Much ado has been made by the Biden administration and attendant commentariat about his “near-perfect” economy and self-proclaimed post-neoliberal green economic governance project. On this positive account, the Bidenomics project has been premised on supporting full employment, making use of green industrial policy and curbing corporate power — all subordinated to the aim of attempting to assert geoeconomic dominance by bolstering American manufacturing. One of the more bombastic claims, has been, as Branko Milanovic declared, that Biden went “full Kalecki”. Contra those who have invoked the great radical-Keynesian Marxist synthesist Michał Kalecki to champion Biden, Kalecki’s understanding of capitalist interest and state intervention provides a useful framework for more critical assessment of the political economy of so-called Bidenomics and the prospects for continued evolution of the contemporary interventionist and increasingly nationalist state under a possible — if still highly uncertain — Kamala Harris administration.

Kalecki, Capital Order and the State

Capitalist economies are in a state of permanent disequilibria because of the liquidity preference of capitalists, who control, among other things, the investment function. At best there is structural underinvestment and underemployment of labour; at worst, the capricious violence of the business cycle. John Maynard Keynes saw the structural inability to maintain full employment as a fundamental social antagonism that threatened discord and revolution. Keynes thus sought resolution in state action to fortify the liberal separation of the political and the economic which this antagonism made fragile. Public investment, Keynes argued, could not only stabilise economies during downturns; it could eradicate the business cycle entirely and secure permanent full employment through the relative socialisation of investment. The only economic limit to full employment and the public investment to sustain it would be real resources and the effectiveness of their social coordination. At first glance, the primacy of the profit imperative for capitalist producers need not be in tension with such a Keynesian state, as public investment and full employment structurally boost growth and with it aggregate profit potential. But Kalecki saw that maintaining full employment and the relative socialisation of investment would politically threaten the power of capitalists and thus the capitalist social form — tempering the profit imperative.  

Full employment reduces capitalist power over wage labourers: Kalecki argued “the ‘sack’ would cease to play its role as a disciplinary measure” at both the level of firm and society. Public investment, let alone ownership of assets or productive enterprise, threatens to supersede the primacy of private investment. Thus, the relative socialisation of investment curbs capital’s political power to withhold investment, reap rewards from ownership of juicy assets and control production decisions. The primacy of the profit imperative is also then tempered by the tension between the interests of an individual capitalist and capitalists as a class: their individual interest is in minimising costs and maximising control or power, particularly concerning labour, even if at the expense of maximising aggregate effective consumer demand and thus their own profit potential — preferring a larger piece of a smaller pie. Capitalists are therefore ambivalent about growth, each other, and their own maximum profit potential.  

Crucially, capitalists are not averse to but particular about state spending and intervention in the economy, a reflexive dynamic of support and opposition Kalecki called “the political business cycle.” Alongside their individual interests in profit and power, capitalists’ ongoing collective concern (and their practical activity) is flexibly shaping the state to reconcile perhaps at times a Keynesian instinct for relative political and economic stability with the absolute imposition and maintenance of what Clara Mattei has coined the “capital order.” In Mattei’s account of austerity as a “vital bulwark in defence of the capitalist system”, she argues, “capitalism is in crisis when its core relationship (the sale of production for profit) and its two enabling pillars (private property in the means of production and wage relations between owners and workers) are contested by the public...” . Maintaining or enforcing capital order and protecting capitalist interests in a fundamental sense is therefore a matter of enforcing these two enabling pillars even as other aspects of the state-capital nexus can prove flexible. Thus, we see the rationality of spectacular state spending and intervention throughout the neoliberal era. Indeed, if neoliberalism has been a project of capitalist counterrevolution against popular democratic claims it has secured an era of what Melinda Cooper has dubbed “fiscal extravagance” in service of subsidising returns to capital but austerity for the rest.  

