COUNTERREVOLUTION:
Extravagance and Austerity in Public Finance
Melinda Cooper
ISBN 9 78195 861154
Melinda Cooper is a Marxist of some stripe, unfortunately. Marxism is
mentioned only towards the end of this detailed, thoroughly researched and
argued study; the bulk is devoted to explaining the spectacular success of
the radical right over the last half century. That success is due in part to
the equally stunning failure of the left which is partly attributable to its
abiding sins: factionalism, the narcissism of small differences, the belief
that “history is on our side” (it’s just people who are against us), and the
eschatology Cooper refers to negatively: “If we just wait long enough,
capitalism’s long slowdown will release us from capture.” In cities across
the UK young members of the Revolutionary Communist Party are adorning bus
shelters with their poster demanding: “Are You A Communist?” It’s hard to
imagine a more mindless politics. What percentage will respond positively?
Marx, as Bertrand Russell pointed out, was muddle-headed. His mistakes are
many but the most disastrous is empty organism theory, given its clearest
expression in the 6th thesis on Feuerbach. If, as Marx claims,
the essence of being human does not inhere in each individual, if, rather,
it is nothing more than the product of historically changing economic
relations, where is the moral barrier to those relations making of people
what they like. Put those relations in the hands of an all-powerful leader,
and you have Stalinism. Marx is also wrong in seeing himself as a scientist;
his claim to have discovered the laws of historical inevitability is without
serious evidence; the theory that forces of production are certain to burst
asunder relations of production and give birth to a new economic and social
order, likewise. In her conclusion, Cooper seems to suggest revolution is
possible. She’s no vulgar Marxist, expecting the revolution next Thursday,
but revolutions are very rare. The counterrevolution she studies here is,
she admits, without a revolution. It is in fact the result of patience,
steady work, the refusal to accept defeat, the willingness to compromise in
order to advance the cause, clever manipulation and a propaganda system of
remarkable efficiency. Maybe the left needs to ditch Marx, forget
revolution, and focus on the next real gain, and then the next and the next.
Just as the radical right has done.
If there is a simple message to be had from this book, it’s that public
spending can be as wild as you like, so long as it helps the rich. If it
shoves up high-end asset prices, all to the good. If it helps the poor get
through the week, it’s sinful. Cooper calls the tax cuts and other gifts to
the asset rich which have been characteristic of the USA and therefore of
its poodles since Reagan, “functionally equivalent to traditional public
spending”. They are State interventions on the side of the wealthy who
consistently vote against State interventions. In a sense, they are the real
Nanny State. In 1971 Nixon removed the dollar from the gold standard, giving
the State far greater leeway over fiat money. Take away gold, and the system
is afloat on confidence. What happens when the confidence gets shattered?
Ben Bernanke, as head of the Federal Reserve during the credit crunch,
bought over $1 trillion of debt in eighteen months. Jerome Powell, in March
2020, while people were dying in their thousands because evolution and
natural selection were working before our eyes, in spite of what
creationists think, was spending $100 billion per day on bonds. Cooper is
too subtle to put the matter bluntly, but if that can be done to rescue the
financial system or the economy in a crisis, why can’t it be done to address
the crisis of poverty? The answer is beyond the scope of her study, which
rightly confines itself to economic and political analysis. In a word, it’s
supremacism. Plainly, coloured people don’t deserve public extravagance
because they’re coloured and god made them that way to distinguish them from
the good white folk. Then there are the bad white folk, those who don’t own
houses or pension pots. Clearly, as J.D.Vance knows, they don’t deserve
public munificence because they’re feckless, lazy, self-pitying. The
unspoken truth at the heart of this book is that we haven’t yet accepted the
fact (in the sense that all the serious evidence supports it) that we have a
shared human nature which is insulted by assigning people to tendentious and
transitory dubious categories.
James McGill Buchanan is not a name known to the general public, but he has
been hugely influential in right-wing circles. He was a member of the Mont
Pelerin Society, established in 1947 with von Hayek as one of its moving
forces. Ostensibly it might be thought of as a body of researchers and
intellectuals putting their heads together to address serious problems, but
that implies no restricting preconceptions. The MPS was formed specifically
to advance the market and restrict the public sector, in so far as that was
government funded. Begin from such a biased position, and how is your work
going to have any value as objective inquiry? It’s perfectly honest to found
an organisation to promote a preconceived view, if that’s what you admit you
are doing, but it’s dishonest to claim to be disinterested inquirers if you
are touchy about ideas which conflict with your assumptions.
