Melinda Cooper, "Counterrevolution: Extravagance and Austerity in Public Finance" (Zone Books, 2024)
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Welcome to the New Books Network.

which takes us sort of deeper into these ideas around austerity and sort of what financial authorities, you know, government, treasury, central banks, those sorts of people are doing. Because, of course, on the surface, we are talking about institutions that are always concerned about public debt burdens,

are focused quite a lot on government austerity and sort of the need to stick to it no matter what. But it turns out there's actually a whole bunch of things behind that, lots of really interesting and important ideas that shape these expectations, that shape these policies, that are very much worth excavating to understand sort of how we got to some of these ideas and how they are still so influential. So I'm very pleased, Melinda, to welcome you to the podcast to tell us about your book.

Thanks for inviting me, Miranda. It's a pleasure to be here. Well, I'm very pleased to have you. Could you please start us off by introducing yourself a little bit and tell us why you decided to write this book? Okay, my name's Melinda Cooper and I work at the Australian National University where I teach sociology. I sometimes have trouble placing myself within disciplines, although of course I'm officially now a sociologist.

But I would say that my interests lie at the intersections of political economy, political philosophy and social theory. I was actually trained in continental philosophy, so in French post-structuralist philosophy specifically, and its connections to the European leftist Marxist tradition.

At a certain point, I stopped writing in that vein. So these days, I don't work so much intertextually. I draw on an archive that is much wider and I think much richer. I think it allows me to be more creative, though I think I've remained preoccupied by the same questions about the nature of capitalism today and the changing nature of power.

My latest book, Counter-Revolution, looks at the political and economic history of the United States since about the 1970s. This is a period of time that I've turned to again and again, I think in my three last books. But the specific focus of this book is, as you said, it's on the question of public finance and how it changes during this period.

So what I mean by public finance is the economic activity of the state. And this includes everything from taxation and public spending and the issuance of treasury debt, what we refer to as fiscal policy. But it also includes the economic interventions of the central bank. So the creation of money and the regulation of the price of money. This is what we refer to as monetary policy.

So in very broad terms, in this book, I'm looking at the shift from a broadly Keynesian consensus around public finance to a neoliberal practice of public finance. When you look at the United States, I think the Keynesian consensus settles into place sometime in the 1950s under President Eisenhower.

where you get a general consensus, not only among Democrats, but also among Republicans, that this really is the era of the big tax and spending state and that there's no going back. So the kinds of enormous new unprecedented fiscal responsibilities that the state took on during the New Deal and World War II are something that the state is now obliged to carry out.

Of course, Democrats and Republicans and various other constituencies within these two parties have disagreements about where this spending should be directed, what portion should go to defense, and what should go to welfare and public services. But there is also a remarkable degree of agreement around the need for a broad progressive tax base, big spending, and historically very high levels of taxation of wealth.

Now Keynesian public finance undergoes a further shift in the mid-1960s when you see an enlargement of the social remit of the American welfare state. You start to see new welfare programs, Medicaid and Medicare and the like, and a shift in the proportion of government spending going to social services versus defense.

Now, someone like President Johnson is known or remembered as the president of guns and butter. But what is really significant about his presidency is the fact that from around about 1965, domestic social spending is rising faster than defense spending. So this is a turning point in all kinds of ways, 1965.

This is where you also start to see the fissures in the so-called New Deal coalition that kept the Democrats in power. You have this whole section of business, big corporations, big publicly traded corporations that are completely brought into the New Deal project. This is the faction of monopolistic corporate capital that was very dependent on government contracts.

And it benefited from the labor peace provided by Cold War unionism and a rather generous welfare state.

But around about this period, the same faction of corporate capital starts to have second thoughts. They start wondering, is this Keynesian consensus with labor really working for us? Or is it working more in favor of the unions themselves, but also a growing segment of the population that is just entering the union movement or just gaining new welfare rights?

So to cut a long story short, this is the moment where a very longstanding critique of the Keynesian welfare state comes into its own politically. And this critique has been called neoliberal. Okay. And I maintain that terminology. Okay.

The intellectual critique is now animated by a growing political coalition of business and political interests that want to break with Keynesianism entirely and reimagine the very form of American capitalism on new terms. So what this book is looking at is how this backlash led to a profound reshaping of public finance in particular.

I argue that we're still living in the wake of this counter-revolution. In fact, the counter-revolution has gone into hyperdrive, into a state of revolutionary reaction, if you like. We're living in the era of neoliberal public finance.

So there is a vast literature already available on neoliberalism, of course, but I think the question of public finance in particular has been relatively neglected or treated only in siloed ways. So this is why I wanted to zoom into this question. If you look at much of the existing literature, it focuses on the private finance side of the equation.

People have looked at the rise of private equity, for example, and shareholder value ideology. They might refer to this as financialization and theorize the links between financialization and neoliberalism. But I argue that you can't really understand what's going on here if you aren't also aware of what's going on in terms of public finance.

All these maneuvers that are sold as heroic innovations of individual entrepreneurs and financiers are actually utterly dependent on government fiscal interventions of some kind.

So I wanted to flip the narrative and say we need to understand how the neoliberal state has been massively backstopping and enabling the vast concentration of wealth that we live with today and that we don't really have the whole picture if we don't understand this other side of the story.

Hmm. That's an incredibly helpful introduction and foundation for our discussion. Thank you for starting us off so clearly and comprehensively. The point I most want to pick up, though, from that is this idea of terminology, right? Because as you said, neoliberal is a key thing to understand here. Can we talk a bit more about the term counter-revolution and sort of what you mean specifically? I mean, it's literally the title, right? It's very prominently part of this. So can you tell us more about your use of the term?