State intervention and fiscal spending cannot be reduced to capital’s interest alone. For example, the Federal Reserve backstopped the municipal bond market during the Covid-19 crisis to support public balance sheets.  But the shape and character of state intervention is delimited by capital’s strength. Kalecki should not be read as providing a deterministic account of the state, foreclosed to political transformation including by the claims of progressive forces.  He provides above all an account of capital’s fundamental political interests around spending and intervention by the modern state, interests that condition potential political transformation in flexible ways relative to capital’s strength and to the contours of the conjuncture.  

Writing in 1943, when the global labour movement was building power and asserting full employment as a central demand, Kalecki concluded in his seminal essay “Political Aspects of Full Employment” that:

[.quote][.quote-text]“Full employment capitalism” will, of course, have to develop new social and political institutions which will reflect the increased power of the working class. If capitalism can adjust itself to full employment, a fundamental reform will have been incorporated in it. If not, it will show itself an outmoded system which must be scrapped.[.quote-text][.quotee]Michał Kalecki[.quotee][.quote]

Bidenomics as a Kaleckian regime as a positive project is therefore quite the claim. But the political economy of Biden’s term is still understood well in Kaleckian terms: conditions have been such that a liberal-capitalist democracy has attempted to accommodate aspects of the competing claims of left-leaning coalitions and more powerful factions of capital amenable to particular kinds or degrees of transforming the state-economy nexus to achieve some semblance of social, economic and climate stability subordinated to the project of attempting to assert geoeconomic dominance and, above all, maintain capital order.  

This accommodation looks like a state project to attempt to facilitate a highly relative redistribution of power in labour’s favour and a repudiation of the complete primacy of market-led capital allocation in favour of renewed, if weak, green nationalistic state-led developmentalism. Yet, on both pillars concerning the wage relationship and private control of production and investment, the capital order remains objectively safe. The danger going into a potential Harris term is that capital’s interest in its own vision of renewed statism as well as the Democrat’s embrace of economic nationalism will continue if not increase, while left coalitions’ ability to form and press collective claims upon the state diminishes, even relative to four years ago. Indeed, Kalecki worried that fascism and militarism are ways to politically reconcile full employment with the interest of capital.  

Full Kalecki?

Bidenomics came in two distinct phases: the swift passage of the American Rescue Plan (ARP) following Biden’s inauguration in the Spring of 2021 constitutes the first; the more substantive implementation of “modern supply-economics” the second. Mainstream invocations of Kalecki to marvel at Biden’s economic statecraft mainly came in response to the first. In 2021, years of left-resurgence, elite-democratic reckoning with the Trump’s 2016 victory and its relationship to the inadequacy of Obama’s post-08 stimulus, the economic convulsions and the mass death event of the pandemic, the George Floyd rebellion, and as the N+1 editors put it, Biden’s “lack of vision and tide-drifting passivity”, politically coalesced in the form of an emergency $2 trillion Covid-19 crisis stimulus package that defied austerity logic, in the largest, if temporary, expansion of US welfare programmes in half a century.

Immediately following the American Rescue Plan’s (ARP) passage, economic historian Tim Barker offered a Kaleckian warning against a triumphalism that claimed the stimulus constituted a dramatic pivot from neoliberal governance: Democrats seemed to have learned that deficit spending, unconventional monetary policy and low interest rates across the 2010s had not led to inflation, and these tools had been unable to meaningfully revive growth; that austerity had cost them elections and that Republicans had pursued their own electorally winning non-recessionary stimulus policies. But, as Barker put it at the time, “if policymakers have now come to believe that there is more room for stimulus, it is in large part because they believe workers lack the power to make meaningful economic demands”.

