The Atlantic's "Great Jobs Debate" (“What's the single best thing Washington can do to jumpstart job creation?”) is depressingly insignificant in the solutions the participants came up with, but at least it set off a good side discussion of "left" neoliberalism and what's wrong with it.
As business journalist and Nation editor Doug Henwood says of the debate itself:
The “debate” itself was a remarkable collection of tiny little “ideas”—expand the R&D tax credit, offer entrepreneurs the welcome mat (I’m surprised they were treated any other way in this very capital-friendly country), increase the amount of money in circulation, fire the bad teachers (that from former DC schools chief Michelle Rhee, who didn’t put it exactly that way, but that’s what she meant), offer a tax credit to employers for hiring the long-term unemployed), and so on. Yglesias’ contribution was suggesting that the Federal Reserve should adopt a higher inflation target...
As I said, depressing and pathetic in the scale of what's proposed compared to what's needed.
But Henwood went on to add this interesting observation:
Orthodox types—and I’m including Yglesias, who describes his political leanings as “neoliberal” on his Facebook profile page—usually prefer monetary to fiscal remedies. Why? Because they operate through the financial markets and don’t mess with labor or product markets or the class structure. A jobs program and other New Deal-ish stuff would mess with labor and product markets and the class structure, and so it’s mostly verboten to talk that way. From an elite point of view, the primary problem with a jobs program—and with employment-boosting infrastructure projects—is that they would put a floor under employment, making workers more confident and less likely to do what the boss says, and less dependent on private employers for a paycheck. It would increase the power of labor relative to capital.
Jobs programs and infrastructure investment can be very potent economic tools. Economists use the concept of a multiplier to estimate the effects of fiscal policy on the economy. For example, a multiplier of 1.5 means that for every dollar the government spends, GDP would increase by $1.50. The multipliers on jobs programs and infrastructure are quite high. According to Economy.com, such spending has a mulitplier of about 1.6 to 1.7—meaning that for every $1.00 spent on such programs, GDP increases about about $1.60-1.70. (Economy.com is run by Mark Zandi of Economy.com, who advised John McCain during the 2008 campaign, so these multipliers are not from some pinko source.) The multipliers on tax cuts are much much lower – under $0.40 for extending the Bush tax cuts or giving corporations tax breaks (meaning that they increase GDP by less than half what they cost). The multiplier on the payroll tax holiday is higher—around $1.20 – because the working class spends all it gets, but the upper brackets don’t. Infrastructure spending has a big kick not just because workers spend so much of what they get, it also involves buying lots of raw materials and equipment, meaning large spillover effects beyond the site of the initial spending.
So aside from putting the unemployed to work, a compellingly humane goal in itself, and spiffing up our rotting environment, jobs programs and infrastructure investment would boost broad economic growth dramatically. But we can’t do that, because...jobs programs might lead the working class to develop an attitude, and we can’t have that.
Instead the solutions embraced by the political elite are inflation and loose money policy. This has the advantage of helping small business without lifting wages.
Easy money is really a cowardly substitute for redistribution—over the long term, Milton Friedman was more or less right that loose money can’t change the economic fundamentals. It can’t spark much growth, it can’t raise real wages—it’s mostly just froth. To spark growth and raise wages you need serious spending, better labor laws, and stronger and more pervasive unions. Or, to put it another way, the best that loose money can give us is more of the same; jobs programs and infrastructure spending can give us child care and high-speed rail, and not just more consumer goods and carbon dioxide emissions.
Sweden, a true social democracy, has kept a tight money policy (higher real interest rates), and has seen real wages rise throughout the neoliberal period when they've not expanded in the U.S.
Henry Farrell of Crooked Timber expands on this:
There is a real phenomenon that you might describe as left neo-liberalism in the US - liberals who came out of the experience of the 1980s convinced that the internal interest group dynamics of the Democratic party were a problem. These people came up with some interesting arguments...but seem to me to have always lacked a good theory of politics.
To be more precise – Neo-liberals tend to favor a combination of market mechanisms and technocratic solutions to solve social problems. But these kinds of solutions tend to discount politics – and in particular political collective action, which requires strong collective actors such as trade unions. This means that vaguely-leftish versions of neo-liberalism often have weak theories of politics, and in particular of the politics of collective action. I see Doug and others as arguing that successful political change requires large scale organized collective action, and that this in turn requires the correction of major power imbalances (e.g. between labor and capital). They’re also arguing that neo-liberal policies at best tend not to help correct these imbalances.... Even if left-leaning neo-liberals are right to claim that technocratic solutions and market mechanisms can work to relieve disparities etc, it’s hard for me to see how left-leaning neo-liberalism can generate any self-sustaining politics.... (who are the organized interest groups and collective actors who will push consistently for technocratic efficiency?)...
Erik Loomis of LG&M takes the next step to connect the dots that explain the puzzling political weakness of the Obama Administration in spite of the president's own clear personal political talent:
Progressive change in this country...has almost always happened through mass movement politics eventually electing politicians to office to enact desired changes or forcing reluctant politicians to go along. Think Civil Rights, environmentalism, or the labor movement. Today, the gay rights movement is succeeding because of collective action changing people’s minds and making politicians realize that supporting it is good politics....
Does policy follow grassroots politics or can successful policy be created without a grassroots base? I’d argue for the former–being right about policy rarely matters in American politics. It’s about how many people you can get out to support you, regardless of a position’s merits. Conservatives understand this well. The Tea Party supports terrible policy on nearly every issue. But that hasn’t stopped it from moving the nation significantly to the right....
The Obama campaign was an amazing grassroots campaign, where you had left neo-liberals ready to support all sorts of policies with their technocratic expertise and millions of Americans (or at least hundreds of thousands) waiting to do what their president asked to see universal health care, job creation, immigration reform, etc.
And then after the election, Obama and his team allowed the grassroots movement to slip away. Obama, clearly never comfortable with being the head of a mass movement, preferred the politics of the Beltway to that of the street. Like so many other left neoliberals, he failed to understand what both labor unions and right-wing activists know well–politics are primarily won in the street, next to the water cooler, at the local bar, and on the airwaves, not in meetings of intelligent people.
So to sum up–being right about policy is often irrelevant unless you have a mass movement of people behind you ready to engage in collective action to see those policies enacted. And I don’t think left neo-liberals often understand that. This is why I get so outraged when, for example, left neo-liberals support education “reform” that weakens teacher unions. We probably all agree that there are bad teachers out there and it would be great to get rid of them. But by weakening the one educational institution that can best mobilize people to protect our schools from conservative attacks, these reforms often further right-wing politics even if they theoretically achieve a left neo-liberal policy point.
I think that sums up the pickle the Obama Administration finds itself in - to make change happen, you need to inspire a mass movement, but who's going to be inspired by the wonkish technocracy and incrementalism of left-neoliberalism?
They had a mass movement at their beck and call and dismantled it in favor of backroom deals and bipartisanship and crafting technocratic compromises among institutional stakeholders. But without a mass movement at their back they've been reduced to sending around video paeans to the virtues of compromise.
To me that's a better explanation of what's going on than all the dark speculation about bad motives or cowardice on the part of the president and his administration. He's got an intellectual view of politics that's ineffective. He thinks proper policy prescriptions should and will win the day. Tell that to the shrieking loonies of the Tea Party who are, horrifyingly enough, making a damn good game of winning their own dark vision of the future through the power of a popular if misguided movement.