Fighting Neoliberalism with Keynes & Minsky: A Stage View of Capitalism and the Path to Targeted Government Spending

Ricardo Bello Fiore, affiliated with the University of Bergamo, presents a critical analysis of neoliberalism and proposes a way forward using insights from Hyman Minsky and John Maynard Keynes, augmented by a Marxian framework. He argues that while neoliberalism is conceptually 'dead,' it persists as a 'zombie,' necessitating new approaches beyond traditional private investment or generic Keynesian government spending. Bello Fiore highlights the unsustainability of 'indebted consumption' as a driver of aggregate demand, which creates an appearance of stability but leads to an uncertain and fragile capitalism. He emphasizes the need for a paradigm shift in economic policy to address the structural crises inherent in the current system.

The analysis delves into Hyman Minsky's lesser-known 'stage view of capitalism,' which outlines five phases from commercial to money manager capitalism, and his strong advocacy for the New Deal heritage, including the socialization of investment and the state as a direct employer. Bello Fiore integrates this with a Marxian perspective, focusing on labor, surplus value, and a non-mechanical interpretation of the falling rate of profit. He distinguishes between different historical crises: the late 19th-century depression (low surplus value), the 1930s crisis (under-investment, effective demand crisis), and the post-Keynesian era's end (profitability crisis due to social struggles). Neoliberalism is rephrased as the 'real subsumption of labor to finance and debt,' characterized by a flat Phillips curve and households driven into debt by financialization.

Bello Fiore challenges common interpretations of the 2007-2008 Great Recession, aligning with Adam Tooze's view that it was primarily a 'crisis of funding' stemming from short-term, transnational North Atlantic finance, rather than global imbalances or internal Eurozone issues. He posits that while each capitalist phase has an 'upper turning point' leading to structural crisis, the 'lower turning point' is not necessary but requires deliberate institutional innovation. This innovation is crucial for escaping the current crisis, as evidenced by Minsky's emphasis on institutional change.

The proposed solution involves a shift towards 'targeted government spending,' drawing on Minsky's ideas and Alperovitz's concept of 'good planet deficits.' These are expenditures that, while initially increasing debt-to-GDP ratios, create tangible and intangible new resources—such as infrastructure, green initiatives, health, and education—ultimately boosting GDP and leading to a more sustainable economy. This approach contrasts with self-defeating neoliberal policies that claim to reduce deficits but often kill GDP and employment, thereby increasing deficits. The ultimate goal, echoing Minsky, is a balanced budget at full employment, excluding productive investments.

now the point is that neoliberalism is dead but still is alive as a zombie how we can go go out

I don't think that private investment can be only the driver that's not true since the 30s of last century

the phase of indebted consumption may create the appearance of stability for a while but it creates a capitalism which is uncertain unsustainable

Minsky in the 80s developed a stage view of capitalism speaking of five phases

his view out of the crisis of the 70s but I would say also the same can be said of for going out of this crisis was actually a view which tried to connect the Cain's heritage to the new deal heritage

he loved to say that in capitalism money is not the most important thing is this the only thing

I see neoliberalism yes as Minsky says as the money manager capitalists face that they would rather rephrase in the Marxian way as the real subsumption of labor to finance and debt

the so-called financial crisis was not really due against a falling rate of profit under consumption these kind of things and not immediately from effective demand it was due from the perversion of a too short-term finance a sort of crisis of funding in a world which is now transnational and there are interlocked matrix the heart of the matter is north atlantic finance

in this view where there is a kind of necessary upper turning point there is no necessity in the lower turning point there must be institutional innovation

I think the way out is a kind of different government spending a targeted government spending in the Minsky meaning of the world

we want to have excellent planet deficit which rise for a while the depth over gdp but these expenditures are good because they create tangible and intangible new resources not only infrastructures but also the green expenditures but I think that we should put into investment things like health education and and so on

in full employment you should have some kind of balanced budget excluding the investment