A new supply-side agenda for the left
The task facing Europe is to meet the challenge of the global economy while maintaining social cohesion in the face of real and perceived uncertainty. Rising employment and expanding job opportunities are the best guarantee of a cohesive society.
The past two decades of neo-liberal laissez-faire are over. In its place, however, there must not be a renaissance of 1970s-style reliance on deficit spending and heavy-handed state intervention. Such an approach now points in the wrong direction.
Our national economies and global economic relationships have undergone profound change. New conditions and new realities call for a re-evaluation of old ideas and the development of new concepts.
In much of Europe unemployment is far too high - and a high proportion of it is structural. To address this challenge, Europe's social democrats must together formulate and implement a new supply-side agenda for the left.
-- Tony Blair and Gerhard Schroeder, The Third Way/Die Neue Mitte, 1998.In a 1981 review of George Gilder's Wealth and Poverty, Anna Weniger and Hank Robinson succinctly described "the essence of supply-side economics" as "simply a campaign to redistribute income from poor to rich, dressed in the garb of economic theory." Gilder's economic theory was fundamentally an affirmation of Say's so-called Law. "The essential thesis of Say's Law," he insisted, "remains true: supply creates demand. There can be no such thing as a general glut of goods."
I'm not going to bother trying to debunk supply-side economics. What would it take to change the mind of someone who "can't see what's wrong" with a theory about a monetary economy that is based on the assumption it is a barter economy? What would it take to change the mind of someone whose belief in the theory is intimately tied to their identity?
So let's assume that anyone I could persuade with the following argument is already inclined to agree with Weniger and Robinson's assessment of supply-side economics as mere pretext. Theoretical flimsiness is no problem for conservatives because the argument is, after all, consistent with their values and objectives. Supply-side rhetoric is their sales pitch.
But what about "the left"? If we take Blair's and Schroeder's representation of their position on the left at face value, the question arises of what in Hell did they think they were selling? A social democratic redistribution of income from the poor to the rich? It appears they were selling the supply-side rhetoric to themselves and to corporate media and campaign donors as "realism."
The old ideas that were thinly veiled ends in themselves for conservatives were to be repackaged as new concepts that would enable electoral success in an environment that was inhospitable to the Labour Party's own "old ideas." Whether the "new concepts" could somehow deliver social cohesion and expanding job opportunities as well as redistribution of income from the poor to the rich was seen by Third Way acolytes as strictly a matter of cleverness. Third Way proselytizers were supremely confident of their cleverness.
You Don't, Say?
On the assumption that those who believe Say's Law -- or those who cling to the argument as a ready-made justification for their preferred policy outcomes -- will not change their minds, I would like to present what might be described as Say's other law:
Misery is the inseparable companion of luxury.A position Say proclaims "as false in principle, as it would be cruel in practice" is that misery and want are indispensable as incentives to work:
The apologists of luxury have sometimes gone so far as to cry up the advantages of misery and indigence; on the ground, that, without the stimulus of want, the lower classes of mankind could never be impelled to labour, so that neither the upper classes, nor society at large, could have the benefit of their exertions.Of course the Third Way manifesto didn't overtly "cry up the advantages of misery and indigence." The phrasing was more subtle and nuanced:
But providing people with the skills and abilities to enter the workforce is not enough. The tax and benefits systems need to make sure it is in people’s interests to work... Part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs. ... The labour market needs a low-wage sector in order to make low-skill jobs available.
In short, there needs to be more low-wage jobs to transition people away from benefits and benefits need to be restricted so that they are not an impediment to people accepting low-wage jobs. Or, in blunter words, "without the stimulus of want, the lower classes of mankind could never be impelled to labour."
Say's "other law" appears in the chapter "On Consumption" in his Treatise on Political Economy; or the Production, Distribution, and Consumption of Wealth. Here's more: