“My worry is that starting with just price controls, buffer stocks and taxing the rich is unlikely to get much beyond first base while the finance, business and resources remain in the hands of a tiny minority of owners

Michael Roberts is an Economist in the City of London and a prolific blogger.

Cross-posted from Michael Roberts’ blog

Isabella Weber is an associate professor of economics at the University of Massachusetts Amherst and an associate in research at the Fairbank Center, Harvard University. She is author of the prize-winning How China Escaped Shock Therapy – see my review of this book here. She has advised policy-makers in the US, Germany, Europe and Latin America. And she has been recognized by TIME Magazine on their 100 Next list.

Now she has a new book out, Anti-Fascist Economics: in defense of affordability, dignity and democracy, which is taking the economic and financial media by storm.  Weber is being interviewed on her book by myriads of leftist media sources and even has had an interview in the London Financial Times. Leftist journals like Jacobin have praised the book. At the same time, her views have been strongly attacked and dismissed by many mainstream economists.

Given that Weber grew up in Nuremberg, the German city where Adolf Hitler staged his vast Nazi rallies, the title of her new book can be no surprise.  Weber is deeply worried that fascist forces are gaining strength again in Europe: with the Alternativ fur Deutschland (AfD) in Germany; Rally Nationale in France; Vox in Spain, Chega in Portugal and Brothers of Italy – and similar parties in many other European states. 

The main theme of the book is to come up with economic policies that can win working people away from fascist ideas and revive democratic politics. For her, that means solving the cost of living crisis and delivering basic services in education, health and housing that are badly missing. If living costs are curbed and basic services delivered, Weber hopes that fascist forces will be weakened and defeated.  I think she is right on that.

But the increase in support for the anti-democratic right is the result of decades of fiscal austerity that has cut public services to ribbons and increasing economic insecurity for the majority. Weber maintains that the core of the problem is ‘market fundamentalism’ —the notion that the market self-regulates and is best left to operate on its own. This is really “profit fundamentalism,” a zero-sum, winner-takes-all pursuit that benefits the ultrawealthy at the expense of the rest.

OK. So what’s the answer?  What are the policies needed to end the rising cost of living, precarious jobs and crushed public services in economies dominated by big finance, big business and big tech led by super-rich oligarchs? For an answer, Weber looks to what she calls the various founders of ‘anti-fascist economics’: namely, Karl Polanyi, John Maynard Keynes, Michał Kalecki; Franklin Delano Roosevelt and John Kenneth Galbraith – but not,it seems, Karl Marx. Indeed, she criticises the German Social Democrats of the early 20^th century for sticking to the ‘dogma’ of Marx’s labour theory of value rather developing ‘practical policies’ to meet economic crisis of the 1920s Germany that eventually brought Nazism to power.

Like so many leftist reformers before her, she argues that there is a viable ‘middle ground’ between two straw men: a totalitarian command economy (presumably Soviet ‘socialism’?) and the free market. So we need to return to the theories and policies of the ‘middle road’ as represented by the social democracy of the post-WW2 period of Keynesian macro management.

Weber writes that anti-fascist economics “removes the economic anxiety and sense of overwhelming crisis that fascists exploit, and it demonstrates—concretely, in people’s daily lives—that democratic governments can act in their interest.”  So what is in this antibiotic that can kill the fascist disease? Weber concentrates her ideas on policies to control inflation to restablish ‘affordability’. What is driving people towards fascism boils down to the unaffordability of living and ever rising living costs. Inflation in 1920s Germany did exactly that.

What has been the cause of the inflationary spiral since the end of the pandemic slump?  She argues (in a series of papers and op-eds) that the cause was not ‘excessive demand’ caused by government spending or excessive wage demands but what she has called ‘sellers’ inflation’. Her central argument is that when supply shocks occur, like the global supply chain collapse in the pandemic or say the energy crisis from the Iran war, they can drive up prices throughout an economy. Because oil is an input in countless other goods, many producers passed on the price shock by raising their sale prices.

This is undoubtedly a correct analysis of accelerating inflation post the pandemic. It was clearly due to a ‘supply shock’ and not excessive demand. Consequently, conventional monetary policy of hiking interest rates or tightening money supply will not curb inflation, but instead raise the cost of borrowing for households (mortgages) and businesses (loan rates) and so risk a slump. I argued similarly during the post-pandemic period.

But how do we curb inflation then? Weber’s answer is price controls.  Governments must not leave inflation to the vagaries of markets dominated by monopolies that can hike prices to preserve or increase profits. As Weber puts it: “Commodity markets are inherently volatile, and the human cost of leaving them entirely to private participants falls hardest on those least able to absorb it, while carrying the potential to destabilize whole economies and societies.” Indeed, but are price controls the answer?  Controlling energy prices for the domestic consumer would not solve price rises at the producer end, but simply drive private energy distributors into bankruptcy. That would force governments to subsidise them with funds or end controls or take over failing companies.

