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 realm of indirect government spending that escapes the naked eye. Capital gains 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 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 complementary 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 and debt issuance without guilt, 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?
“For many years, neoliberalism’s victory was so complete that its dominance appeared inevitable. Drawing on rich archival sources, Melinda Cooper brilliantly recasts the fierce intellectual battles which neoliberals waged against forgotten and half-perceived alternatives. Her book is a must read for anyone interested in the intellectual and economic history of our present day as well as for those fighting over the economic paradigm of the future.”
—Isabella M. Weber, author of How China Escaped Shock Therapy: The Market Reform Debate
“Melinda Cooper’s painstaking work shows that public spending is not a problem for most policymakers–unless the spending benefits labor. Counterrevolution is a stark and urgent examination of class suppression masquerading as economics. Cooper’s voice is extraordinarily important.”
—Clara E. Mattei, author of The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism
“Counterrevolution is incisive, engaging, and extraordinarily learned, and I know of nothing that can compare to its analysis of the ideas and environments that began to undermine the welfare state in the fateful 1970s. In a moment in which fiscal and monetary power might seem increasingly creative, but only in the effort to protect and enrich corporations and the wealthy in new and innovative ways, this book is indispensable.”
—Geoff Mann, author of In the Long Run We Are All Dead: Keynesianism, Political Economy and Revolution