Well, I'm using the term counter-revolution to describe dynamics and shifts that I think other people are describing using the term neo-feudalism. And I make a deliberate choice not to use that term, in fact, to critique it because I think it comes from a blind spot about the nature of capitalist dynamics and

that when extended into a kind of long-form analysis leads to all kinds of dead ends and all kinds of political impasses. So the short answer to this question is that I'm using the term counter-revolution because I think it belongs to the analytics of capitalism already.

And I think the dynamics I'm describing, deep wealth concentration and radical right-wing backlash, do belong squarely within the analysis of capital.

I'm not talking about a reductionist theory of capitalism here. What I'm trying to say is that our analysis of capital needs to be capacious enough to capture what's going on here. If we can't capture this return of seemingly archaic processes of outright coercion or revolutionary reaction, then there's something wrong with our analysis. It's not something wrong with capitalism, unfortunately.

Now, why am I doing this? I'll make a little detour here to explain the kind of political second thoughts that I'm having when I make these terminological decisions. I made a similar argument in Family Values, my last monograph, where I opened up by saying we need to understand modern conservatism as one of the primary ideological expressions of capitalism alongside economic liberalism.

And I think it's an analytic mistake and it's a political mistake also to reduce capitalism to free market liberal ideology. I think people do that almost intuitively. I think Marx does it a lot of the time. Not always, but there is this kind of reflex interpretation of capitalism as being best expressed ideologically by the tradition of economic liberalism.

I think this is a political mistake because it tends, it lends itself to the idea that conservatives are somehow opposing capitalism. They often tell you that they're opposing capitalism. In fact, they're opposing the liberal expression or the liberal tendencies within capital. But they themselves are direct expressions of another impulse which is equally constitutive of capitalism, and that is the proprietary impulse.

You don't have one without the other. And this is a kind of not internal to economic liberalism, because at some point, I argue, you always need some element of conservatism. Liberals themselves at some point turn into conservatives. You often find it when they're talking about the family or the inheritance or the question of inheritance, for example. They tend to become very embarrassed because of

Because, of course, what were the great bourgeois revolutions of the late 18th and 19th century all about? They were about toppling inherited orders of power. And yet, of course, you can't enact a new regime founded solely on contractual economic relations without also shoring up the foundations of that wealth and ensuring its preservation across time. How does this happen?

through the family, through genealogical, through legal orders of genealogy, the community, the nation state, etc. So liberalism needs conservatism and I won't go into the argument here, but I think modern conservatism needs modern economic liberalism too.

So I think similarly, the reason why people are suddenly seeing an end to capitalism today is because they can't make sense of fascism. I think we need to see fascism as an episodic tendency within capitalism. It's a unique tendency within capitalism. It has its own rhythms, its own temporality, its own logic, but it is part and parcel of the complex systematics that is capitalism.

So people tend to see some of the kind of strange political phenomena we're seeing lately in the form of the MAGA movement or Trump himself as so aberrant.

so antithetical to their definition of what capitalism is that it has to be something completely other. What this really means is that they have a very simplified, idealistic view of how capitalism should express itself or be constituted, that they're not able to fully theorize these other phenomena.

Now, I'm a very sympathetic reader of Marx. I would even consider myself a Marxist of sorts, but I know a lot of Marxists wouldn't. But there's one shortcut that Marx repeatedly makes when it comes to the question of history. And I think the terminology of neo-feudalism derives precisely from this dimension of Marxist thinking.

There's a side of Marx's work that is so over attentive to the liberal impulses of modern capital that he sees any kind of recurrence or reversion to outright forms of coercion or personal dependence as residues of the past.

residues of non-capitalist feudalist regimes of power. So feudalism in some of Marx's work becomes this kind of proxy for pre-capitalist or non-capitalist power relations. But of course this immediately throws up problems for Marx that he has to resolve in other parts of his work.

you know, immediately he has a problem with slavery or indentured servitude or even with domestic labor in the home, which of course actually grows at the end of the 19th century because what you have here are personal relations of dependence that aren't mediated through a third person or an intermediary, which don't create surplus value in Marxist terms. And if you're a strict Marxist, that means that these are not capitalist social relations.

Now, there's a tendency in Marx, in some of Marx's work, he has a tendency to say, well, the timeline of history is liberal, it's progressive, it's modernizing, and it's irreversible. It only goes in one direction. So, of course, there are feudal remnants, you know, not all power, not all labor relations have succumbed to the steamroller of history as yet, but they will, and in 50 or 100 years,

what I'm describing as capitalism will be our world. So for Marx, the steamroller of history is forward-looking and progressive, even if it's capitalist. So remember that for Marx, liberalism is literally revolutionary. It's not absolute revolution. It's not complete revolution. The proletariat has the honour of being the historical agent of complete revolution. But

Liberalism itself has this kind of tendency to upheaval, to modernism in Marx's terms. But you can pose a challenge to Marx and say, well, if liberalism is revolutionary, can conservatism be revolutionary too?

I think it can, and I think this is a very good, distilled, abstract term for what some people would call fascism. There's a lot of preciousness, a lot of reservations these days about using the word fascism, and for good reason too, because it is so anchored in a particular historical time and place, and it's

You want a definition that is a little bit more plastic, a little bit more supple. So I think revolutionary conservatism is a good term for fascism. And I think there's an argument for saying that fascism or revolutionary conservatism is an episodic tendency within capitalism. It's not capitalism as a...

as normal. It's not capitalism as liberalism, but it's a certain expression of capitalist dynamics. And you do find a recognition of that in some moments of Marx's thinking. You find it in his journalistic work, for example, in the 18th Brumaire,

And these kind of occasional writings are where I think Marx is a much more sophisticated political and historical thinker. So I would say you can read Marx against Marx and you can find a more complex and a more useful Marx by doing that.