During the post-pandemic energy surge in 2021 and 2022, the French government forced the state-owned Électricité de France (EDF) to cap household electricity price increases at 4% as part of a nationwide “tariff shield” (bouclier tarifaire). While this policy shielded French consumers from the severe cost-of-living shocks seen across the rest of Europe, it triggered massive financial losses for EDF and eventually led to the company’s full nationalization. In my view, the latter poses the best policy solution anyway: public ownership of the international energy and food companies that operate throughout the global supply chain would enable national governments to set prices rather than profit-seeking moguls.

But public ownership of ‘price gouging’ companies is not on the agenda of Weber’s anti-fascist economics. Instead, she offers an alternative that keeps energy, tech, finance in the hands of capital. She suggests that governments should build up ‘buffer stocks’ to smooth out supply shocks when they occur. The state could ‘regulate’ prices by creating substantial reserves of nonperishable goods — especially food and fossil fuels, by buying en masse when they are cheap and selling when prices rise. Price controls can therefore be entirely viable if they are implemented through supply management, rather than mere fiat. Naturally, mainstream economists reject buffer stocks as a method of price control, arguing that such policies will not cope with speculation or the risk of governments having to fork out monies to balance the cost of stocking if prices swing sharply.

In Anti-Fascist Economics, Weber cites various cases where price controls worked. There was the FDR-Galbraith administration during World War II, which sustained effective price controls.  And Weber argues that price controls in Communist China in its early years were very successful.  But these examples are misleading, in my view.  In WW2, US and UK governments were in full control of the major sectors of the economy in order to direct them to the war effort.  A war economy with the major companies and financial institutions working to a plan is nothing like the free-for all for the capitalist sector in profits and investment now. Total price control in an economy would require total control by the state of the oligopolies over investment and production. And total control would only be possible by taking the oligopolies into public ownership with a plan for investment and production. And that is why in China under Mao price controls were successful because ‘sellers inflation’ was not possible.

In post-pandemic capital economies, price controls will squeeze profits. Fine, you might say. But in a profit-driven capitalist economy that will only eventually lead to lower investment and productive growth (see France above). As one mainstream critique of buffers stocks concluded: “Even if public buffer stocks can promote price stability in the face of short-term supply shocks, they cannot sustainably address price changes that reflect longer-term structural changes.” In my view, those ‘long-term structural changes’ are when productivity growth slows because investment growth slows, leading to slowing supply relative to demand goods and services. It is this that is the underlying cause of rising inflation, not ‘price-gouging’ as such. In an economy dominated by profit-driven companies in energy and other key sectors producing basic necessities, prices will then rise. See the summary of my argument here.

Of course, Weber’s anti-fascist policies are not confined to controlling inflation.  She calls for “active government policies that would steer, manage or provision essentials.” On the provisioning side, she ‘defends’(?) a revitalization of public education, transportation, and health care under a framework of ‘universal basic services’. Weber reckons that we need a ‘strong state’ that actively counteracts inequalities with instruments such as industrial and social policy or tax reforms, strengthens social security and pro-actively manages crises (?) and processes of change.

Well yes, we need these things,but how can these be achieved in capitalist economies where public spending is being cut and and private investment growth is weak (excepting AI or defence)? Even if we had social democratic governments in Europe or the US prepared to tax the rich more and spend more on ‘universal basic services’, would this deliver fundamental change?

Weber quotes Polanyi where he says ‘The victory of fascism was made practically unavoidable by the liberals’ obstruction of any reform involving planning, regulation, or control.’  So Weber now appeals to the new Democrat majority in the US Congress: “Affordability just revived democracy (so not fascism after all). But to safeguard it, Democrats have to change the playbook, not just the slogans. The economy needs to be rebuilt from the essentials up — to restore public power, put a floor under livelihoods, and a ceiling on private wealth.“

As a review of Weber’s book in Jacobin pointed out, “readers of Anti-Fascist Economics who seek either an overarching theoretical critique of capitalism or a detailed policy agenda will not find everything they’re looking for. Weber is explicit that what she offers “are not blueprints but starting points.” My worry is that starting with just price controls, buffer stocks and taxing the rich is unlikely to get much beyond first base (to use a baseball analogy), while the finance, business and resources remain in the hands of a tiny minority of owners such as the Magnificent Seven. But no doubt Weber would see this criticism as ‘Marxist dogma’ that lacks ‘starting points’. The title of Weber’s book is instructive. It is Anti-Fascist Economics, not Anti-Capitalist Economics. Her aim is to restore (social) democracy and ‘dignity’ by managing capitalism, not replacing it.

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