Melinda Cooper, "Counterrevolution: Extravagance and Austerity in Public Finance" (Zone Books, 2024)
Feb 18, 2025
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Melinda Cooper, a sociology professor at the Australian National University, dives deep into the complexities of public finance in her latest insights. She reveals how neoliberalism balances austerity with extravagant government spending, especially for the wealthy. The discussion includes a critical look at supply-side economics, its impact on American policy, and the manipulation of working-class narratives. Cooper also reflects on the evolution of class dynamics and the political strategies that have reshaped fiscal policy since the 1970s, urging for a nuanced understanding of modern economic challenges.
The transformation of public finance from Keynesianism to neoliberalism reflects a broader political shift towards wealth concentration and austerity since the 1970s.
The rise of supply-side economics reshaped government fiscal policies, privileging business interests at the expense of worker welfare and income equality.
Understanding budgetary politics as a tool for political power reveals the need for a more nuanced leftist approach to fiscal strategy and class dynamics.
Deep dives
Transformations in Public Finance
Public finance in the United States has undergone a significant transformation from a Keynesian consensus to neoliberalism, which has shaped fiscal policies since the 1970s. During the New Deal and World War II, a strong belief in government involvement through taxation and public spending emerged, creating a foundation for a big-spending state. However, by the mid-1960s, as domestic social spending rose, fractures began to appear in the political consensus, leading to a backlash against Keynesianism, mainly driven by corporate interests questioning the efficacy of welfare programs. This period marked the beginning of a profound reshaping of public finance, setting the stage for the neoliberal counter-revolution that continues to influence economic policies today.
Neoliberal Counter-Revolution
The term 'counter-revolution' is essential in understanding the dynamics that led to a significant shift from Keynesian public finance to neoliberalism, characterized by wealth concentration and a growing radical right backlash. This counter-revolution gained momentum as critiques of the welfare state emerged, fostering a political coalition that sought to redefine American capitalism. The book argues that the neoliberal state plays a crucial role in facilitating the concentration of wealth, challenging the notion that market-driven innovations exist independently of government actions. As neoliberalism's grip on public finance strengthens, the fabric of economic and social relations begins to reflect medieval-like hierarchies of power and dependency.
Supply-Side Economics Rise
The emergence of supply-side economics in the 1970s marked a critical departure from Keynesian macroeconomic approaches, suggesting that stimulating production and investment was essential for economic growth. This movement emerged in response to perceived failures in demand-side management, particularly as labor's share of national income began to rise alarmingly, stirring fear among the business elite. Supply-side advocates argued that generous worker protections and welfare provisions were counterproductive, promoting a shift towards fiscal policies that incentivize businesses over direct support for workers. As this ideology became embedded in public policy, it reshaped the relationship between government and the economy, favoring tax cuts for the wealthy and corporations under the guise of fostering growth.
Political Alliances and Class Consciousness
Throughout the late 20th century, the Republican Party successfully redefined class consciousness by appealing to white, blue-collar workers, often framing them as small business owners or independent contractors. This strategic alliance served to undermine the solidarity of the working class by fostering divisions along racial and occupational lines, particularly against public sector workers. The creation of the Tea Party in the aftermath of the 2008 financial crisis further exemplified this successful political reorientation, as it rallied home-owning small business owners, masking their wealth as a form of working-class identity. The ability of the right to manipulate class narratives demonstrates the need for the left to develop a more nuanced understanding of class dynamics and to articulate a compelling alternative narrative.
Rethinking Fiscal Politics
The discourse surrounding fiscal politics has often been obscured by technocratic language, contributing to a general sense of political helplessness among the public. By tracing the historical roots of austerity politics back to the Southern Democrats and their legacy of budgetary strategies, it becomes clear that these frameworks have been strategically repurposed by contemporary right-wing movements. Understanding government budgets as not merely financial instruments but as tools of political power can empower citizens to challenge the prevailing narratives around austerity and public spending. The left is called to embrace creativity and boldness in fiscal strategy, paralleling the right's adeptness in using budgetary politics to serve ideological aims.
At the close of the 1970s, government treasuries and central banks took a vow of perpetual self-restraint. To this day, fiscal authorities fret over soaring public debt burdens, while central bankers wring their hands at the slightest sign of rising wages. As the brief reprieve of coronavirus spending made clear, no departure from government austerity will be tolerated without a corresponding act of penance.
Yet we misunderstand the scope of neoliberal public finance if we assume austerity to be its sole setting. Beyond the zero-sum game of direct claims on state budgets lies a realm of indirect government spending that escapes the naked eye. Capital gains are multiply subsidized by a tax system that reserves its greatest rewards for financial asset holders. And for all its airs of haughty asceticism, the Federal Reserve has become adept at facilitating the inflation of asset values while ruthlessly suppressing wages. Neoliberalism is as extravagant as it is austere, and this paradox needs to be grasped if we are to challenge its core modus operandi.
In Counterrevolution: Extravagance and Austerity in Public Finance (Zone Books, 2024) Dr. Melinda Cooper examines the major schools of thought that have shaped neoliberal common sense around public finance. Focusing, in particular, on Virginia school public choice theory and supply-side economics, she shows how these currents produced distinct but ultimately complementary responses to the capitalist crisis of the 1970s. With its intellectual roots in the conservative Southern Democratic tradition, Virginia school public choice theory espoused an austere doctrine of budget balance. The supply-side movement, by contrast, advocated tax cuts without spending restraint and debt issuance without guilt, in an apparent repudiation of austerity. Yet, for all their differences, the two schools converged around the need to rein in the redistributive uses of public spending. Together, they drove a counterrevolution in public finance that deepened the divide between rich and poor and revived the fortunes of dynastic wealth.
Far-reaching as the neoliberal counterrevolution has been, Dr. Cooper still identifies a counterfactual history of unrealized possibilities in the capitalist crisis of the 1970s. She concludes by inviting us to rethink the concept of revolution and raises the question: Is another politics of extravagance possible?
This interview was conducted by Dr. Miranda Melcher whose new book focuses on post-conflict military integration, understanding treaty negotiation and implementation in civil war contexts, with qualitative analysis of the Angolan and Mozambican civil wars.
