How progressive is the Biden Economic Plan?
Is Neo-liberalism over?
Many on the left have commented on Biden’s Rescue Plan and Jobs Plan as being a repudiation of Neo-liberalism. For the first time since the 70s , the U.S. government is aiming at giving direction to the economy in a big way. Many are describing this as a return to Keynesianism.
An excellent article in Socialist Resurgence by OSMAN KESHAWARZ addresses this:
Some commentators have warned that many people will be swept away by the Biden plans and see them as gigantic progressive steps . This may increase support for the Democrats among Republicans, Independents and even the Left. They rightly point out that we need to understand the Biden program as being for the rehabilitation of capitalism. They do unfortunately see the turn from Neoliberalism as a turn away from austerity
Their concern is well warranted. The Left needs to be clear in explaining the sources of the Biden Program and its real goals. However, I believe they are wrong to assume a turn from the prevailing form of neo-liberalism means a turn away from austerity.
The main reason for the Biden plan as both authors point out is the need to restore profitability and to compete with China. Neo-liberalism was instituted to overcome the crisis of profitability at the end of the Post-War boom. Exemplifying Marx’s law, profit rates were declining and the U.S. was facing increased competition from Japan and Europe. At the same time, the strength of social movements including labor had declined. All these factors led the U.S. ruling class from the mid-70s on feeling it could attack social programs and turn to neo-liberalism.
There were several aspects of this. Corporations were allowed to make more profit by reducing federal regulation. Taxes on the corporations and the rich were reduced to allow greater capital accumulation. The rate of exploitation was jacked up by union busting and cutting of the social wage through austerity. US global domination was at the heart of this. This allowed the dollar as the dominant global currency to absorb resources from around the world. Based on this influx of dollars the U.S. could spend militarily, cut taxes on the rich , and increase budget deficits by borrowing from the world. The U.S. was seen as a safe haven. Driving down real wages and the social wage with increasing productivity allowed rapidly increasing concentration of wealth at the top. The living standards of the working class were partially maintained through massive increases in household debt, based in part on rising housing prices. The increase in debt at all levels resulted in rapidly increasing financialization of the economy.
At the time the US instituted neo-liberalism, Stalinism was facing a severe crisis. Its profitability was also on the decline. Its model of autarky had worked in the generally autarkic 30s and 40s . It no longer fit with increasing globalization after WWII. It needed to be part of the international division of labor to advance. This meant that by the time the U.S. and the West went full steam into Neo-liberalism, there was little centralized state competition. The U.S. could allow its corporations to go their own way with subsidies when necessary to keep the economy afloat. Examples included the Chrysler bailout, the Savings and Loan bailout and of course the rescuing of the banks in the 2008–9 crash.
The actual neo-liberal program in the Northern countries never matched the semi-libertarian justification offered as an excuse for cutting government social programs. Government spending as a portion of the economy stayed the same or grew. Neo-liberalism defunded the carrot and built up a bigger stick. Government was still responsible for the same aspects of the economy, it just subcontracted more of those functions to private corporations
The seeds of a shift from classical neo-liberalism were sewn in the 2008–9 crash. By this time, China’s economy had rapidly expanded. Its ruling class used a combination of state capitalism and integration into the world economy to rapidly increase profits. It copied the South Korean model with a vengeance on a massive scale being the most populous country on earth.
This meant that when the 2008–9 recession hit, it could give central direction to its economy. It instituted a massive stimulus plan which dwarfed the US bank bailout in terms of percentage of its economy. It was able to maintain demand and was instrumental in keeping the world economy afloat.
It showed in practice that a version of centralized planning could be more competitive than letting the corporations run free. Of course , the US had never fully given up state direction of the economy but the Chinese took this to a much higher degree. The key for the Chinese was central planning , including large scale state ownership combined with active insertion in the global division of labor. None of this is to imply that China solved all its economic problems but it did show the superiority of its strategy at that time.
By the time of the Covid Crisis and especially , the onset of the Biden administration, it became clear to large sections of the U.S. ruling class that more state intervention in the economy was crucially needed in order to compete with the Chinese economic model.
This shift from a more laissez faire approach has been and will continue to be problematic. It is not clear at this point how successful it will be. Capitalism in general and Neo-liberalism in particular has accentuated the greed of individual capitalists and sections of capital. Short-sighted greed will conflict with the need for Biden’s more collective capitalist class conscious approach. “Enlightened” capitalists such as Jeff Bezos have declared their willingness to pay higher taxes to make the U.S. more competitive. Bezos’ Amazon will of course directly benefit from an improved transportation infrastructure. More conservative Republican oriented capitalists are more attached to the neo-liberal less regulated model.
