The notion of ‘market confidence’ is perhaps the intellectual bedrock on which the agenda of economic conservatism rests. It can be invoked to justify fiscal austerity, privatization, labour market deregulation and so forth. The late Michael Kalecki, an eminent Marxist economist, offers one of the most prescient pronouncements on ‘market confidence’ and the role that it plays in shaping economic policy …
Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence.