The 1929 Wall Street crash signalled the beginning of the end of neoliberal economics. The subsequent austerity driven Great Depression almost finished the job and brought F D Roosevelt to the US Presidency. He introduced the New Deal investments, the second wave of which he introduced observing that “We had to struggle with the old enemies of peace – business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism and war profiteering. They had begun to think of the government of the United States as a mere appendage to their own affairs. We know now that Government by organised money is just as dangerous as Government by organised mob.”
A decade previously J M Keynes had ended his General Theory of Employment, Interest and Money with the observation that “the ideas of economists and political philosophers, both when they are right and when they are wrong, , are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men … are usually the slaves of some defunct economist.”
Who was right? Was it organised money that had messed everything up? Or was it economists? Or were they both right? Was it organised money being slaves to defunct economists? Or rather than ‘slaves’ were the various components of organised money, the corrupted and criminal slave drivers and exploiters of economists and everyone else? And does it really matter in 2021?
Neoliberal economics ended its reign of power after the Gt Depression, but it was carelessly left ‘lying around’ as Friedman put it, before adding his own distinctive variations such as the primacy of stockholder interests over customers, employees and all other stakeholders. Then in the 1970s the eruption of inflation – caused by OPEC’s 300% rise in oil prices – together with economic stagnation – arising from the decline of 2nd industrial revolution activities – gave organised money and its defunct economics an opportunity to take over as political driver once again.
That does matter for 2021 because it appears, after four decades of neoliberal economics it is again being recognised as ever more obviously dysfunctional and unsustainable. In many ways we are in a repeat of the situation Roosevelt inherited. The 2008 crash was followed by a decade of defunct economist driven austerity. Only things are much more urgent now with global population having tripled since Roosevelt’s day. And we are much more aware of the many destructions we are now wreaking on planet earth. Moreover, we are reminded of all people’s interdependence, if we ever needed to be, by the coronavirus pandemic. In 2021, it all matters far more than it ever has previously.
New book, Remaking the Real Economy, acknowledges the positions of both Keynes and Roosevelt as well as the fundamental critiques provided by leading economists who reject being dominated by organised money. More importantly Remaking the Real Economy identifies the necessary actions for the real economy to be remade so as to achieve sustainable progression.
The first action has to be the setting aside in its entirety of defunct economics, not leaving it ‘lying around’. Understanding of the microeconomic processes of organisational systems has to be based on observation of reality rather than the blind application of mathematical models which bear no relation to the real world. Only then will organised money by constrained within sustainable limits and the real economy remade.