The same is true of Buchanan himself. He is on record as saying he began as
a “zealous advocate of the market”. That’s a bit like a biologist saying
they began as a zealous advocate of species as a ladder, each one arriving
fully formed or a physicist saying they began as a zealous advocate of the
Ptolemaic system. Some of Buchanan’s ideas make sense. The notion that only
individuals make choices, for example, if it’s combined with the recognition
that those individuals form groups which exert influence over their
thinking; but if that is true, what’s the market? The standard view is that
it makes decisions, better decisions than people. Von Hayek makes this
argument: if the market isn’t allowed to make the choices, people will, and
they will choose badly, while markets, being without prejudices, are
efficient.
Buchanan spent his career trying to formulate a theory which would justify
his preconceptions. The result is pseudo-intellectualism. He called the
distinction between progressive and regressive taxes, “spurious”, advocated
sales taxes and the “user pays” principle. Thatcher tried the latter by the
introduction of the poll tax which was most poignantly exposed by the
criticism of her colleague John Major when he said its problem was it was
impossible to collect. Is the idea of user-pays a dispassionate policy?
Obviously not. Nor is the idea of a wealth tax. The latter is motivated by
moral objections to huge disparities of wealth. Moral objections aren’t
dispassionate. User pays is motivated by a desire to protect the wealthy
from higher taxes. Is that a moral motivation? It could be argued that there
is a moral objection to taking money from people who have worked hard to
give it to those who haven’t, but most great wealth is made by the work of
those who don’t own it.
Buchanan’s work is known as “public choice” theory whose essence is to pull
back to the constitutional question: how much should the State be permitted
to spend? Three things were crucial to the doctrine: so-called independent
central banks, budget rules and tax cuts. Hey presto! Austerity. The poor
get it in the neck, the rich carry on as usual. Which is just as the world
should be.
The 1970s might have been a good time for punk rockers, but it was terrible
for the rich. Inflation was eating its way into easy money. The
supply-siders effectively promoted a revolt by business. Goodbye to the New
Deal, to co-operation between corporates and unions, to the heady days of
60s labour activism and the Great Society. Business showed itself capable of
the solidarity the labour movement liked to pride itself on. The push was
principally against progressive taxation. The supply-siders and the public
choice gurus had common ground. The patient work of the MPS was bearing
fruit.
Along with the shift to lower taxes and away from the stability which
corporations had relished up to the middle of the 20th century
and which gave way to returns from assets rather than production, came the
rise of the family as a bulwark against State expenditure. “There is no
better instrument for the long-term hoarding of wealth, than the legal haven
of the family.” Forget love, eroticism, child rearing, companionship: the
family is a business proposition. The American veneration of the family is
both thoroughly cynical and sentimental. Christopher Lasch explored this to
some degree in Haven in a Heartless World. His title was ironic. The
shift in American capitalism from the standard corporate to the family,
dynastic model was part of the unrelenting assault on organised labour. In
1984 (auspicious year) the Koch brothers founded Citizens for a Sound
Economy (the titles of these bodies are always brilliantly
euphemistic and wonderfully angelic, surely soon there will be an
Association for Motherhood and Apple Pie) whose essential mission was to
push for the balanced budget amendment Republicans insisted on in return for
their support for a rise in the debt ceiling. Gingrich, the Tea Party,
Trumpists, all recognise a simple fact: public provision through democratic
means is a crucial the way the common folk can have some influence, the
other is labour unions. There is no absolute reason why State provision
can’t be social provision. It takes the State form because winning the
franchise has been the historical means of popular empowerment. Once
capitalism had entrenched itself, its afterthought was universal suffrage,
granted not out of altruistic benevolence, but because working people had
shown their initiative, drive and entrepreneurialism in building a union
movement powerful enough to take on not only employers but the State . The
State’s primary function has always been the defence of property. Hence the
hysteria when it begins to look after the folk who don’t have any. Faced
with a State tilted somewhat to the interests of the people, even though
still primarily a defender of property, the American rich have worked
diligently to find ways to seriously restrict the State’s power to spend
(except, of course, lavishly on weapons and subsidies for the billionaires).
