Thursday Morning Links

This and that for your Thursday reading.

- Mariana Mazzucato discusses (JPG) the importance of an intelligent industrial strategy. And David Kotz argues that neoliberal capitalism has reached the point where there's no plausible path toward sustainable growth without a new economic model:

For several decades, neoliberal capitalism was able to bring a series of long economic expansions punctuated by relatively brief and mild recessions as well as a low rate of inflation. However, the programme of freeing markets and cutting taxes did not lead to a prosperity that trickled down to those in the middle and bottom. Rather than a rising tide that lifted all boats, neoliberal institutions brought stagnating or falling incomes for the majority and a remarkable upward income redistribution to the very rich.

Neoliberal transformation did not unleash the promised wave of investment, which has been sluggish compared to the era of post-war regulated capitalism, but the increasing inequality and rising profits it produced did stimulate initial economic expansion. However, a long economic expansion requires growing demand for output as well as profit incentives for expansion, and stagnating wages and state spending created a problem on the demand side. The demand problem was solved by two other features of neoliberal capitalism, large asset bubbles and a risk-seeking financial sector. Together those two features led to rising debt-fuelled consumer spending, which underpinned the long expansion of the 1990s and that of 2001-07 in the U.S.

However, under the surface the very same features that together promoted long expansions and low inflation — growing inequality, an increasingly risk-seeking financial sector, and a series of large asset bubbles – gave rise to trends that were unsustainable over the long run. In 2007-08 the unsustainable trends — growing household and financial sector debt, the spread of toxic financial assets, and increasing excess capacity in industry – interacted with the deflation of the U.S. real estate bubble to bring a financial panic and Great Recession, which quickly spread in various forms to the other developed countries.

Austerity policies in Europe and the U.S. can be interpreted as an effort to preserve the neoliberal form of capitalism. That form of capitalism has been very favourable for corporate profit and the income of the rich, and it is difficult for its beneficiaries to give it up. Austerity policies also follow logically from the dominant economic ideas of this era, which are difficult to dislodge despite the evidence that austerity only deepens the stagnation.

I argue that both theoretical considerations and historical precedents indicate that the neoliberal form of capitalism can no longer give rise to sustained economic growth.

- Kimberly Phillips-Fein discusses how a culture of fear created by U.S. employers led to a particular lack of solidarity and social strength at Ground Zero of the global economic meltdown, while Teuila Fuatai weighs in on Ontario's widespread violations of employment standards. And the New York Times editorial board points out that governments and their contractors should be expected to lead the way in ensuring fair treatment of workers.

- Rafe Mair writes that Justin Trudeau is following the Libs' traditional pattern of combining posturing about climate change with a lack of meaningful action. And Andreas Sieber and Pavlos Georgiadis point out how a new wave of trade agreements may prevent governments from giving effect to their climate change commitments.

- On that front, Brent Patterson asks why Justin Trudeau seems determined to push for the "provisional" application of CETA even when actual ratification seems unlikely.

- Finally, Elizabeth McSheffrey reports that Husky's North Saskatchewan River oil spill has predictably led to water quality failures. Jennifer Graham notes that the Provincial Auditor has long been calling for actual enforcement of pipeline regulations, only to be ignored by the Saskatchewan Party. And Brad Wall still refuses to talk about pipeline safety (and his government's associated neglect).