Neoliberalism and its enemies IV

The success of full employment and the failure to adjust

This is the fourth and final post in our series on the movement to construct a “post-neoliberal” economic policy agenda for Democrats. You can read the first post, a brief history of neoliberalism, here. The second and third are also free for everyone to read, but today’s post is for paid subscribers.

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The anti-neoliberalism movement has tried to use Donald Trump’s election to persuade the Democratic Party to abandon large swathes of the Clinton-Obama ideological legacy.

My view is that this is mistaken and that Obama’s big ideas were basically right, even if, like any president, he made some mistakes. I think the difference between “made important mistakes” and “had a flawed intellectual paradigm that needs to be overthrown” is important and underrated because we live in a world where big ideas are perennially overrated. I was actually very critical of Obama-era economic policy at the time because I thought the United States was falling badly short of the mark on full employment. This involved several mistakes that were more serious than was generally acknowledged at the time, and I had my hair on fire about it. But one reason those mistakes were underrated was that not only did the Obama team want to defend its record, but its critics on the right and the left liked to believe the problems were more profound and conceptual than they really were. These days, people don’t talk much about Occupy, but it’s clear that the sluggish labor market recovery from the Great Recession fueled an incredible amount of diffuse youth radicalism that served as rocket fuel for an older generation of left intellectuals who were ready to tell disgruntled youth about the profound failures of capitalism.

They were so eager to tell the world about the profound failures of capitalism that they didn’t really want to talk about Federal Reserve Board of Governors appointments, nominal income level targeting, or the importance of the prime age employment-population ratio.

Those failures were much too boring, much too technical, and much too lacking in exciting ideological content to be worth focusing on. It’s easy to forget now, but 10-15 years ago, left intellectuals like Doug Henwood and Cory Robin offered scathing criticisms of my commentary about the need to use monetary policy to aggressively boost the labor market. Bernie Sanders’ star-making filibuster speech about “corporate greed and the decline of our middle class” was delivered in opposition to a bipartisan fiscal stimulus deal that he didn’t like because it included tax cuts for the rich. In my more embittered and polemical moments, I like to say that at a time when American public policy was causing millions of person-years of unnecessary unemployment due to austerity, the left’s main policy idea was that we needed even more austerity. In calmer and more judicious moments, I know that is ungenerous. It’s not that the left wanted the labor market to be worse. It’s that they cared more about other things than about full employment, and wanted full employment to happen if and only if it could be achieved through specifically left means.

Regardless, I thought at the time that the big problem with Obama-era economic policy was that there was too much joblessness. To the extent that you can blame Obama for the rise of Trump, that is the place to put the blame. And to the extent that Biden improved on the Obama formula, it’s been by really sinking political and financial capital into full employment. Where it all tends to go wrong is that having achieved full employment, you need to take the win and not keep advancing policy ideas that are premised on conditions of high unemployment.

Barack Obama’s big (repeated) mistake

People often gloss over the problems with Obama-era macroeconomic policy by saying his stimulus bill — the 2009 American Recovery and Reinvestment Act — was too small. This is both a bit of a misread of what actually happened with ARRA and an understatement of the situation.