On the mixed economy

I thought this brief discussion of the ‘mixed economy’ was appropriate after the Labour Party’s surprisingly good performance in this week’s UK General Election. They did not win, but they exceeded all expectations, running on what proved to be a popular manifesto and some good campaigning by leader Jeremy Corbyn.

Their manifesto can be seen as a traditional social democratic platform, rather than a socialist one. It was against continued austerity and cuts to public services and proposed a large increase in pubic investment in infrastructure and new technology to support the development of the private sector. Having said that, it did almost match the Conservatives’ freeze on some benefits which will hit the poorest hard over the next few years, so it wasn’t all good.

It also seemed to be missing the kind of political reform that I feel is needed alongside economic reform, and which only the more centrist Liberal Democrats proposed.

Here is Michael Hudson once again, from J is for Junk Economics (p.155):

Mixed Economy: Every economy is mixed, with public and private sectors co-existing like the DNA molecule’s intertwining spiral strands. Well-run societies need reciprocal checks and balances to avoid the extremes either of public or private sectors, ranging from Stalinist Russia to neoliberal regimes.

Historically, the basic elements of commercial enterprise – standardized prices and accounting, interest-bearing debt and profit-sharing contracts – first seem to have emerged in Bronze Age Mesopotamian temples and palaces (especially for long-distance trade) and gradually diffused throughout the economy at large. Today’s public sectors still play a supporting and regulatory role, providing legal and economic infrastructure and military security for the private sector, and creating the money supply.

Wealthy elites tend to gain ascendency via financial dynamics, which typically take over governments as well as real estate and industry. An equally predatory outcome may occur when bureaucracies seek their own self-interest by controlling the flow of revenue and hence the economic surplus. This often leads to insider dealing. In both cases an emerging kleptocracy creates an oligarchy. Governments tend to be controlled by families at the top of the economic pyramid – going all the way back to the chieftains’ households that dominated Mesopotamia’s temples and palaces. No society in history seems to have resisted this kind of polarization for long, although popular morality has almost always called for such reforms, checks and balances.”

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