Academic journal article The Economic and Labour Relations Review : ELRR

Markets, Madness and a Middle Way Revisited

Academic journal article The Economic and Labour Relations Review : ELRR

Markets, Madness and a Middle Way Revisited

Article excerpt


A lecture delivered at a Public Meeting of the Centre for Applied Economic and Policy Research, held at Swinburne University of Technology on 10 July 2006. The author is Emeritus Professor in the History of Economic Theory, Cambridge, Emeritus Fellow, Jesus College, Cambridge and Professor Emeritus, Adelaide.


May I thank the original inhabitants of the land on which we now meet, for their courtesy in having us as their guests?

Just over 14 years ago, I gave the second Donald Horne Address on 'Markets, Madness and a Middle Way' (I have a horrible feeling it was also the last Horne Address). Tonight I want to revisit some of the themes and issues I raised then. February 1992 was a strategic time in which to reflect upon and assess the emerging or emerged effects of the Monetarist experiment in many advanced capitalist economies, together with the rise to dominance of neo-liberal policies backed up by the arguments of economic rationalists. It was also an appropriate time to try to persuade the then Prime Minister, Paul Keating, to have second thoughts about some old-fashioned theories and policies which the ALP government had jettisoned almost entirely but nevertheless were still maintaining relatively open minds about, as the law of unintended consequences began to emerge explicitly and openly.

Though Mrs. (as she then was) Thatcher and President Reagan were credited with being the first to implement the 'Monetarist Revolution; as far as policy is concerned, in the 1980s, I would argue that they were preceded by yet another great Aussie first in the last year of the Whitlam government (1975) and then again in the years of the Fraser coalition government prior to the election of the Hawke ALP government in 1983. Years of thorough preparation culminated in the ideas advanced through the late 1970s ALP National Committee of Enquiry (on which I was the economist). These ideas were preceded years earlier by the courageous stances of Ralph Willis in the political sphere and Laurie Carmichael in the industrial/union sphere. They were taken on board by academics such as my great mentor and friend, the late Eric Russell, and had a significant influence on policy at least for the first years of the Accord. As I often remark (at 75, a legitimate procedure) the broad suggestions of Discussion Paper No. 6 on 'Economic Issues and the Future of Australia' (1979) were accepted by Bob Hawke for at least half an hour after he became Prime Minister.

In the 1970s I was openly critical of those Australian economists who, largely innocent of the insights bequeathed to us by Marx, Keynes and Kalecki, provided 'respectable' academic support for Monetarist and like-minded policies. At that time, Paddy McGuiness was critical of those he dubbed 'Kindergarten Marxists'; I adopted his phrase making in talking of our 'Kindergarten Macroeconomists' (no names, no pack drill). In doing so, I was joining forces with Tommy Balogh and Nicky Kaldor in the UK. Balogh called Monetarism 'the incomes policy of Karl Marx': the need to recreate a reserve army of labour and make the sack an effective weapon again after the years of the Long Boom (the Marxist description) or Golden Age of Capitalism (Julie Schor's, Alan Hughes's and Ajil Singh's description) had swung economic, political and social power from capital to labour. This swing resulted in the relatively short-lived but powerfully irresponsible behaviour of trade unions in many advanced capitalist economies, which was at least partly responsible for the accelerating inflation and then the stagflation episodes of those years. These developments explicitly illustrated the extraordinarily prescient insights of Kalecki's 1943 (!!) classic, Political Aspects of Full Employment. Kalecki distinguished sharply between the political economy of getting back to full employment after a prolonged slump, when all classes and pressure groups were in at least temporary agreement about its desirability on the one hand, and sustaining full employment on the other, when profound differences emerged cumulatively (I have discussed these issues more fully in a recent paper on what would Marx and Keynes have made of the last 30 years and more). …

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