Capitalism According to Kev and Katy

By Katy Swain , 8 August 2026
Object
RadioMMT
Status
Active
Category
Task
Agent
Katy Swain
Kevin Gaynor

Katy's Notes

  • Middle East policy is gun-barrel inflation management.
  • Important to distinguish between capitalism and the existence of private markets.
  • McCracken report for the OECD:
    • 70s stagflation:
    • "Clearly, government has become the source for a new administered inflation, and it is of major proportions." (1978)
    • Public services are bad: "Demand management policies could be managed in a much more sure-footed way if we increased the resistance to strong pressures for channeling a growing proportion of the national income through the public sector."
    • Governments should: "eliminate restriction and rigidity and promote competition and mobility would improve the efficiency of macro-economic policy instruments and make a significant contribution to better price and growth performance. This calls in some areas for the removal of obstacles to a freer play of market forces, in others for action by the authorities to supplement market signals." (i.e. subsidies for business)
    • The unemployed are to blame for being the wrong type of unemployed. Governments must "reduce mismatches between supply and demand for particular categories of labour". Solution is "investment in training and human capital". But we must be careful, because "wages are both incomes and costs, there is a conflict here between equality and efficiency".
    • Businesses are not investing because of inflation expectations: "The expectations of high rates of inflation and pessimism about future growth generated by recent experience have undermined normal, self-correcting forces present in market economies".
    • The Accord: "governments should discuss regularly with the organisations representing business and labour the general evolution of prices and wages to be aimed at over the coming year or so, consistent with achieving or maintaining high employment levels. Indeed, if governments are going to adopt a policy of not accommodating high rates of inflation they must be prepared to indicate to those responsible for wage and price determination what kind of behaviour on their part would be consistent with the monetary and fiscal policies the authorities intend to follow."
    • The solution to unemployment is to stop employing people: "Somewhat paradoxically, therefore, we believe the route to sustained full employment lies in recognizing that governments cannot guarantee full employment regardless of developments in prices, wages, and other factors in economic life." "essential that the managers of economic policy be prepared to stand firm in their demand management strategy even as further slack develops in the economy". Michelle Bullock!
    • "arrangements for financing social security should be altered to avoid taxing employment so heavily". MMT-illiterate, but an excuse for compulsory superannuation.
    • "If left to themselves, capital markets are generally innovative and competitive", so deregulate finance. If they understood endogenous money, rather than the loanable funds myth, they would realise this would increase the money supply.
    • Mercantilism: Core countries must consume, peripheral countries must produce. IMF, export-driven development.
    • "We do not find doomsday predictions about the exhaustion of depletable natural resources, over any reasonable time-horizon, to be persuasive. Changes in relative prices should, in due course, produce the necessary shifts in output, recycling, substitution and saving."
    • "environmental considerations raise serious problems for the functioning of the market mechanism. We support policy instruments, which rely on the price mechanism, to make “polluters pay”.
    • Keohane, 1978: "The powers of government are limited externally by the effects of other governments' actions as well as by the decisions of private financial markets. Governmental policies that are inconsistent with the expectations and behavior of the public, or with the requirements of international solvency, are likely to fail. Only those policies that pursue the "narrow path to growth," involving considerable unemployment over a period of time, have much prospect of success. Contemporary capitalism implies considerable unemployment in the short run."
    • Keohane, 1978: "The policy science of economics, as manifested in the McCracken Report, assumes that modern democratic governments must act in ways that promote capitalist development. If successful capitalism requires increased profits and private investments, democratic governments should endeavor to increase corporate profits. If international financial markets are important, governments should try hard to gain the confidence of international financiers. The unstated premise in these transitions from positive statements to normative imperatives is the contention that democratic politics must adjust to capitalist economics, rather than vice versa."
    • Keohane, 1978: "As explanatory theory, the report is deficient. It does not carefully explore non-economic sources of inflation and therefore cannot explain its fundamental causes. Worse yet, it resorts to sloppy, impressionistic discussion when treating social, political, and psychological issues. As policy science, it contains a large dose of ideology, which is neither explicitly defended nor critically examined. This pervasive ideology facilitates the many transitions in the report from empirical to normative propositions."
  • Late Soviet Britain - Abby Innes: 
    • We've discovered natural laws of social phenomena that are analogous to the laws of physics.
      • Furthermore, the system self-equilibriates to arrive at the optimal distribution of resources.
      • Politics solved!
    • Problem is, it doesn't work:
    • As the perfect, infallible system, neoliberalism can't adapt, only double down; it demands that reality adapt.
      • Thatcher (1981): "Economics are the method; the object is to change the heart and soul."
      • But people will tolerate this for only so long. In the US, one party just switched to open fascism, and the other has triangulated rightward in response, as always. In the UK, both Labour and the Conservatives are finished, and there are.
      • The Liberals seem finished; half of them are eyeing defection to Hanson. 
      • Is Albanese likely to stand up and say "Sorry, everybody; the last half a century has been an unqualified disaster. I've been absolutely hopeless; a craven careerist and the emptiest suit yet, in a long and undistinguished line of empty suits. But don't worry, we are going to put this right."
  • Again, important to distinguish between capitalism and the existence of private markets.
  • Don't like capitalism? We can dial it down or switch it off. It's our decision to make.
    • Mixed markets with a public option.
    • Charter revocation, end limited liability, or impose double liability.
    • Partnerships, co-operatives, county councils, etc.
  • Benn's 5 questions:
    • What power have you got?
    • Where did you get it from?
    • In whose interests do you exercise it?
    • To whom are you accountable?
    • How can we get rid of you?