Neo-liberalism specialized in selling an illusion, namely that the unfettered functioning of markets, both commodity markets and financial markets, constituted the best economic arrangement for a society. This illusion had been buried in the 1930s, by the experience of the Great Depression, and by the theoretical endeavors of John Maynard Keynes, a British Liberal and Michael Kalecki, a Polish Marxist. But it was resurrected to serve a specific purpose. This resurrection had nothing to do with any theoretical demonstration of the invalidity of the Keynes-Kalecki propositions. True, the Keynesian prescription for the rescuing of capitalism had turned out to have been problematical, as indeed one would expect with any Liberal panacea for capitalism; but this is not the same as saying that the Keynesian analysis of the ills of capitalism had been proved wrong. The resurrection therefore was a theoretical sleight-of-hand.
Behind this resurrection were financial interests, re-acquiring hegemony in a new incarnation, after the setbacks faced by them during the Depression, war and immediate post-war years. Keynes had called for the “euthanasia of the rentier” and the “socialization of investment.” In his view the basic fault of the market mechanism was that it could not distinguish between “enterprise” and “speculation”, so that the unfettered functioning of markets made the livelihood of the common people dependent on the whims of a bunch of speculators. Capitalism, whose survival he had wanted, could not, in his view, survive if this grievous fault was not rectified through the institutionalization of State intervention in crucial spheres relating to its functioning. Resurgent finance capital, in its new “globalized” garb, starting from the late sixties, took its revenge on Keynes, and decided to put the clock back. It “sold,” or imposed through agencies like the IMF and the World Bank, its free market ideology all around the globe. While Keynes had wanted finance to remain national, so that nation-States could have the autonomy to pursue employment-promoting policies, “globalized” finance forced nation-States to open their doors to its unfettered movements, and justified it by invoking the illusion of an efficient free market.
Is “Voodoo Economics” fianlly dead?