Intro: "For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine."
Portrait, New York Times columnist Paul Krugman, 06/15/09. (photo: Fred R. Conrad/NYT)
Death of a Fairy Tale
27 April 12
This was the month the confidence fairy died.
For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should - by spending more to offset falling private demand - but with fiscal austerity, slashing spending in an effort to balance their budgets.
Critics warned from the beginning that austerity in the face of depression would only make that depression worse. But the “austerians” insisted that the reverse would happen. Why? Confidence! “Confidence-inspiring policies will foster and not hamper economic recovery,” declared Jean-Claude Trichet, the former president of the European Central Bank — a claim echoed by Republicans in Congress here. Or as I put it way back when, the idea was that the confidence fairy would come in and reward policy makers for their fiscal virtue.
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Every time I hear the trickle down theory spewed out I think, "What evidence can you point to to back that up?"
Every time I hear it spewed out I darn near "spew out" myself. If it's ever mentioned by anyone I'm face to face with, they'll wind up with spew all over their shoes!
China has thousands of kilometers of high speed rail, we do not have one inch. Denmark has had off shore wind generating electricity since the early 1990s, generates 20% of its electricity that way, and will soon be up to 50%. We have no off shore wind. We are not even maintaining our roads and bridges. The first step for both democrats and republicans is to step out of the imaginary world they are living in and take a hard look at reality. It is no longer 1945.
Goldman now expects the BRICS countries to account for almost 40% of global gross domestic product (GDP) by 2050, and to include four of the world’s top five economies.
[snip]
The multitrillion-d ollar global question remains: Is the emergence of BRICS a signal that we have truly entered a new multipolar world?
Yale’s canny historian Paul Kennedy (of “imperial overstretch” fame) is convinced that we either are about to cross or have already crossed a “historical watershed” taking us far beyond the post-Cold War unipolar world of “the sole superpower.” There are, argues Kennedy, four main reasons for that: the slow erosion of the U.S. dollar (formerly 85% of global reserves, now less than 60%), the “paralysis of the European project,” Asia rising (the end of 500 years of Western hegemony), and the decrepitude of the United Nations.
http://antemedius.com/content/tomgram-pepe-escobar-full-spectrum-confrontation-world#bricbybric
Much of it unused & decaying, and of the used part: one train recently derailed.
"Denmark has had off shore wind generating electricity..."
A vastly larger % of Denmark is coastline compared to U.S.; it makes more sense for them to spend on wind.
"We are not even maintaining our roads and bridges."
True. