You might say that politicians and mainstream economic policy have learnt their lesson and now realise that ‘austerity’ only makes things worse by reducing spending and ‘effective demand’. In other words, austerity policies will not be revived. After all, even the International Monetary Fund is saying, ‘Spend as much as necessary and don’t worry about the consequences for debt’.10 But that is now - in the depth of the pandemic slump. When debt costs and government measures mount on the capitalist sector, capitalism will look to protect already weak profits by cutting government taxes and spending.11
The supporters of Modern Monetary Theory (MMT) may cry out at this point and argue that governments do not need to borrow money through debt issuance and so run up interest costs. They can just get the central banks to ‘print’ the currency and put it in the government coffers. Rising public debt is then not an obstacle to government investment and spending in order to boost the economy and deliver full employment. In a way, that is right if government spending is productive for the economy. But what is an obstacle is the willingness and capability of the capitalist sector to invest if profitability is low.
How much government investment would be necessary to replace capitalist investment and get the US economy growing at rates that restore and raise real wages, achieve full employment and apply resources and innovation to combat climate change? It would require ‘war economy’ levels, when federal government investment rose to 23% of GDP and the government controlled and directed the capitalist sector to invest.
That is not on Biden’s agenda or, for that matter, on the agenda of MMT supporters, because such a move would be way more than just ‘stimulating’ the capitalist sector: it would actually mean ‘replacing’ its investment role. It would mean an economic revolution not wanted by Biden, and not envisaged by MMT.
In an editorial entitled ‘Bidenomics can preserve support for capitalism’, the Financial Times put it thus: “Since John Maynard Keynes, the best case for state intervention has not been to abolish the market, but to preserve public support for it”; and, while “if implemented, Bidenomics would make life more burdensome for business and for high-earners, it might also avert a larger reckoning further down the line.”12
