. So the views of the private sector and the state sector kind of do actually align since the private sector pays for the public sector.
Also, I thought you lefties wanted a minimum income standard, or jobs guarantee,or something. JSA is £70 a week, the MIS is ... wait, it says £70 per week. It must be a misprint or something. Maybe it's supposed to be £170. Anyway, why would the benefits recipient care in either case? Is it higher under Labour?

[Dave Timoney]

The idea that certain policy areas should be beyond democracy is pernicious. I understand why SWL feels this, but he undermines his case by holding up central banks as non-political, as if they were not subject to ideology and regulatory capture. I wonder how he'd feel if the security services suggested they too should be exempt from democratic accountability, for "technical" reasons.

More practically, we over-estimate capitalist wiles. Your average voter has never heard of Stefano Pessina and will not assume that being the CEO of Boots gives him any particular insight into the world beyond the cosmetics counter. Though the Tories persist with this "captains of industry" tripe every election, there is no evidence it actually works. As with most propaganda, its purpose is not to change minds but to reinforce existing prejudices.

As Syriza has shown, electorates are not averse to stimulus programmes instead of austerity. The problem is not democracy, or even the power that capitalists have to influence the media, but the absence of choice. Kalecki's point was that capitalists don't have to intimidate the electorate; they just need to intimidate the main political parties.

[Lounge Iguana]

Surely the trouble is that if you give central banks political power, they become political (viz the ECB).

Getting rid of politics sounds very noble, but it translates to allowing someone to smuggle in a political agenda under the guise of technocracy.

[Uncommercial]

It's quite untrue that the private sector pays for the public sector.

[SpinningHugo]

"Plato (Republic, Book VI) argues that democracy is inferior to various forms of monarchy, aristocracy and even oligarchy on the grounds that democracy tends to undermine the expertise necessary to properly governed societies. In a democracy, he argues, those who are expert at winning elections and nothing else will eventually dominate democratic politics. Democracy tends to emphasize this expertise at the expense of the expertise that is necessary to properly governed societies. The reason for this is that most people do not have the kinds of talents that enable them to think well about the difficult issues that politics involves. But in order to win office or get a piece of legislation passed, politicians must appeal to these people's sense of what is right or not right. Hence, the state will be guided by very poorly worked out ideas that experts in manipulation and mass appeal use to help themselves win office."

http://plato.stanford.edu/entries/democracy/

We have been down this path before. We shouldn't of course fetishize democracy, or be blind to its flaws. However, S W-L's analysis, which is as you say Marxist, has been taken seriously by the left in many different recent times and places. It hasn't ended well.

Having elected politicians make these decisions, even when they cock things up, is much to be preferred.

[Magpie]

Chris,

That's an interesting comment, but I'm not sure it's entirely fair.

Let's be realistic. Any person with views on social life, at one moment or another, is bound to feel like Prof. Wren-Lewis does. After all, if one believes in one's theories, then other people's opposing ideas must be fought against.

This applies to Marxists, Keynesians, Austrians and everybody else. I don't think many can legitimately cast the first stone, and so, I won't.

Incidentally, you forgot to mention Austrians. But it's well-known that Mises served under a fascist government in Austria, before the Anschluss. Maybe he wasn't a technocrat, but he wasn't particularly democratic, either.

Hayek was sympathetic to Pinochet (and so was Friedman, btw, but he wasn't an Austrian). Hayek wasn't so sympathetic to the Argentine dictartorship, though: they were quite fond of government intervention.

Which brings me to Keynes. He himself was quite tepid about democracy. But you don't need to take my word for that: Lord Skidelsky wrote about Keynes' multiple points of coincidence with Hayek. Indeed, being, as he was, an eugenicist, it's quite natural that his views of democracy would be considerably different from ours.

[Brett]

You're attributing too much cohesiveness and far-sightedness to employer opposition to full employment policies. They oppose them because they've been filled up with an ideology that says that government planning/spending/whatever is bad, so they oppose it even if it would probably help them.

[Icarus Green]

This blog has been hitting it out of the ballpark over the past few weeks.

Technocracies are the aristocracie's last strategy to abolish democracy. After trying to suppress the left with violence, then nationalism/imperialism and then propganda, they realise that over the long arc of history people eventually realise they're the ones charging the cannons while the officers drink tea, paying the taxes while their masters hold everything in the caymans, and being told what to do all their lives while their masters lie on a beach.

Technocracy provides the veil of rationality. The presumption of neutrality and balance. Until of course we do a bit of digging on who exactly the technocrats are and their backgrounds, who they marry, who they smoke cigars with and we realise its just another way of duping people to continue to take it up the ass.

Fiscal policy run by technocrats would almost certainly be austerity, shifting tax burdens onto the poor (hello VAT, public service user charges) and "pro-business" subsidies for shell companies and the like. Democracy (and the implicit threat that we will rebel if its removed) is the only thing stopping us from being Thailand.

[Igor Belanov]

It should be added that technocracy cannot wholly divorce itself from the political, social and economic context. Thus in the 1950s and 60s when there was a much stronger organised working-class and an expansionary economy, technocracy often took a paternalistic form that at least took the needs of ordinary people into account, even if it hestitated to let them have any involvement. In 2015 this would be an entirely different matter....

[JW Mason]

"Independently" by whom?

There is nothing remotely Marxist about the idea that a public authority can be set up above society. It's Bonapartist if anything.

The notion that business has "captured" government is similarly un-Marxist. It is based on the childish idea that government was at some point a pure representative of a unitary public interest.

The idea of government without politics is a fantasy.

[Tom Usher]

Not "fiscal policy" but monetary.