It has built a coalition by associating welfare spending with an attack on
the family, the American way of life, sexual morality, Christianity, god
himself, who, obviously despises State munificence and is on the side of the
super-rich. The exit from this miserable farrago of misplaced notions is for
the Left to campaign for social provision, to make the case that the State
is the defender of wealth above all else and to propose our shared human
nature as the basis of economic equality.
Buchanan and those like him take a high moral tone as they defend what Adam
Smith called “the vile maxim of the masters of mankind: everything for
ourselves, nothing for anyone else”. Buchanan believed he had spotted a
quasi-Hegelian zeitgeist in the 1960s and 1970s, composed of a diminution of
the work ethic, liberal attitudes towards sex, decline of manners,
corruption, growing loss of faith in democracy, inter alia. It doesn’t seem
to have occurred to him that some of this might have been due to the
economic system for which he was a fervent apologist. Part of his thinking,
designed to undermine confidence in voting, is that each individual’s vote
has virtually zero effect on the outcome of an election. That person may
have to drive to a polling station, queue for half an hour, thus defying the
strict law of economic utility. Voting, in this view, is irrational.
Somewhat odd that a man who gets in a fluster about young people getting
into bed with one another, in a different context, seeks to apply cold,
economic pseudo-logic.
Reagan’s Economic Recovery Tax Act of 1981, was a bonanza for the wealthy
and the corporates. By September 1982 12 million were unemployed. A crucial
feature of the new arrangements was “accelerated depreciation”. Imagine you
were permitted tax relief on the depreciation of your car over, say, 15
years. Your Ford has gone to the scrapyard and you can claim for the loss.
The government reduces the time-frame from 15 to 5 years. You still have
your car to drive, but you get tax relief for its depreciation. In addition,
you can use this loss to offset taxes from earnings. If you’ve got a few
cars, you could pay no tax at all. That’s what Reagan did for the assets of
the rich. It fuelled property speculation and made Donald Trump a
billionaire.
Then there’s the leveraged buy-out. You run a café. I buy it for £100,000,
£70,000 of which is borrowed. The collateral is the business. I sack two of
the four staff. Extend the hours of the remaining two, cut their holiday
entitlement and no longer allow them to eat for free. The turnover finances
the debt. After five years the business is worth £150,000, the debt is now
£30,000. I sell it, settle the debt and pocket £20,000 on which I pay no tax
because I’ve been allowed to offset. This is laughably petty. In 1995 Trump
filed losses of $1bn but was permitted to use them to reduce taxes on other
sources of income. Hence, no taxes for nearly twenty years. Imagine that if
you were a teacher or a nurse.
California may have voted principally Democrat since 1992, but in 1978 it
was the site of a tax revolt supported by 65% of voters. Local property
taxes were limited to 1% of market value, a great relief for home-owners who
had seen their tax bill rise along with the value of their home. Thus,
home-owning, the family, rugged American individualism were set at odds with
the evil State, seizing the assets of the successful to subsidise the
losers.
Chapter 5 is called Aborting America. This is, perhaps, the most interesting
part. The Right has succeeded in using abortion as a weapon against welfare.
In the 1960s and 1970s, Nixon and Reagen were pro-choice. What happened? Did
they radically change their views of abortion? Pure political opportunism.
It was when they twigged the issues could be made use of to convince people
all the nation’s woes could be traced to it, they switched their rhetoric. A
central figure is Howard Phillips, associated with Christian
Reconstructionism which proposes, among other things, the death penalty for
homosexuality, adultery and blasphemy. That’s a lot of dead Americans. The
Right managed to associate abortion with eugenics, helped sadly by the
legacy of Malcom X and the Black Panthers, who had reason to fear an attack
on their people, but were wrong to link reproductive choice to supremacism.
It’s barely an exaggeration to claim abortion has been the major issue in
the rise of the American ultra-Right. In order for it to gain traction, it
had to shred the Republican Party, which was transformed from a standard
political organisation working to win election into a self-conscious
insurrection against democracy itself. “Phillips,” writes Cooper,
“….identified abortion as the literal manifestation of national and familial
decline.” Phillips bemoaned the lack of shame in living off someone else’s
labour. By this he didn’t mean, naturally, employers, but welfare
recipients. The tendentious nature of the conceptions of the ultra-Right,
advanced as if dispassionate, is stunning. It speaks to the impossibly low
level of thinking among the American public. Can anyone with a minimal
capacity for reason believe abortion is responsible for the national debt?
