At the close of the 1970s, government treasuries and central banks
took a vow of perpetual self-restraint. To this day, fiscal
authorities fret over soaring public debt burdens, while central
bankers wring their hands at the slightest sign of rising wages. As
the brief reprieve of coronavirus spending made clear, no departure
from government austerity will be tolerated without a corresponding
act of penance.
Yet
we misunderstand the scope of neoliberal public finance if we assume
austerity to be its sole setting. Beyond the zero-sum game of direct
claims on state budgets lies a whole realm of indirect government
spending that escapes the naked eye. Capital gains on existing wealth
are multiply subsidized by a tax system that reserves its greatest
rewards for financial asset holders. And for all its airs of haughty
asceticism, the Federal Reserve has become adept at facilitating the
inflation of financial asset values while ruthlessly suppressing
wages. Neoliberalism is as extravagant as it is austere, and this
paradox needs to be grasped if we are to challenge its core modus
operandi.
Melinda
Cooper examines the major schools of thought that have shaped
neoliberal common sense around public finance. Focusing in particular
on Virginia school public choice theory and supply-side economics,
she shows how these currents produced distinct but ultimately
complimentary responses to the capitalist crisis of the 1970s. With
its intellectual roots in the conservative Southern Democratic
tradition, Virginia school public choice theory espoused an austere
doctrine of budget balance. The supply-side movement, by contrast,
advocated tax cuts without spending restraint, in an apparent
repudiation of austerity. Yet, for all their differences, the two
schools converged around the need to rein in the redistributive uses
of public spending. Together, they drove a counterrevolution in
public finance that deepened the divide between rich and poor and
revived the fortunes of dynastic wealth.
Far-reaching
as the neoliberal counterrevolution has been, Cooper still identifies
a counterfactual history of unrealized possibilities in the
capitalist crisis of the 1970s. She concludes by inviting us to
rethink the concept of revolution and raises the question: is another
politics of extravagance possible?