And, of course, because of capital’s broader consent:  

[.quote][.quote-text]The pandemic has created a new outlet for government spending that organised business — including its more conservative wing — not only accepts but welcomes. In addition to the immediate health imperatives, business also perceives longer-term opportunities for public sponsorship of private investment. It is too soon to tell how far these will develop, but, along with increasing public-private action around climate change, they cannot be ruled out as forms that can accommodate large infusions of government money without threatening existing patterns of power and resources.[.quote-text][.quotee]Tim Barker[.quotee][.quote]

Invocations of Kalecki by no less than the likes of the Financial Times’ Martin Sandbu came in the aftermath of the ARP’s passage, not to describe public spending as such, but the administration’s vocal defence of its prospects to drive a high-pressure economy, full employment, and thus an increase in worker power amidst a broader labour shortage, especially in the service sector. Following Biden’s taunt that capitalist concerned with a shortage of workers should simply “pay them more”, Sandbu wrote in August 2021:

[.quote][.quote-text]What this looks like is the return of something that was exiled from centrist policy debate and mainstream economic analysis for decades: class conflict and its economic consequences. To be precise, we may be witnessing the manifestation of two outmoded ideas: that the relative power of economic classes alters macroeconomic outcomes; and that macroeconomic policy tilts that relative power.[.quote-text][.quotee]Martin Sandbu[.quotee][.quote]

It is something of a marvel that the Biden administration has supported full-employment, especially, as it fought to pass the suite of further spending packages that would constitute the second phase of Bidenomics even as inflation became and has remained a political problem.

Indeed, beyond fiscal policy and the administration’s control of the National Labor Relations Board, Biden became a “master oil trader”, manipulating the strategic petroleum reserve in something of an intra-state conflict against the Federal Reserve’s dominance, macro-deflationary bias and inadequacy of the Fed’s ability to stabilise systemically significant prices such as that of oil. But this is relative to preceding Democratic policy regimes. It is hardly the case that Biden has waged outright class war against capital in labour’s favour. At stake for capital is labour’s ability to make meaningful political demands on the state towards weakening capital order, also considered against other priorities such as political stability. There is plenty of room for the balance of power to shift without posing acute threat. Biden had promised wealthy donors during the 2020 campaign they should expect redistributive measures in the name of stability but that “nothing would fundamentally change”. Indeed, as historian Andrew Elrod chronicled in his account of the political economy of Bidenomics, the abandonment of social spending from the now complete suite of Biden’s spending packages constitutes a victory of capital’s political campaign against redistribution and a potential more fundamental reshaping of US labour relations. The US service sector, including social services, is where the contemporary American working class is employed, and its functioning has come to structurally rest on low wages. Thus, Elrod argues, “the American economy appeared unable to provide basic services at full employment.” Maintaining full employment and service provision would require:

[.quote][.quote-text]Altering the terms of business in the service sector — expanding the provision of public spending on loss-making activities, such as education, to pay competitive wages; regulating the profits in low-wage industries such as long-term care or childcare, where expanding service at scale with high wages and high profits meant pricing themselves out of their markets; and overcoming the political resistance of low-wage employers, for whom softer labour markets were preferable to making these adjustments to a high-wage economy.[.quote-text][.quotee]Andrew Elrod[.quotee][.quote]

Following the passage of the ARP, the Biden administration articulated an aspiration of shaping further spending packages towards these ends and as Elrod notes towards “constructing an electoral coalition of low-wage service-sector workers, public-sector unions, and immigrants.” Yet, the aim of crafting a “modern supply-side economics” premised on “reform[ing] of key social-service industries such as elder and childcare, increase[ing] public expenditure on education, and [raising] corporate taxes” tested the limits of “the deep influence of corporate power within the federal government—which ultimately determined what kind of spending the US political system could tolerate.”  

Phase two of Bidenomics has instead seen the practical emergence of a supply side governance regime premised on the state attempting to more directly govern fixed capital investment through heavy public subsidies for private capital, with an aim to deliver growth, decarbonisation, resilience, and geopolitical dominance. As many have noted, renewed industrial policy and protectionism began under the Trump presidency. But it is still significant that as a suite, the Bipartisan Infrastructure Law, CHIPS and Science Act and the Inflation Reduction Act reflect recognition by the Democratic establishment of the limits of market-led capital allocation, including to meet abhorrent geostrategic aims.  The concrete nature of state intervention upon capital allocation is crucial: by and large the state is attempting to bribe private capital into making fixed investment in key domestic sectors or infrastructure systems through tax credits, where even on its own unambitious terms, such policy is subordinated to “national security” interest in building American manufacturing. Barker’s prediction that the political and economic conjuncture might make capital accept increasing public spending and intervention, especially concerning climate change, so long as such action does not threaten capital order has been justified in the latter part of Biden’s term. But capital’s acceptance of an increase in public spending and intervention to address climate change is not the same as building an effective decarbonisation regime. Nor is “green” nationalism.  