The ungenerous reading would be to say that the people who evoke the concept of neo-feudalism are being faithful to Marx. I mean, that would be ungenerous to Marx. The generous reading would be to say that these people are simplifying Marx, that in fact, Marx is a much more complex, untidy, but also much more interesting thinker. And I tend to go with that.

So I do think the neo-feudalist thesis is consonant with a certain reading of Marx, but I think it comes from a loyalty to the most reductionist aspects of Marxist thinking. And I don't think you need that. I think this terminology of revolution and counter-revolution, revolutionary conservatism and revolutionary liberalism

can play the same descriptive role, but avoid the kinds of analytic and political problems that you get with feudalism, where you're more or less assuming that, say, someone like Trump just isn't capitalist anymore.

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LinkedIn, the place to be, to be. Yeah, the idea of kind of what our definitions can flex to and encompass is definitely key for, as you said, any sort of analytical clarity. So thank you for walking us through the terms and the sort of logics that we want to use to think through these issues. Moving then to applying them to the historical problems you were mentioning earlier in terms of kind of where these ideas come from in the American economy and in politics.

Can you tell us about the supply side movement in economics and when and why it developed and became embedded in American public policy? Yes, the supply side movement was one of the many currents within economic thinking that emerged in the 1970s as part of a general backlash against Keynesian macroeconomics.

Where supply-side economics was distinct is that it hung on to the idea of growth. It hung on to the idea that growth should be the overarching objective of state economic management. So this much it shared with Keynesian macroeconomics.

But where it intervened was to say that, okay, all the contraptions and recipes that Keynes and Keynesians devised to promote economic growth, they were fit for purpose up until recently. They were fit for purpose certainly during the Great Depression when economic stagnation was all about a slump in demand.

but they are no longer fit for purpose. So what Keynes was recommending was instruments of demand management, as they came to be called. So you were implementing all kinds of policies to raise wages, to ensure the security of labor, to ensure that the unemployed did not go sick or hungry, generous unemployment benefits and a welfare state, for instance.

that ensured that consumption remained more or less stable or was even growing. And Keynes argued that you needed this, you needed a certain kind of consumer abundance to maintain the stability of capitalism itself and to maintain this constantly rising growth.

Now, the supply-siders came along and said, well, this worked up until about the 1960s, the mid-1960s, again, this fateful date, but they're not working anymore. In fact, the very same instruments that Keynes advocated are having a counterproductive effect. So now we have workers that are so secure and so well-paid that they've just become hopelessly militant. They're striking all the time.

They've upset the idea of shared growth. This is not shared growth between capital and labor, wages and profit anymore. And in fact, in the early 1970s, this was devastating to the business elite. You see the labor share of national income rising faster than the profit share. This happened for a very brief moment, but enough to scare the daylights out of them, basically.

And they're also saying things like unemployment benefits are creating the wrong incentives now. This isn't making sure that people don't die when they're unemployed. It's actually incentivizing people not to work. Right?

All right. So what we need now is a whole different set of incentives. These incentives need to work from the supply side, not from the demand side. What do they mean by supply side incentives? They mean all kinds of stimuli to production and investment. Basically, you want to use fiscal

mechanisms that will push people back to work, that will incentivize them to work. And at the same time, you want to incentivize business to invest again. Because what happened when profit rates stagnated during the 1970s? You see this dramatic shift, this dramatic slump in rates of investment. Okay. So that is the basic message of supply-side economics.

I spend a lot of time differentiating different currents within supply-side economics. I should say that I think it's a tremendously important and consequential current within neoliberal thinking, but one that has received surprisingly little attention given its durability.

It really has had an enormous effect on public policy, much more so than many of the other little schools in neoliberal economics, for example, rational expectations. But I think for a long time it has suffered under a kind of reputation of being a little bit, the reputation of being voodoo economics. That was President George Bush Sr.'s epithet.

And I think this is because it was associated with only one wing of the movement. This was the populist wing. Now, I argue that there's actually two wings to the movement. There was the elitist wing, which was all about, which basically had an agenda of tax cuts for the very wealthy and for business.

So tax cuts for corporate profits, tax cuts for capital gains, which end up being enormously consequential, tax cuts for inheritance and gifts, for instance.

So very much in the tradition of Republican business elitism. And this certainly merits the description of trickle-down economics, because the idea is these policies are not there to cater to the poor or to wage earners, but we think this will be best for the economy. When business is happy, workers will be happy, all the benefits will trickle down.

But you had very quickly had this split within the movement, a cast of characters who are not so directly attached to the political or academic elite,

These are people who are journalists, who are associated with the Wall Street Journal, but they're very clever Republican strategists or right-wing strategists. And they understand that the Republican Party is never going to become a popular party. It's never going to attain the same kind of commanding position that the Democrats had assumed in the wake of World War II if it doesn't come up with something for the working class.

So this group of popular supply-siders, the names that you'll probably recognise, like Arthur Laffer and Jude Winniski, the politician Jack Kemp, they come up with this idea that we need to sell tax cuts to the working class as well, and we can afford it. So we can afford income tax cuts to start with, but later on we can afford property tax cuts, and we can afford a whole suite of...

Credit accommodating tax cuts, tax cuts for capital gains. Later they morph into a kind of movement for a kind of financialized democracy. But that's a longer story that I won't go into here. So, sorry, yeah.

Please continue. I was just going to say that supply-siders were very much focused on the question of taxation, hence they're one of the two schools of thought that I think have had a real influence in terms of neoliberal fiscal politics.

