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Friday, September 1, 2006

My Life Among the Neoliberals

Members of the Tacoma Revenue Tax Force may be surprised to hear the word "liberal" associated with themselves, but these are the folks to whom I am referring, and the term is "Neoliberal."

It derives from 19th century England, free trade and laissez-fair economics. The alternative term that I feel fits the practice of Neoliberalism is "Corporate Capitalism."

Others might use "Free Market Capitalism." All of the terms are misnomers, for the school is not liberal, it ignores the dominance of corporations, and its practitioners may have the hymns of the free market memorized, but ignore fully half of them in practice.

Beyond this, in order to get the concept to fully function, you have to ignore reality -- the reality of government except as a distortion and the reality of empirical data which demonstrates the whole scheme simply does not work.

Seeing glazed eyes among my readers, I return to the point at hand.

The last session of Tacoma's Revenue Task Force concluded Wednesday evening with the adoption of a truly singular document, a report containing three proposals:
  • A non-revenue proposal, which prescribes a system of fines for excess police and fire calls.
  • A non-new proposal, the "levy lid lift," which is a measure newly revived by court action. Cities can now raise the property tax to 106 percent of current revenue, as opposed to 101 percent.
  • A political non-starter. The city manager's original idea for a city services tax minus the only element that would have given it a chance to work -- extending the tax base to nonprofits. This last proposal was adopted a month ago, then analyzed (in a Queen of Hearts order of things), and finalized Wednesday amid some jocular acknowledgement of its absence of political appeal.
The people on the Tax Force are good people who -- aside from one notable exception -- will not gain financially should this report's recommendations survive. But most are where they were at the beginning, anti-tax. These are frugal folks who manage money and operations well and accept the economics of the times as if it were an extension of this frugality and competence.

And the economics of the times is Neoliberalism. Government produces no value and only rides on the backs of the private sector. Taxes are a good way to bleed a vibrant economy. Etc.

As a city, this ultimately means that the services of police and fire protection are less valuable than those of beer truck drivers or hairdressers, no disparagement intended.

It means that production of roads and bridges is of less economic value than production of whatever private infrastructure you want to put in this blank. And it means debating particular policies is ultimately frustrated by the acceptance of the general myths.

Thus the dominating advantage Neoliberalism or Corporate Capitalism or Free Market Hypocrisy has over reality-based economic schemes -- everybody knows the tune. It is familiar. So familiar it is sometimes referred to as "common sense."

(Just as, I suspect, the tenets of communism and the rule of the proletariat were once referred to as common sense in the USSR, even as overt bureaucratic corruption brought down the system.)

For the advantage of familiarity there is no easy cure. The New Deal Keynesianism responsible for the enormous prosperity between World War II and the rise of Reaganomics was well understood by policy-makers, but never found a popular expression, partly ....

Oops, more glazing.

So the problem facing us at the Tax Force and forums like it is how to debate good policy particulars while avoiding easy answers based on demonstrably wrong -- but widely popular -- assumptions.

I have no answer to this. If I did, I would have used it at the Tax Force. I suppose it could begin with -- in the case of taxes -- challenging the fallacy that there is no economic value to public goods.

In fact, public goods have enormous value, real direct economic value, which is not recognized by the market because it is broadly shared and the market only recognizes a transaction value. Still, the second bridge to Key Peninsula is generating astronomical gains in property values, dollar gains to private economic actors.

Primary and secondary education produces six times or more its cost in value to the educated, their employers and the society benefited and not burdened. Courts provide the essential arbitration of private market contracts without which a market economy would unravel. And so on.

This is a simple concept which is easy to corroborate and blows up the theory that supply and demand in a private market produces all value. But since it lies outside the current framework, it is viewed with the suspicion that it is somehow a trick or plot against the status quo.

Another angle might be the direct look test -- to simply point at the corporations domination of the private marketplace.

These do not exist in Free Market Hypocrisy. A company which can manipulate demand, or coerce labor, or rig the rules with government? It cannot happen in a system where everything is competition, free markets, and supply and demand.

  • The final document ended the last evening at the Tax Force without my signature. That will be applied to a Minority Report, which will detail the eight or ten different ideas that have some practical application to revenue and a couple ideas to mitigate the B&O, not all of which were mine. The Minority Report will be available through NPI beginning the week of August 12, and will contain a context appendix (process, this question, the fact that the same problem is in front of all cities, etc.) and a technical appendix. We'll put up the official Tax Force version, too, so you can see if I'm blowing smoke or not.
  • The Alternative to Neoliberalism is a Post-Keynesian view -- less familiar, but no more complicated. It's major advantage is that it works in the real world. Briefly, output depends on aggregate demand (a proposition sometimes borrowed by others when tax cuts for the wealthy need a fig leaf of justification). Government provides infrastructure, public services, structure and enforcement. Corporate power is offset by institutional mechanisms such as the minimum wage, union organizing power, regulation, and so on. Supply and demand market operations are supported where their built-in incentives can efficiently supply private goods (supported in the sense of keeping the rules fair, e.g., curbs on monopoly).
There is, of course, a lot more to this discussion, but although it is Miles Davis to me, I understand it is polka bands to the rest of you. A more complete discussion can be got at Thomas I. Palley, "From Keynesianism to Neoliberalism: Shifting Paradigms in Economics," 2004.