America opts for irrationality

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The US electorate has acted as everyone predicted— irrationally.

The ordinary people of the USA have rejected economic policies designed to benefit them - and which have actually done so by creating employment, preventing deflation and by sustaining well-being. They have instead of the policies that will increase unemployment, threaten many more home foreclosures, undermine many banks and increase their national deficit.

This is one of the extraordinary achievements of the neoliberal era. It created the idea of “rational expectations” and so distorted true rationality in the process that they have persuaded people that voting against their best interest is the right thing to do.

The right will, no doubt, claim this as a major turning point,and the re-emergence of the old order, just as they did with the ConDem victory in the UK.

I very strongly suspect that they are wrong. Whilst I do not agree with everything that Anatole Kaletsky wrote in his book Capitalism 4.0 I have no doubt that his suggestion that neoliberal capitalism is, to coin a phrase, a busted flush, is correct. I fully accept that the world has not as yet wholly appreciated this, under this electoral backlash is indication of this, but the model is undoubtedly completely broken, and the extraordinary assumptions on which it was built have been shown to be wholly invalid.

It is only by reform, the creation of a new economic model, and the reinvigoration of both markets and the relationship between markets and government that we can move forward. The American electorate have rejected that for the moment, largely on the back of the enormous sums of money that the old order can still command, but when the prescription that the Republicans offer fails then I have no doubt that a new order will emerge. Just give us a little time.