And as I mentioned, they wanted to introduce tax cuts for corporations, but also tax cuts for individuals. Interestingly, the tax cuts for individuals had a kind of double valence because personal income taxes are paid by wage workers, but also by all kinds of small business companies.

And interestingly, the kinds of limited partnership and limited liability companies that become more and more important during the 1980s and thereafter are taxed as on their personal income, their so-called pass-through businesses. So often there was a double message to supply-side populism. They were talking to workers but kind of dog-whistling to small business and to private investment managers.

Yeah, it's this impact on companies that I definitely want to talk more about, and specifically family-run companies. We've sort of mentioned a bunch of these things, right? Inheritance, individual, but how do all these ideas about supply-side economics lead particularly to the renewed prominence of family-run companies? Yeah.

Well, I think that's a very big story and I wouldn't place all the blame at the feet of supply-siders, but because I've given myself this remit of talking about these particular schools, I may have overemphasized the role that supply-siders play here. They certainly do play a role.

I think like most neoliberals, they had a vested interest in the idea that wage owners could and should be persuaded to see themselves as small property owners or small business owners. We know that the petty bourgeoisie is always preferable to the proletariat from the point of view of the business, right? Because it means that people are identifying upwards rather than horizontally.

So the populist supply-siders were very canny strategists, and they played a big role in the making of the new Republican-right coalition around Reagan because they managed to convince Reagan and friends that they needed to attract at least some traditionally Democratic voting members of the working class.

And they were very attentive to the fact that not all members of the New Deal working class had the same employment status. They might have had the same class consciousness for all kinds of historical reasons. But if you looked at their de jure employment status, there was something very interesting going on here. There was a very interesting hybridity. And the supply-siders saw political possibility there.

So some unionized workers were sole traders, for instance, and this was particularly the case in the construction sector. And this meant that they could potentially find common ground or common interests with other small business owners. They were independent contractors, which literally means they're small business owners. They're self-employed.

Moreover, by the 1970s, you have an enormous number of working class white men who have become homeowners. They're not just indebted. They're not just mortgages or mortgages at this point. They're outright homeowners.

And this means that they have a set of interests in property ownership that renters, primarily minorities and single women, perhaps gay men, did not. So part of the business right was very invested in the need to liberalize laws around worker classification.

They understood that if they could reclassify more workers as independent contractors and sole traders, they could perhaps undermine labor rights, but also they could create new constituencies of small business owners. These people would literally be small business owners, not workers.

So there are a lot of steps, intermediary steps here in this story. But I think most people would recognize that the standard contract of employment today no longer plays the same hegemonic role it once did.

So most people today in most sectors can expect to spend at least part of their working life as a freelancer or a sole trader of some kind. That is, that's to say that most of us have experience as de jure small business owners at some point in time, if not just individually.

gig workers who are de jure small business owners, it's most of us at some, perhaps for part of the working week or perhaps during our 20s or during our 60s and 70s. This has become a kind of common experience and a very standard experience in the same way that the traditional long-term employment contract became the hegemonic form of labor in the post-war years.

So what I want to add to this story is something that regularly becomes apparent in ethnographic studies of small business.

So while most small businesses are registered as sole traders or self-employed, in practice what you find is that they very commonly draw on the invisible labor of spouses or partners or children or various other family members. So small business is very rarely an individual enterprise.

because it often sustains the economic security of an entire household in the same way that family responsibility in general has replaced

many of the former functions of the welfare state, a family business can assume all these welfare and labor functions at the same time. Of course, migrant families have been familiar with this. This is the experience of people who are marginal to standard citizenship have always been in this position. But I would argue that it's become a much more standard experience and one that most of us have some inkling of at some point.

If you look at the far right wing and the religious margins of the Reagan Business Coalition, you find that there's a very interesting crossover between the small business constituencies and the religious right constituency.

If you look at people like the DeVos family, who were tremendous Republican donors from the very beginning, they're part of the Amway dynasty. These people were always very candid. They always understood that small business plays a moral role as much as an economic role because

because it drags people back into types of familial dependence. You're turning back to a supposedly, you're turning back to something that looks like an allegedly pre-capitalist mode of household production.

where you find labor relations are indistinguishable from direct relations of personal dependence, for example. Of course, I don't think these are pre-capitalists. I think they've always been there in the margins of industrial production. They were there in the 19th century. They even expanded at the end of the 19th century. But I think it's

interesting to look at the moments when they do expand and certainly in the 1980s you see a similar generalization of self-employment and family business. These are also economic and business forms in which gender hierarchy and generational hierarchy bleed into labor hierarchy. So the kind of personal and status-like dimension of

supposedly pre-capitalist relations are front and center in these kinds of organizations of labor. So you see this happening at all levels of the income and wealth scale, this kind of merging of family and business. I would argue you also see it happening at the very top of the income scale,

So one of the arguments that I make in the book that seems to have been a little controversial is that the neoliberal counter-revolution transformed the very shape of business organization. So the publicly traded corporation was supposed to represent the endpoint of modern business evolution.

Corporations are inventions of the modern state. They are literally state-chartered, and often they take a very bureaucratic, a very professional form. The professional manager is one of the key characters in the cast of the modern corporation.

They tend to marginalize family business and partnerships. This was the prediction made by many business historians of the 20th century. Beginning in the early 20th century, as soon as you see the publicly traded corporation assume a dominant position in economic life, then dynastic family businesses are going to be marginalized. So these were the predictions that were being made and which...

Operated as fairly standard up until about the 1980s. Suddenly, at this point in time, you see a resurgence of limited partnerships and the like. You see private equity firms and corporate raiders who are organized for the most part as partnerships or limited liability companies a bit later on.

And these firms start attacking the big incumbent corporations. This is their raison d'etre. And they're forcing them to adopt very different metrics and objectives. They're literally acting as disciplinarians of the publicly traded corporations and forcing them to reorganize almost in their mirror image.

So when you take a look at who belongs to the top 1% today, you won't find corporate managers. What you'll find is general partners in a hedge fund or a private equity firm, these business firms that are organized as limited partnerships or limited liability companies,

And these are business forms that are actually a lot older than the modern corporation and have a much less professionalized, bureaucratic style of management. Often they emerge out of friendships, out of family relations. You know, some of the leading corporate raiders of the 1980s were brothers or cousins or they came out of families. Certainly their seed money was familial.

So among the 1% or the top 1% of the 1% today, you'll also find company founders, someone like Musk, who owns Twitter or X outright. He bought it with his so-called family office.

You also find people who look like they run a standard corporation, a corporation like Palantir, for instance. But when you take a closer look, you realize they actually own controlling shares. So they have all the advantages of the outright owner, but they don't bear the same risks. So they have disproportionate voting shares. They control the company, but they don't own all the numerical shares.

So brotherhood is one way of looking at this, and the metaphor of the brologarchy is very prominent today and makes a lot of sense. And yes, the business relations that dominate here are very male-focused, very frat boyish, but there's also an intergenerational dimension to their extreme wealth.

Where does all this money go? It goes back into family offices, which are basically private wealth funds that only include kin. And these family offices are now acting as independent investors in financial markets. So here again, we're seeing this merging of some of the most asset-rich investment firms and the family. We're seeing this shift to patrimonial forms of business organization.

So I do draw a little bit on Max Faber, if only for the terminology here, because I think it's very suggestive. And after writing the book, I found it very interesting to learn that Max Faber's first monograph is actually a business history of the partnership form. And this is where he sees one of the origins of patrimonial business, because he traces the partnership back

to early modern Italy, the merchant families of early modern Italy, and he argues that they very often took a fraternal and a familial form. These are partnerships that began within the family, and when they extended, they had this way of turning business partnerships or business relations into de facto fraternal bonds. So I think there's some very interesting historical twists and turns here.

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Yeah, there's definitely some really interesting historical twists and turns and also sort of rhetorical ones as well, because everything you've just described, right, the frat boy element, the bro, the family, the kin, that is, as you mentioned, so prevalent at the very, very top of the economy. And yet there is also this idea you mentioned earlier of selling tax cuts to the working class.

So there's an interesting alliance coming up here. And you talk in the book that it's quite often portrayed through the rhetorical device or the image of the white male construction worker, which is specific on a whole bunch of levels. So why is that the image of this alliance?

Yeah, so the business right and the supply-side populace, they needed a way of breaking the New Deal coalition. As I said, this was the genius of the populace supply-siders. They were strategic thinkers as much as...

uh policy thinkers and they knew that they needed some kind of way of reorienting the emotional allegiances of at least some part of the working class toward the republican right and you know they tested a number of ways they they played with a number of ways of doing this

What they did, first of all, is not so original. It's tried and tested. You divide the working class against itself.

And so the New Deal coalition originally very much centered the white, blue-collar, working-class man, primarily the factory worker, but all blue-collar workers. Now, by the 1960s and the 70s, along with the expansion of welfare that occurs under Johnson, which I mentioned before, you also see a more inclusive working class.

So you see whole sectors of the economy growing, coming into power and unionizing for the first time and becoming part of the de facto working class. So what I'm referring to here is the white collar service sectors, but also public sector work. And these

And this is a sector where women and minorities predominate or are disproportionately represented for all kinds of historical reasons that I won't go into.

Now, there are cleavages here, cleavages that have everything to do with the political history of the United States. So it's relatively easy for the supply-siders to come along and kind of work those dividing lines, work the mistrust that there might be between white and black workers, private sector and public sector workers.

And they managed to do that quite successfully, particularly because if you recall, if you have some sense of the chronology of the 1970s, it was the private sector blue collar workers who were really leading things at the beginning of the decade. By 1975, these unions were in a real slump.

The mid-decade recession really hurt factory workers and construction workers. And Volcker comes along at the end of the decade, engineers, a recession, and that's the coup de grace, essentially.

But by the end of the decade, the public sector unions are coming into their own. And at the end of the 1970s, they're the ones that are going on strike. And they're the ones that can be plausibly accused of driving wage push inflation. So the supply-siders have this very clever idea of using all their various media outlets, not just the Wall Street Journal, but Nation's Business, which was a very popular small business magazine, widely disseminated.

They're trying to convince blue-collar workers that really they don't have much in common with these public sector workers. And in fact, because their wages are stagnating now and public sector workers are going on strike, these public sector workers are actually very privileged. I mean, they're educated and that means privilege. They're white-collar. They don't have to get dirty. They're women for the most part and that signifies bourgeois and the

I don't know, the fantasy labor imagination. And so it's very easy to convince one part of the working class that their interests no longer lie with the wider working class. And in fact, when public sector workers are driving up inflation and when they go on strike, they're driving up taxes, making public services more expensive, then it's the white blue collar worker who is suffering.

So they managed to cleave one part of the working class against another very successfully. The second trick they use, which is even more clever, I would say, is that they managed to divide the blue-collar, the white male blue-collar working class against itself.

How do they do this? They leverage the fact that there is a hybridity in the employment status of the blue-collar working class. I mentioned the fact that very many construction workers are actually de jure independent contractors. So in legal terms, they're small business owners, at least for part of the year. It might be in the off-season, it might be on the weekend.

