Yves Smith’s blogsite, Naked Capitalism notices the rise of far right, authoritarian politics.
As expected, Marine Le Pen’s National Rally came out on top in the first round of French elections yesterday, solidifying the country’s move to the right after the European vote earlier in the month.
The EU’s three largest countries by population and three largest economies – France, Germany, and Italy – are now all led by far right parties or on that path. The rise of austerity economics might have something to do with the rise of far-right fascism.
“Another sign that the EU elite has learned nothing is that it plans a return to austerity starting in six months. Should it stick to that plan, it will force member states to start cutting spending under already-difficult conditions. There’s also the fact that there is a wealth of evidence that increased austerity leads to a larger vote share for “extremist” parties. You can go back as far as the 1930s to see the results.”
The United States should be put on that rightward leaning list. Former President Donald Trump has been beating the drum about the threat of immigrants, and arguing that liberals are destroying the nation’s morals. Trump wants to be an autocratic leader, similar in fashion to Hungary’s Prime Minister, Viktor Orban.
The underlying failure is one of neoliberalism economics. This economics is best described as a fiction.
Mainstream economists argue that governments have created too much public debt. Mainstream economists recommend austerity as the solution. The governments need to cut their spending.
Neoliberalism also recommends that nation’s de-regulate the private sectors, arguing that if left alone, private business will create prosperity. The narrative also claims taxes should be reduced, thus allowing the private sector to invest more money.
The economy doesn’t work that way. Left unregulated the private sector becomes speculative. Asset inflation creates chronic “boom and bust” episodes.
Private sector failures abound. Homelessness, Political inequality, Income Inequality, the rise of a rentier class that does not invest in the economy, but hoards rental incomes instead.
The correct economics is called Modern Monetary Theory, or MMT.
MMT co-founder Australian economist William Mitchell explains the problems.
“Over time we observe a pattern of idiocy in the financial press, where different fictions, dressed up as allegedly shattering propensities, are regularly cycled through in succession, each one getting headlines for a day or so, only to be replaced by the next sensationalised issue. So-called experts or corporate bosses are wheeled out and make horrendous predictions that one country or another is entering a catastrophe of its own making – too much government spending, too much debt, or some other policy position – is usually fingered as the culprit. None of the predictions ever come to pass and the media never follow up to reflect on why. They are too busy pushing out the next headline and the next issue, which, in turn, will be replaced by something else, and then something else, and so on, until the initial prophesy of dooms is recycled, despite failing dismally to engage with the real world when it was last aired. And this pattern has unfolded over decades. Who ever checks the veracity of the predictions? How does the reputation of these so-called experts survive continual failure? The problem is that most of us believe this fiction and elect politicians and accept poor economic policy based on the fictional world we live in. Anyway, I have a prediction … read on.
I still remember the claims by the prominent US commentator during the early days of the GFC that:
But make no mistake, we are coming close to the end game. Some countries and economies are closer to that point than others, but the entire developed world is lurching, in almost drunken fashion, towards our economic denouement.
You know a fancy word – dénouement – ‘the outcome of a complex sequence of events’ – the ‘climax’ – the “end game” – it’s all over folks.
The commentator in question ran a rather large mailing list to make money for himself and told his readership that “Over the next several months, we are going to start to explore various aspects of the end game. Whither Japan? … Where do we find $1 trillion (plus!!!) in US savings to fund the deficit, assuming foreigners buy about $400 billion?” etc.
It all sounded authoritative.
It was just bunk, the lot of it.
I discussed that specific case in this blog post – Watch out for spam! (January 25, 2010).
And then we had guys like Martin Feldstein who regularly predicted the US social security system would become insolvent.
He featured in the 2010 film – Inside Job – by Charles Ferguson who wrote this about Feldstein in the – The Chronicle Review (Chronicle of Higher Education) – on October 3, 2010:
Martin Feldstein, a Harvard professor, a major architect of deregulation in the Reagan administration, president for 30 years of the National Bureau of Economic Research, and for 20 years on the boards of directors of both AIG, which paid him more than $6-million, and AIG Financial Products, whose derivatives deals destroyed the company. Feldstein has written several hundred papers, on many subjects; none of them address the dangers of unregulated financial derivatives or financial-industry compensation.
I discussed Feldstein in this blog post – Martin Feldstein should be ignored (May 3, 2011).
I could cite countless examples.
And recently there have been a whole swag of characters being wheeled out by the mainstream media and getting lurid headlines predicting a debt meltdown in the US.
It is like a cracked record – blah, blah – followed by blah, blah – and then again.”
Monetary sovereign nation’s can create money to pay deficit bills, without issuing any debt. Monetary sovereign nations can impose taxes in order to help pay the bills. For example, a monetary sovereign nation could impose a land tax, which would discourage rentier hoarding.
Monetary sovereign nations cannot run out of money. They create money when they pay a bill. They do not need to issue debt.
Mainstream economics claims that we have too much debt. MMT shows that the need for debt is vastly over-estimated.
MMT shows that the restraint on spending comes from resource scarcity. If you spend too much money chasing scarce resources, you will create inflation. The “cure?”: Don’t use debt!
Fortunately, the United States is resource rich. That means the US government has the wealth to improve its economy, which is being suffocated by a failure to tax, and the rise of a class of rentiers who do not make productive investments, but simply hoard their rents.
MMT shows that deficit spending creates wealth in the private non-government sector, dollar for dollar. This is not an opinion it is a bookkeeping “identity” it is, by definition, always true.
Which doesn’t mean you can spend willy nilly. That would be incompetent and would create inflation.
MMT economist, Stephanie Kelton, says government spending should be aimed at balancing the economy not the budget. Deficit dollars pump wealth into the economy. Deficit dollars also create more investment by business, because they open up more opportunity for businesses to make profits. Deficit dollars '“crowd in” private spending.
Mainstream economics has it exactly wrong. Mainstream economics claims government spending “crowds out” private spending.
The problems we have are almost all the consequence of adopting the fictional mainstream economics.
https://www.nakedcapitalism.com/2024/07/the-eu-doom-loop-embracing-more-austerity-will-cause-further-rightward-shift.html
https://billmitchell.org/blog/?p=61837