The ultra-Right understood that failure can be the source of success. There
is a cliché on the centre-Left that
only if you are in power can you make a difference, and therefore, radical
policies must be jettisoned to secure the centrist vote. Barry Goldwater’s
1964 campaign showed how wrong this can be. He was trounced, but he opened
up the debate and laid out the path for the subsequent Regan victory, and
from that, the rise of the Tea Party, Gingrich and ultimately Trump. The
social democrats do the opposite: close down their own options and purge all
radicals. Thus, the debate remains narrow and the prophecy self-fulfilling.
Cooper points out how the Left was puzzled by the rise of the Tea Party,
which was as critical of the corporates as of labour unions and public
spending. She argues the phenomenon looks much more standard if it is
understood as part of the tradition of “small business conservatism” The Tea
Party, that is, was more astute than the Left in spotting that the State is
the protector of big business.
By attacking both simultaneously it could take on the patina of a true
defender of the common folk. Blue-collar, male homeowners could be pitted
against female public sector workers by pitching the property rights of
workers as anti-establishment while painting public sector employees as part
of or in cahoots with a ruling elite. The politics of Alice in Wonderland.
Of great help to the ultra-Right, of course, was communism, though Cooper
doesn’t discuss this at any length. It is the lurking shadow, the unspoken
horror which can be evoked by a subtle reference. It doesn’t require the
brashness of Trump to ignite the lingering fear. The practice of communism
has been a disaster for the common people not only because Soviet and
Chinese totalitarian State capitalism can be raised as a spectre, but also
because the Left in America, Europe and elsewhere has wasted its time and
energy trying to make whatever happens fit into a rigid Marxist grid. Does
anyone still believe “dialectical materialism” means anything?
Who exactly constitutes the
“proletariat” in today’s America, and what evidence is there that
“revolution” is inevitable? Marxism is a form of non-thinking, a ready-made
interpretive scheme most people pay no attention to. The belief in
inevitable victory has done enormous damage: if victory is inevitable, it
isn’t victory: it can be so only if defeat is possible. Every small victory
has to be campaigned for, and it requires a great deal of thought and not a
little talent to combat the propaganda system on its own terms.
Roe v Wade
has been lost, Trump has triumphed, the ultra-Right plays fast and loose
with democracy and the viability of the American economy, the choice of
austerity drove tens of millions into poverty. Cooper sees capitalism now as
a “regime of asset price appreciation”. Capital gains, assisted by tax
breaks, rule. Proletariat versus bourgeoisie? Rather asset owners versus the
asset poor. Breaking out of this, Cooper argues, depends on control of the
money supply:
“We do not lack the means to collectivise public debt issuance, to monetise
that debt, to channel that money into collective spending on education,
healthcare, welfare and the transition to renewable energy, or to
redistribute the ensuing social wealth. What we lack is the political will.”
It will take a monumental political struggle.
It’s important to remember taxation doesn’t pay for State spending: money
creation does. The private sector doesn’t create money, other than fool’s
gold like crypto. State purchase of government debt on a Gargantuan scale
during the credit crunch and the Covid crisis gave the game away. Taxation
is the defence against inflation, and the notion only the private sector
creates wealth and, therefore, only by growing it can the taxes be raised to
fund schools, hospitals, care homes etc is a myth. The private sector has
always depended on the public. There is no reason why an economy can’t be
built around meeting people’s needs, recognised as such. Housing, education
and health should be the core of the economy. Needs to be met not
opportunities for the accumulation of the personal wealth Adam Smith called
a “delusion”.
In order to achieve this or anything near it, we will have to learn to
combat the propaganda of the ultra-Right as it arises, and to ditch the
foolishness and arrogance which made so many believe Trump was too much of a
buffoon ever to get to the White House. The world is run by buffoons,
narcissists, psychopaths and time-servers, and will be until we do the hard,
patient work of finding the language which can connect the common folk to a
new vision, and fighting every election as if our lives depended on it, and
that means ditching worn-out, Victorian political clichés.