Matthew Yglesias regrets that his original commentary on monetary policy, and my disagreement with it, got hijacked by Henry Farrell and turned into an analysis of the limits of neoliberalism. (I also stand corrected that Yglesias hasn’t written in favor of a jobs program in the past—apparently he has, though there was no evidence of it in the piece I responded to.) I like what Farrell has to say, and agree with him: there’s a kind of liberal, or neoliberal technocratic approach to politics that boils down to, as Adolph Reed once put it, let’s just get all the smart people together on the Vineyard and we can solve everything. As much as I admire John Maynard Keynes, you could say something similar about his approach to politics.
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, and they seem to me to have a pretty good case. 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.
I dig absolutely, as Leonard Bernstein put it in a somewhat different context (though it was part of a conversation about achieving full employment).
But I want to focus on a smaller point, Yglesias’ strange claim:
I think that better monetary policy, though hardly the solution to all of America’s ills, could do a lot to reduce unemployment. His view seems to be not just that a more thorough economic restructuring would be desirable, but that it’s strictlynecessary to achieve recovery. In my view, that’s factually mistaken. Better monetary policy over the past several years would, I believe, have produced a much shallower and shorter recession….
I really don’t know what he expected the Fed to do. Just before the Lehman crisis, the Fed held about $900 billion in assets. (See first column, here.) Within weeks, it held over $2 trillion. Now, it’s close to $3 trillion. They bought all kinds of stuff, guaranteed trillions more. They cut interest rates to zero and made it clear they’d stay there for a long time. They did it in a secretive and unaccountable way, but they can hardly be accused of passivity. Would it have made a big difference if they’d said, “Gosh, we wish inflation would rise to 3%”?
What would have made a big difference is if we had a bigger, longer-term stimulus and growth package centered around a jobs program and infrastructure spending, without all the tax breaks. I understand that getting that through Congress—even the old, pre-November 2010 model—would have been nearly impossible, but that’s another story. A story that would take us back to Henry Farrell’s point about the need for a self-sustaining movement.