Contemporary Macroeconomic Outcomes: A Tragedy in Three Acts

The thesis developed in this paper is that contrary to the claims of its proponents, the main supply-side consequence of neoliberalism was to zap labour, institutionalize worker insecurity, and install an `incomes policy based on fear' in the US economy. Like any successful incomes policy, this diminished con flict over shares of real income and so reduced in flationary pressures - but at the cost of decoupling real wage growth from productivity growth. This last outcome fueled rising income inequality and hollowed out the wage-funded, consumption-led core of the demand-generating process. The demand-side weakness of the neoliberal economy was initially concealed by household borrowing that debt-financed increases in autonomous consumption spending. But it has asserted itself in the wake of the Great Recession, following the exhaustion of the household debt accumulation process. The result was a depressed upswing 2009-2019 that addressed none of the fundamental structural weaknesses evident in the US economy prior to the Great Recession. The institutionally entrenched but exhausted neoliberal paradigm left the US unprepared for the onset of recession in 2020, and for the larger social and economic travails of the COVID-19 pandemic with which the initial onset of the 2020 recession was associated. This paper is excerpted from Capitalism, Inclusive Growth, and Social Protection: Inherent Contradiction or Achievable Vision? (Edward Elgar, forthcoming).