Ian Welsh

Strategic Political Economy

The Big Failure of Small Government
Maria Mazzucato [Project Syndicate, via Naked Capitalism 5-22-20]

Effective governance, it turns out, cannot be conjured up at will, because it requires investment in state capacity….

Decades of privatization, outsourcing, and budget cuts in the name of “efficiency” have significantly hampered many governments’ responses to the COVID-19 crisis. At the same time, successful responses by other governments have shown that investments in core public-sector capabilities make all the difference in times of emergency. The countries that have handled the crisis well are those where the state maintains a productive relationship with value creators in society, by investing in critical capacities and designing private-sector contracts to serve the public interest….

Unfortunately, for the last half-century, the prevailing political message in many countries has been that governments cannot – and therefore should not – actually govern. Politicians, business leaders, and pundits have long relied on a management creed that focuses obsessively on static measures of efficiency to justify spending cuts, privatization, and outsourcing….

Vietnam’s successful approach to COVID-19 has emerged as a striking contrast to the US and UK responses. Among other things, the Vietnamese government was able to amass low-cost testing kits very quickly, because it already had the capacity to mobilize academia, the army, the private sector, and civil society around a common mission. Rather than simply outsourcing with few questions asked, it used public research and development funding and procurement to drive innovation. The resulting public-private collaboration enabled rapid commercialization of kits, which are now being exported to Europe and beyond.

New Zealand is another success story, and not by coincidence. After initially adopting the outsourcing mantra in the 1980s, the New Zealand government changed course, embracing a “spirit of service” and an “ethic of care” across its public services, and becoming the first country in the world to adopt a wellbeing budget. Owing to this vision of public management, the government adopted a “health first, economy second” approach to the current crisis.

Tax evasion, to pick just one crime concentrated among the wealthy, already siphons up to 10,000 times more money out of the U.S. economy every year than bank robberies. In 2017, researchers estimated that fraud by America’s largest corporations cost Americans up to $360 billion annually between 1996 and 2004. That’s roughly two decades’ worth of street crime every single year. As the links between corporations and regulators become increasingly incestuous, the future will bring more crude-soaked coastlines, price-gouging corporate behemoths and Madoff-style Ponzi schemes. More hurdles to suing companies for poisoning their customers or letting bosses harass their employees. And more uniquely American catastrophes like the opioid crisis and the price of insulin.

An interview with Philip Mirowski [Jacobin, via Naked Capitalism 5-17-20]

Neoliberals really believe that people are inherently bad cognizers — they can’t work their way out of their problems just by thinking. Of course, that sounds like a very negative doctrine: i.e., telling us that people are incapable of understanding the nature of their problems and pursuing their own democratic ends.

The neoliberals talk among themselves, too, and already at this stage of the crisis there are discussions of what they see as current political successes…. They see the gutting of FDA controls over drugs, the boosting of privatized telemedicine, which is something that they’ve proposed for a long time — seeking to get rid of the idea that a poor person ought to be able to see a doctor face-to-face. They also see these developments as blocking a state-run, single-payer system in the United States — they believe the crisis made it less likely than before.

They also like the idea that this is turning pharma into a “heroic” sector, after there had been a lot of political pushback against pharma and it was getting a bad rap. That’s all being undone now. They love the idea that this crisis is inadvertently causing a reengineering of higher education. They have long argued that higher education is just something that most people can’t afford to have. Now, what’s going to happen is widespread distance education, even at elementary levels. It’s promoting homeschooling, something they’ve always been in favor of. It’s boosting the privatization of elementary education, so that’s great . . . They like the idea that an inadvertent effect of the crisis is to kill the US Postal Service. These are the sorts of projects they’ve long had on the back burner. And now they see, “this is our chance.”