There are no free-market capitalists in a foxhole

There is a famous saying that means something to the extent that there are ‘no atheists in a foxhole.’ Foxholes are the burrows used during wartime. Well, in the face of a potential global economic collapse, there are no free-market capitalists who suggest responding to the crisis by doing nothing.

None of the measures considered by the Australian government are anything like the free-market rhetoric we were hearing some months ago, particularly the desire to have a budget surplus. So the desire for their previous agenda never had substance to it. It was a smokescreen and an excuse for why they did not want to pursue what would be popular economic policies. But given a crisis lurks on the horizon, their hand is forced.

Why exactly do they do it? Why have a go at the unemployed etc?

We used to let markets keep to themselves for quite sometime when the West first embraced capitalism. Sure, there was protectionism in the form of Mercantilism as countries sought to accumulate gold against one another (keep in mind this was the old gold standard system), domestic economies were comparatively ‘free’ compared to what we have had since the Great Depression. The whirlwind of casino capitalism and stock market speculation in the ‘roaring twenties’ ultimately lead to the 1929 crash that would create the Great Depression, allow for the rise of Hitler, and ultimately WW2.

Since WW2 allowed for full employment as many countries embraced Keynes’ ideas, full employment policies would set the stage for the ‘golden age‘ that culminated in the stagflation of the 1970s. Since with full employment, labour was relatively more powerful than they were before, they could bid up wages in a way that Kalecki foresaw in his article ‘The Political Aspects of Full Employment’.

Unemployment became a policy tool to discipline labour and to avoid stagflation. That is why they do it. So the unemployed are the cost of ‘price stability.’ Keep people unemployed, avoid the economy booming too much, keep workers afraid and encourage them to demonise anyone who is lower than them on the economic ladder, and there’s your answer. That’s why they do it.

But during a time of crisis, the emperor has no clothes.