A major point that the Left needs to make is that both wings are capitalist and devoted to profit. We should not seem to support more class-conscious capitalists against the individually greedy ones. Both exist on the exploitation of workers. This is shown by enlightened Bezos’ anti-union attitude in Alabama. This does not preclude us supporting particular plans put forward as part of Biden’s modernization strategy. More accessible broad band and bridges that don’t collapse are beneficial to workers. However, we need to point out that the plans will only benefit workers when there is an accidental complimentary interest or when we use mass action to compel concessions. Any support we give must be critical.
In spite of more government involvement, the Biden plans will be organized to benefit private capital as much as possible. This neo-liberal strategy will not magically disappear. The rebuilding of roads and bridges will for example be done with government money handed over to private business. We should argue that the rebuilding be done through taxing the rich and by government programs that don’t give private profit . Winning this demand is unlikely, but we should raise it at least as a propaganda point. Likewise, climate change aspects of the plan are very weak and need to be criticized.
Often on the Left , capitalist strategies are presented in too schematic a way. This is Neo-liberalism or it isn’t. This is Keynesianism or it isn’t. Never the twain shall meet etc. In fact Neo-liberalism is a theory that only ever applied partially in practice. There was always still government regulation. There was always a partial industrial policy through the military. Some described Reagan’s policy as “ military Keynesianism”. There were still remnants of social programs. Tax cuts for the rich were sometimes reversed. Government policy almost always relied on government deficits during the whole neo-liberal period. Neoliberalism was most consistently applied to countries in the Global South not in the Global North. It was an expression of imperialism.
The same is true of Keynesianism. As Osman’s article points out, there can be Keynesianism without increases in social programs. Those who expect a shift from Neo-liberalism to mean a decline in austerity are wrong. The capitalist state can and does mix and match policies all the time. The key factor in determining the level of social wage over time will be the level of struggle. Just as in union wage negotiation, the balance of class forces will be the key determinant.
Biden’s program is a bit anomalous . He felt the need for a quick shot in the arm of $1400 checks to most people in the U.S. just in order to prevent economic collapse. The same is true for Covid testing, vaccination and temporary increases in UE compensation. The infrastructure program is aimed at making the US competitive with China. It will have the byproduct of creating more jobs and may even raise wages overall to an extent. To pay for it, the ruling class may accept higher taxes at least for a while. Obviously, the infrastructure plan is part of the overall imperialist competition with China that can lead to an actual military conflict. As always , Marxists must strongly reject increased imperial competition whether it leads to war or not.
The size and depths of Biden’s plan should show us how deep the capitalist crisis is. The US government has never distributed this amount of money to ordinary people before. Even Republicans agreed to earlier versions of the plan, though these involved mostly direct payments to corporations. The other reason that they are willing to spend so much is because of the fear of a popular backlash against the system. This has taken both left and right forms but is at the back of their minds. This should be encouraging to everyone seeking fundamental social change.
However, we must remember that in the long run, the goal of the Biden Program is to increase profitability and competitiveness of US corporations. The U.S. ruling class will try to enhance profitability in part by raising the rate of exploitation. This means attacks on private wages and the social wage. We can expect that current austerity will not disappear and it will further increase once the economy is fully out of the Covid Crisis. The overall tendency of the rate of profit to decline has not abated. Economists predicted a recession going into 2020. We got an even deeper one because of Covid. However , the original causes of the coming recession have not gone away. Many economists predict a return to recession after the recovery from covid.
There are two things the Left must do now in relation to the Biden program — 1) Explain its origins, real nature , goals and limitations. 2) Continue to warn that the class conscious capitalists represented by the Democratic Party, are not our friends. Instead, their continued increase in profits relies on our increased immiseration.( “ The Rich are rich because the poor are poor”) This means arguing for increased working class organization now and as the further attacks unfold. In spite of the departure of the Orange Menace, the same problems face us. Reject the honeymoon and promote a bitter divorce. The working class needs to be convinced to leave its abusers — the capitalists and their parties.
The other long term task is building revolutionary organization to prepare for ending the system of exploitation, oppression, war and environmental destruction. All these tasks of course reinforce each other.
