Melinda Cooper, "Counterrevolution: Extravagance and Austerity in Public Finance" (Zone Books, 2024)
Feb 18, 2025
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Melinda Cooper, a Professor of Sociology at the Australian National University, delves into the paradox of neoliberal public finance in her new book. She explores how austerity is often paired with extravagant financial policies favoring asset holders. The discussion reveals the evolution of supply-side economics and its mixed impact on the working class. Additionally, Cooper critiques the Republican Party's historical ties to fiscal conservatism and examines the shifting class alliances that challenge traditional labor dynamics. It's a profound analysis of capitalism's complexities.
The shift from Keynesianism to neoliberalism in U.S. public finance reflects a profound ideological transformation prioritizing capital interests over collective welfare.
Supply-side economics emerged as a critique of Keynesian policies, advocating for tax cuts to stimulate investment and economic growth while suppressing labor concerns.
The strategic use of austerity rhetoric by right-leaning factions has perpetuated class divides and framed budgetary constraints as universal problems detrimental to welfare initiatives.
Deep dives
The Shift from Keynesian to Neoliberal Public Finance
Public finance in the United States underwent a significant transformation from the Keynesian consensus established in the 1950s to a neoliberal framework by the 1980s. Initially, under President Eisenhower, Keynesianism emphasized robust state intervention in economic matters, including expansive public spending and high taxation to support welfare and public services. However, this approach began to falter in the 1960s as increasing social expenditure on programs such as Medicare and Medicaid followed rising domestic social spending. This led to tensions among various stakeholders, particularly the business sector, which started questioning the sustainability of Keynesian policies and laid the groundwork for a powerful critique that would culminate in the neoliberal public finance model we see today.
The Rise of Supply-Side Economics
Supply-side economics emerged in the 1970s as a formidable response to Keynesian macroeconomics, arguing that growth should be the primary goal of economic policy. Proponents asserted that traditional demand-management strategies were ineffective and suggested that tax cuts for businesses and individuals would stimulate investment and work incentives instead. They contended that rising labor costs and job security led to increased worker militancy, which in turn suppressed economic growth. Consequently, the movement sought to alter fiscal policies to create a more favorable environment for capital, signaling a significant ideological shift toward promoting business interests over traditional labor-centric policies in public finance.
Neoliberal Counter-Revolution and Fiscal Policy
The counter-revolution against Keynesianism was characterized by a radical reshaping of fiscal policy, primarily influenced by neoliberal thought and the business elite. This period marked a considerable pivot in how the state interacted with economics, steering toward a model where public finance was increasingly seen as detrimental to economic freedom. The changing dynamics led to an environment where austerity measures became normalized, and policy favored capital accumulation and wealth concentration, impacting the broader working population. The consequences were profound, entrenching a fiscal landscape that continues to prioritize wealth generation for a select few while diminishing collective welfare initiatives.
The Political Strategy Behind Austerity
The rhetoric of austerity has become a potent tool for political mobilization, particularly among right-leaning factions, legitimizing cuts in public spending while promoting tax breaks for the wealthy. This discourse has roots in the historic strategies employed by conservative factions who aimed to reinforce white supremacy and undermine welfare initiatives. By framing budgetary constraints as universal problems, the right has often managed to redirect public perception against welfare programs, effectively dividing the working class along racial and economic lines. The strategic utilization of fiscal language has allowed the right to maintain ideological dominance, even amidst significant government spending that favors corporate interests over public welfare.
Challenging Class Narratives in Today’s Economy
Contemporary political movements like the Tea Party cleverly manipulate class narratives, positioning small business owners and property owners against traditional working-class identities. This tactic has effectively reshaped class consciousness, leading many to identify as working class despite their actual status as small business owners or homeowners. Such framing not only undermines solidarity among wage earners but also distorts the understanding of economic inequalities present in society. The left must critically reassess its approach to class definitions and collective organizing to build solidarity across diverse worker demographics while challenging these dominant narratives.
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.
