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We​ are used to hearing that neoliberal political economy is about shrinking the state, and it is true that for many people in the US and the UK the experience of the years since Reagan and Thatcher has been one of continual cuts. But it is more accurate to say that neoliberalism has involved reconfiguring the state to empower markets and finance. The story of recent decades isn’t just one of increasing hardship for those who depend on wages and public services, but of state-sponsored extravagance for those who own assets.

This extravagance is on display in the tax cuts given to rich individuals and corporations. But, especially in the US, investors, financial asset-holders and homeowners have also benefited from a shadow regime of tax breaks, credits, exemptions and deferrals that reduce the amount of tax individuals and businesses have to pay. Governments might deploy these to meet a perceived economic need – promoting saving, spending, investing etc – or use them as ‘incentives’ to encourage or discourage particular kinds of behaviour. Tax incentives might encourage participation in the labour market by actively penalising unemployment, or reward marriage by privileging the nuclear family (though only the right kind of family, as shown by the restriction of child tax credit in the UK to first and second children). Most of all, such schemes benefit asset-holders, by lightening the tax burden on businesses or creating inducements to property ownership, thus creating a cross-class electoral coalition of homeowners. As Melinda Cooper says in her new book, these tax provisions are ‘functionally equivalent to traditional public spending’. They are ‘tax expenditures’ – state subsidies effectively, not for recipients of the social wage but for those who have assets. If you own shares, you will have benefited from tax advantages applying to capital gains; if you own your home, you will have done well out of tax subsidies as well as successive governments’ actions to fuel the property-price boom. The sharing of these financial benefits with the middle classes, in the form of rising house prices and retirement accounts whose value is linked to the stock market, have served to legitimise the otherwise stark inequalities of the neoliberal settlement.

Cooper sees the development of this regime over the last fifty years as ‘one long counterrevolution’. She tells the story as it unfolded in the US. In the late 1960s, faced with decreasing gains from investment and rising inflation spurred by military spending in Vietnam, business interests came together to resist demands for social spending made by those – Black Americans, welfare mothers, the unemployed – who had been excluded from the New Deal settlement, which had privileged industrial workers and households headed by white men. The movement to curb state spending eventually led to a series of monetary and fiscal experiments, beginning in 1979 with the dramatic increase of interest rates under the Federal Reserve chair Paul Volcker and continuing with Reagan’s tax reforms, which together brought about an enormous wealth transfer to high earners and the already well-off. Eight years earlier, Nixon had removed the dollar from the gold standard, which meant that the state had much greater control of the money supply. Now, policymakers wanted to rewrite the tax code in order to determine who would, and who would not, benefit from the potential abundance.

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uziq wrote:

i saved for a house using wage labour, not oil dividends and the appreciation of rank hypocrisy