And this was the reason why there was such a powerful sector of the union movement, the most powerful sector of the union movement for much of the 20th century, because they always had the capacity to say, well, I'm going to put down my tools and I'm going to go and work on a residential project. They had bargaining power. So it made them the most powerful segment of the unionized working class up until the 1970s.

But it also made them amenable to a certain kind of flattery or seduction on the part of the business, right? Because these people could come along and say, listen, you're actually a small business owner. You have more in common with us, your interests lie in us, rather than with the wider working class.

and you own a home, so maybe you should be interested in property taxes on your home. In so many ways, you're more of a small capitalist than you are a wage worker. So perhaps you should drop your allegiance to the wider wage-earning working class, the blue-collar factory workers, and align with us, the small business right.

So the building trades was open to this kind of seduction and because the supply-siders were such astute strategists, this is where they really applied a lot of pressure and I think were quite successful in doing so. Now there's a lot of details to this story, so it did take a lot of intervention in labour law and labour regulation to make this a reality.

But certainly much of the right by the end of the 1970s was pushing for the reclassification of workers or for the ability to reclassify workers as independent contractors in a way that was not possible for much of the post-war period.

Okay, that's very helpful to understand sort of where the divisions are and how they're made to create this political success. And that's very much the sort of theme I'd like to continue talking about. But moving forward in time, obviously, 2007 and 8 was a whole bunch of economic challenge for really any group you want to divide the economy up into workers into. Why was it that the Tea Party was the most effective political movement to come out of that?

The Tea Party was the most effective movement because it managed to organize along class lines in a way that Occupy Wall Street didn't or didn't engage.

in the immediate term. I think it is now beginning to with the rise of new union movements and the like, but I think it took much longer. So the Tea Party was very effective at class organization. They had a very clear sense of their own class basis.

And I don't think outside observers, particularly outside observers from the left, had the same clear-sighted appreciation of exactly what the class basis of the Tea Party was. They misrecognised this movement as working class, as lower working class, as blue collar. And I think all of this speaks to...

how impoverished class analysis has become on the left, that we weren't able to unpack what was going on here with more insight or with more lucidity at the time. It really only became apparent in retrospect.

So what was the constituency of the Tea Party? It was the constituency of home-owning small business owners we've just been talking about. So a constituency that has been cultivated very deliberately by the Republican right since the 1970s. So some of these people may have been Democratic voters in their youth, but, you

Since Reagan, the Republican right has managed to cleave them away. What's interesting is that when these people were asked by various ethnographers and observers, how do you consider yourself in class terms? They often answered working class or we're workers. And when they were prodded a bit further, what do you mean by this? They said, we'll wear blue collar.

Interestingly, many of them worked in construction or the ambient real estate sector that was held aloft by the housing boom of the early millennium. So we're blue collar and we don't have a college education.

in fact, many of them were small business owners. The fact that small business owner is not the same employment status and does not belong to any kind of Marxian definition of the working class, at least, meant nothing to them because they had been so convinced, and I would argue that a lot of left-wing observers have been so convinced by

the right-wing reinterpretation or caricature of class that dominates symbolically in the US today, that they were convinced that they were working class simply on the basis of being blue-collar and not having a college education. Now, they could be relatively wealthy. They certainly owned homes. Many of them were, I'm not sure...

I'm not sure what the precise class terminology would be today because I do think we need to rethink class, but they were certainly property owning in terms of home ownership, but they also owned business assets. So they were not the wealthiest of the wealthy.

But they were also not impoverished wage owners. They were not renters. And this has become an increasingly significant class divide in most Anglo-American economies. So this is where you see how the symbolic figure of the white male

construction worker has done its work. At around the same time, the Republican Party was wheeling out this figure. He was an actual real man. I think he's deceased now. His name was Joe the Plumber.

And, you know, interestingly, I don't think he was even a plumber. I don't think he was a registered plumber. He'd worked for a plumber, but he'd also worked as a wage worker in a factory. But he presented himself and he vocalized the politics of the small business-owning pseudo-working class that the Republican Party has cultivated all this time. And he managed to crystallize a whole constituency around the Tea Party message of...

of tax cuts for small business, personal income tax cuts, tax cuts on homes, and virulent opposition to any kind of public spending on welfare, public services, virulent opposition to public sector workers.

So you can see how this long work of class mobilization and construction of class consciousness from the right has succeeded. Now, what I'm saying here is not meant to be fatalistic because, again,

Of course, you know, gig workers are everywhere. That category has expanded. Many gig workers, you could argue, and, you know, many labor sociologists would argue that they're actually working as dependent wage earners.

Within the construction sector itself, there are a whole mass of people who have the same legal status as sole traders, but you have to really look at what they're doing on the job, what their relationship is to other workers or other small business owners to get a sense of what the actual power relations are here and what the actual fault lines are here. Some would be better classified as dependent workers. Some...

quite well described as small business owners, but the legal category will not give you a sense of that. Now, if that hybridity exists across the economy, and so many of us are kind of between two legal statuses, or actually working most of the time as freelancers, as if we were small business owners,

then that fracture is available to the left as well. The left could try to cultivate new forms of horizontal class consciousness and solidarity, just as the right has spent the last 30, 40 years unmaking them. So I find these kind of...

these pressure points very interesting from the point of view of a history of right-wing strategy, but also as opening up to future possibilities of left-wing strategy and organizing. I'd like to stay on this point of strategy, in fact, because it is really quite interesting both for what, as you say, has been done on the right and what potentially could be done on the left

I wonder if we can talk about the strategy of seeking a balanced budget, because this is something that it feels like we've been hearing about for ages from the Republican Party at a whole bunch of different levels, kind of on and on and on. Why has this been such an effective tool that it's used so consistently for the Republican Party?

Yeah, well, it's a tool that was already effective in the South. It was invented by conservative segregationist Southern Democrats who had a long history since the late 19th century of using constitutional and budgetary tools basically to enact white supremacy and segregation. They were experts in the art of doing this.

And at some point in around the 1970s, the relay, the baton passes from the Southern Democrat faction of the Democratic Party to the emerging Sunbelt Republicans. And this happens for several reasons. The Democrats embrace the civil rights legislation of the mid-1960s. The Southern Democrats have been defeated. They start to die. They're old.

at the same time, you have this emergent right wing of the Republican Party that has its headquarters in the south or in the Sunbelt regions of the United States, and that is moving into the space once occupied by the segregationist Southern Democrats. What they do, I mean, the Southern Democrats invented the Federal Balance Budget Amendment as an idea.

It was the statesman, the Virginia statesman and Senator Harry Byrd Sr. who invented it. And one of the figures, one of the intellectual figures in the book that I'm very interested in is the Virginia school neoliberal James McGill Buchanan, who basically saw himself as translating Byrd's political work into a kind of intellectual architecture, if you like, and a constitutional philosophy.

Now, Byrd proposes the idea in the 1950s, but this is the height of Eisenhower republicanism. Nobody's interested in that. The Democrats won't be interested for much longer. The Republicans aren't interested. And so it goes nowhere. But it stays alive in Buchanan's work.

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And he finds this moment of opportunity in the 1970s, in the mid-1970s, where he brings it to Congress. It doesn't get very far, but he brings it to Congress. And it's very interesting to look at the names of the congressmen who supported this bill.

in 1975 because it's a cast of characters that says so much about the shifting politics of the time. It's a mix of former Southern Democrats, some of them making a transition already to the Republican Party, and also you have some of the early Sunbelt Republicans.

By the 1980s, it's the emergent, radical, reactionary Sunbelt Republicans, people like Newt Gingrich and people like the Republican strategist Lee Atwater, who take up the idea from the Southern Democrats and make it into their own. So today we instinctively think of budget balance policy.

and all these kind of fiscal contraptions and devices, the filibuster, tax and expenditure limitations, we see these as devices that belong to the Republican Party. In fact, the Republican Party rummaged in the toolbox left by the dead Southern Democrats and resurrected them. And interestingly, Buchanan follows the same trajectory. He lives through this

transitional moment in American politics. He goes from being a Democrat voter, like his family had been, and he votes for Barry Goldwater, the original Sunbelt Republican in the 1960s election, and then he becomes a Republican. And by the 1980s, he's working as academic advisor to Citizens for a Sound Economy, which

It's a Koch-funded think tank very close to Newt Gingrich and the Southern Republicans who now lead the campaign, which is still extant, for a federal balanced budget amendment.

So basically what they've done is translated a tool that was used by southern states under Jim Crow to quash any kind of... ..to suppress black people, to make sure that they don't enjoy any of the benefits of the welfare state. And they...

translate it to the federal level. So they want to bring, I think Harry Bird says at one point, I want to bring the politics of the state of Virginia to the federal government. And I think he's quite successful at doing that. Now, some people will say, well, the Federal Balanced Budget Amendment is

It's never been passed. I mean, they've gotten very close. I think they lack three or four states signing up before they can push ahead in any way. But I would argue that they don't really want to pass this amendment. And if they did, it's a little bit like tax and spending limitations at the local level. As soon as these bills are enacted...

going to be all kinds of ways of circumventing them because the point is not to stop spending as such. It's to make sure that spending is only directed towards certain kinds of things and that spending is devoted only to certain kinds of people. The Republicans are actually very big spenders. They have no problems with spending on defense or corrections or criminal justice. They are

are extremely profligate when it comes to so-called tax expenditures. Tax expenditures are various tax preferences. They're often for business. They're often for capital gains. They usually work in favor of people who already own wealth. And they look like they present themselves as tax cuts. I mean, this is the language that the Republican Party speaks. But anyway,

any budget accountant, even any right-wing budget accountant with their name would recognize that a tax expenditure has, a tax cut has exactly the same budgetary effect as direct spending. Okay. So you can introduce, say, a tax preference for capital gains on housing investment,

And that will make a hole in your budget in the same way as direct spending on the urban poor would. Okay? So it's still going to lead to this terrible sin of an unbalanced budget or a budget deficit. But because there's such a widespread...

ignorance about budgetary politics amongst the wider population. The Republicans have been so successful rhetorically in convincing the public that they're very austere politicians. They spend very little, certainly not on themselves, and really what they're doing is tightening the budget across the board. No, they're spending by indirect means through the tax code, and they're

spending on the wealthy in very profligate, excessive ways. Hence one of the words in my subtitle, extravagance. They're very extravagant spenders. And of course, what this turns up, how this turns out on the books, on the government accounts, is as enormous deficits. They regularly leave behind enormous deficits and gaping and an increase in the public debt.

And the dynamic here is that the Democrats are left with that because they're not very ambitious rhetorically or strategically and haven't been for some time. They run after the Republicans in this role of the people who have come to clean up, to be responsible. But really what they're cleaning up is the spending left behind by the Republicans. Hmm.

Definitely interesting to think about kind of where the tools come from and how they've been, as you said, repurposed, but then leaving a lot in terms of what to go forward with in terms of these tools and strategies. So I know throughout this conversation, you've been mentioning particular instances of ways in which the left might want to rethink the use of terminology or the use of different strategies.

