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 into the paradox of neoliberal public finance. She explores how austerity and extravagance coexist within fiscal policies, revealing the hidden subsidies benefiting financial asset holders. Cooper critiques the shift from Keynesianism to supply-side economics, highlighting the rise of a militant workforce in the 1970s that reshaped labor dynamics and safety nets. Her insights challenge traditional views on capitalism and unravel the complex political landscape of fiscal conservatism.
The podcast discusses the transition from a Keynesian to a neoliberal fiscal framework, reshaping government roles and economic stability since the 1970s.
Supply-side economics emerged as a critique of Keynesianism, advocating for tax cuts and deregulation to encourage production and combat economic stagnation.
The Tea Party's political success showcases how class identities are manipulated to rally support for austerity measures while preserving corporate interests.
Deep dives
Reinterpreting Public Finance Dynamics
The discussion highlights a significant transformation in public finance from a Keynesian consensus to a neoliberal framework, particularly in the U.S. since the 1970s. The Keynesian approach, established post-World War II, focused on a cooperative relationship between government spending and economic stability, but began to fracture due to criticisms from the business sector. This shift reflects a growing dissent among corporate interests towards the welfare state, reshaping fiscal policy to prioritize tax cuts and austerity measures. The implications of this transition underscore how neoliberal ideology redefined the role of government in the economy, fostering both deep wealth concentration and a reimagined capitalist structure.
Supply-Side Economics Emergence
Supply-side economics arose in the 1970s as a reaction against Keynesian strategies, promoting the idea that economic growth should be prioritized through production incentives rather than demand stimulation. Proponents argued that the welfare policies of the time, including unemployment benefits and labor security, created a disincentive for work and investment, leading to economic stagnation. With a renewed focus on stimulating business investments, supply-side economics sought tax cuts and regulatory easing to invigorate the economy. This perspective gained significant traction and influenced public policy debates, becoming a lasting component of neoliberal economic thought.
The Role of Family Businesses
The rise of family-run businesses has been influenced by neoliberal policies that encourage individual entrepreneurship and reclassify workers as small business owners. This shift is especially notable in the construction industry, where many workers identify as independent contractors, merging the lines between employee and owner. Such reclassifications enable a narrative of workers as potential entrepreneurs, fostering an alignment of their interests with capitalists rather than the broader working class. This ideological repositioning of labor underscores how economic shifts have transformed traditional employment into a more fragmented landscape of self-employment and familial support.
Class Mobilization and Tea Party Effectiveness
The Tea Party emerged as an effective political movement by successfully organizing small business owners and homeowners around a shared identity that often blurred the lines of class categorization. By framing their constituency as workers, many aligned against perceived threats from public sector employees, which advanced a narrative of privilege and entitlement. Coupled with historical appeals to traditional American values and a dissatisfaction with economic conditions, this movement harnessed sentiments to galvanize support for tax cuts and reduced government spending. The Tea Party's success illustrates the strategic manipulations of class identities that resonate deeply with American cultural and political narratives.
Challenges of Austerity Politics
Austerity politics have been shaped significantly by historical precedents and contemporary ideological battles, particularly regarding budgetary issues characterized by the right's emphasis on fiscal restraint. The term 'austerity' has been weaponized to advocate for reductions in social spending while leaving military and corporate expenditures largely untouched, revealing hypocrisy in claims of fiscal responsibility. This strategic narrative creates a political environment where deflecting blame onto the left for budget deficits obscures the actual beneficiaries of fiscal policy, namely the wealthy. Analyzing the historical roots of these austerity measures and their ongoing impact reveals a complex landscape of financial and ideological maneuvering in American politics.
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.
