The 'new economy'. posted by Richard Seymour

Critical Montages has an excellent post on the myth that lack of skills is at the root of low pay for the average worker during and after the 'new economic paradigm' which was allegedly discovered at some point in the 1990s.

There are a number of things that need to be said about this notion, and I intend to post more about this in the future. The first thing to note is that the 'new economy' was largely an ideological construct deployed in advance of there being any real evidence of increased productivity and the like. Indeed, it was really standing on its head a certain kind of language that was used during the 1980s and early 1990s. Economists as diverse as William Lazonick and Robert Reich were certain, in the 1980s, that a new economic paradigm was called for, and Japan had mastered it. They drew on some truths, but romanticised the reality of Japanese capitalism. In particular, they claimed that the Japanese tendency to look for long-term profit shares rather than short-term profit rates, the intervention of MITI, the existence of 'company unions' and the tendency to keep skills on the shop floor and emphasise training created stability and 'vertical solidarity'. Reich, who went on to become Labour Secretary under Clinton, before leaving in some dissatisfaction, made some stinging criticisms of the Reagan administration in this vein, noting that public spending (in education, health, street-lights and so on) was an investment in the economy.

Well, in the 1990s, the Clinton team utilised some of this rhetoric on being elected, while the real discursive cross-over came when a) the Japanese economy went belly-up and b) the US economy discovered it could have reasonable growth rates without high inflation (ie, without rising wage costs). The 'goldilocks economy' (not too hot, not too cold) conjugated with a great deal of technophilic nonsense about how the web would create millions of rich people. The sort of huckstering, PT Barnum-style case for capitalism that had prevailed in 1920s pamphlets became common ideology, so that Newsweek was moved to published an article entitled "The whine of '99: Everyone's getting rich but me!"

At any rate, David Coates' excellent book, Models of Capitalism, expertly demolishes the nonsense about the impact of skills on wage growth, and also - valuably - on the alleged levelling capacities of education, one of New Labour's favourite shibboleths. I am readying a longer and more boring post on this, but I'll give fair warning.