Thatcher and the neoliberal counterrevolution

from Lars Syll

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes … I believe that there is social and psychological justification for significant inequalities of income and wealth, but not for such large disparities as exist to-day.

John Maynard Keynes wrote this in General Theory (1936).

Four decades later the Iron Lady appeared in the Parliament with this gobsmacking attempt at explaining away the problem:

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It’s hardly surprising that Pinochet-lovers like Margaret Thatcher and other neoliberals of the same ilk had this rather debonair attitude on rising inequality. But how about economists?

Economists are not rewarded for studying the economy. That is why almost everyone in the profession missed the $8 trillion housing bubble, the collapse of which stands to cost the country more than $7 trillion in lost output according to the Congressional Budget Office (that comes to around $60,000 per household).

Few if any economists lost their 6-figure paychecks for this disastrous mistake. But most economists are not paid for knowing about the economy. They are paid for telling stories that justify giving more money to rich people. Hence we can look forward to many more people telling us that all the money going to the rich was just the natural workings of the economy. When it comes to all the government rules and regulations that shifted income upward, they just don’t know what you’re talking about.

Dean Baker

In case you’re in doubt, you might better have a look at e. g. what Harvard economist and George Bush advisor Greg Mankiw writes on the rising inequality we have seen for the last 30 years in both the US and elsewhere in Western societies:

Even if the income gains are in the top 1 percent, why does that imply that the right story is not about education? …

It may be better to think of the return to education as stochastic. Education not only increases the average income a person will earn, but it also changes the entire distribution of possible life outcomes. It does not guarantee that a person will end up in the top 1 percent, but it increases the likelihood. I have not seen any data on this, but I am willing to bet that the top 1 percent are more educated than the average American …

The rising inequality that has been going on in our societies since the Reagan-Thatcher era is outrageous. Income and wealth has increasingly been concentrated in the hands of a very small and privileged elite. And a society where we allow the inequality of incomes and wealth to increase without bounds, sooner or later implodes. The cement that keeps us together erodes and in the end we are only left with people dipped in Reagan-Thatcher libertarian egoism and greed.

Now, more than ever, is it high time to reawaken Keynes’s dream of a more egalitarian society and once and for all put an end to the neoliberal counterrevolution!