To eradicate fossil fuels, we must completely transform the composition of production and consumption, which requires a substantial expansion of both public economic coordination and the role of public enterprises and other forms of public options for capital investment and managed divestment. Bidenomics as a decarbonisation regime is still hindered by the structural limits of market coordination. The profit imperative, liquidity preference, inherent fragmentation and lack of synchronisation in decision-making, along with the fundamental challenge of managing a mismatched combination of two coexisting production and consumption systems, all put us at risk of missing decarbonisation targets and facing the instability that poor coordination can cause. It is true that Senator Joe Manchin’s swing vote as well as the need to pass legislation through the Budget Reconciliation process whittled the IRA compared to the Biden administration’s original ambitions in its proposed Build Back Better agenda. But in more structural terms, capital’s control over investment decision making and other systemic aspects of political control over production remain safe even as the state attempts to assert greater influence over capital allocation towards decarbonisation. Moreover, the prospects of global decarbonisation remain subordinated to a project of further entrenching global financial and economic hierarchy and warmongering.  

Harris has made it a point not to campaign directly on Bidenomics, and indeed seems poised to abandon elements, including by caving to the investor class calling for progressive Federal Trade Commissioner’s Lina Khan’s head. Her announced economic programme is strategically vague but implies the continuation of the logic of Biden’s supply side governance. For instance, the centrality of price control policies and the campaign advisory role of Brian Deese, a midwife of Biden’s industrial policy. These signal the likely prospects of continued renewal of state developmentalism and interventionism and the likely contours of our contemporary “political business cycle”. The world is still reeling from the turbulence unleashed over the last few years by an intensifying ecological crisis, sharpening geopolitical tension and macrofinancial fragility — shocks that are likely to become increasingly frequent. Moreover, it is hard to imagine that maintaining the stepwise increase in fiscal spending and industrial policy resurgence will be yes/no questions, but “how” and “to what end” questions.  We should expect even a relatively centrist Harris administration to continue to follow an economic governance logic concerned with deepening state incursions upon market allocation in an age of instability without much incursion upon capital. And, to expect the Democratic party to continue to recklessly pursue renewed nationalism.

If decarbonisation requires building the green mixed economy, where socialisation of coordination, investment and production in key sectors and infrastructure systems would begin to displace capital and decommodify the means of life, the danger of a prospective Harris administration is a further consolidation of a creeping “hybrid regime” of market and renewed state coordination dynamically reconciled with each other, especially through compounding nationalism,  towards relative political, economic, climate, and, above all, capital order stability.  

The prospects of progressives’ ability to shape a likely ongoing transformation of the state-economy nexus under a Harris administration will be in part a matter of engaging with the changing state. Between here and the total socialisation of the economy, we need credible answers to the question of how we can connect and achieve short, medium and long-term goals of decommodification, decarbonisation and (economic) democratisation — a reciprocal strategy, where the effort to build, strengthen and leverage coalitions capable of challenging capitalist power is both supported by and supports concrete market incursions and institutional developments that establish and operationalise a green mixed-ownership economy. The socioeconomic compact underpinning the high neoliberal era of low consumer prices in the US has waned. The Biden administration has attempted to meet this with a renewed compact of economic nationalism and manufacturing employment. But a changing state-capital nexus where the state is increasingly if insufficiently concerned with decarbonisation and socioeconomic resilience is also the terrain for a competing politics of solidarity and ending market dependence for the means of dignified life.