As we sort of come to the end of our discussion about the book, are there any other sort of things that you hope listeners on the left take from this or things to kind of do from this or stop doing based on what you've come up with? Yeah, well, I am hoping that the book will make fiscal and monetary politics more legible and accessible to a general readership. Often what I'm doing when I start a book project is I'm

There's something mysterious or enigmatic to me and I want to figure it out. And I find that thinking historically how things began and where they end up somehow helps to demystify things for me, to see how they work differently.

Again, that word strategically helps to make things more concrete for me and to make them less awe-inspiring and unapproachable and technocratic. So I hope that I've done a little bit of that work and that people can take it up from there now that they understand some of this history.

So, as I said before, I think that much of the contemporary austerity politics of the right and the left, by the way, relies on a certain state of ignorance whereby people...

People simply stop thinking politically or creatively when they're confronted with the question of government budgets or so-called budgetary crisis, for instance. The technocratic language that is used to discuss these issues creates this barrier, this sense of political neutrality and political untouchability.

When people start talking about the bottom line or budget crises, I think people will have experienced this in their workplace. As soon as a manager says, well, you know, we have a budgetary crisis. Well, that's it. You see part of the union just deflate. There's nothing we can do here. They start entering into kind of all kinds of problems.

corporate, corporatist compromises or what can we do to help balance the budget? And of course, half of the time, the crisis is completely a complete fabulation. So we need to get to that point where we're literate enough in budgetary dynamics to be able to first ask, well, what is really going on here? Okay. And I think we need to do that at a general level in terms of our workplaces, but also in terms of national politics and government politics.

So it's incredibly disarming when you don't have the tools to interrogate what's really going on and what are the forces at play and who stands to gain. The language of crisis itself is disarming. I begin the book simply by asking what was the crisis of the 1970s all about? Because one of my bugbears is the fact that even books written from the point of view of the left will accept that the 1970s was this

period of capitalist crisis. And a crisis for capital seems to have become a crisis for everyone. And really, that was not what was going on in the 1970s. This was not a crisis for labor, at least at the beginning of the 1970s. In fact, it looks like a period of victory that has few historical precedents.

did the right manage to convince people that they had so little power when they were on the ascendant? How did they manage to deflate something like that? I think part of the question lies in this inability to think of the question of government budgets politically. And I address that critique to the Marxist left too, because I think that's where there's been a

considerable amount of resistance. I'm not quite sure where it comes from, but I do think it's a kind of misplaced loyalty to Marx's context, a

a loyalty that I don't think even Marx would have held if he'd kind of lived to the age of 200 or whatever. So that is something I'd like people to take away. I'd like them to look at the fact, like, people on the right, people like Gingrich, they understood that the budget was a weapon of politics, an indispensable weapon of their political project.

The far right has understood this too. It's what's happening right now. It's what's happening with the attacks on Treasury. And this mythical theory that Project 2025 and friends, Kevin Roberts...

just invented apparently in the last year or so, that the president has an executive power of empowerment. This is pure constitutional fabulation and yet they're acting on it. I would like the left to be just as creative. I would like the left to fabulate a little bit, even constitutionally. We just don't have anything like the creativity or chutzpah that the right has had for a long time.

So I'm ranting and raving here, but I think this is what I would like people to take away from the book. What else?

I mean, those are great takeaways. That would be enough. Those are some great takeaways. So thank you for sharing them with us. I do, however, have a final question, I suppose. What might you be working on now that this book is done and out in the world? You gave us such an interesting introduction at the beginning of kind of how your work has developed. I wonder if you already have your eye on the next project or if there's any sort of smaller things you want to give us a brief sneak preview of?

Well, when you finish a book, you have these little, you have unfinished business. So there's these little threads that you want to follow up. And one is the question of, uh,

I guess what's called asset-based capitalism. There's a whole nerdy conversation in that literature about the different forms and actors in asset-based capitalism. And because in this book, I very much focused on the private investment side of the equation, the hedge funds and the private equity funds,

and what have you. I want to write a little, maybe a tiny book, not a giant book, but say one of those kind of 40,000 word kind of books.

just doing a kind of typology of the different actors within asset-based capitalism. So why do you have this seeming partisan divide between the Republican Party now that seems to be so aligned with private equity hedge funds and now Silicon Valley venture capital? And on the other hand, you have this revolving door between the Democrats and this mega institutional government

investor, which is BlackRock. How did we end up here? Because I don't think that trajectory and that kind of partition was predictable, say, in the 1990s. So that's just one of those nerdy little foot nerdy projects, I would say. But the question of strategy really fascinates me. And I think there might be something big

I also wrote a piece on what I call the currency energy nexus. So looking at the time span of the book, but the global geopolitical dimension, what happened to the dollar and what happened to energy in the 1970s, the relation of US imperial power to the third world anti-colonial movements, how they were crushed at the same time that the American domestic left was crushed and

I feel that we're at another one of those geopolitical turning points where the US has claimed energy independence which it tried to do in the 70s couldn't do and at the same time and for the very same reason the form of dollar hegemony that the US has enjoyed as a form of kind of imperialism since the 1980s roundabout is now in question I would say so that's

Another kind of big question mark. So strategy is one of them and the currency energy nexus is another. But who knows? I tend to kind of change my mind every six months. Yeah.

Which, fair enough. And obviously coming off of a big project that sounds like you're very much in the mode of sort of thinking about what could be next. And I'm sure it'll be very intriguing to figure out what you eventually decide on. But while you're doing all of that, listeners can read the book we've been talking about titled Counter-Revolution, Extravagance and Austerity in Public Finance, published by Zone Books in 2024. Melinda, thank you so much for joining me on the podcast. Thanks, Miranda. Thank you.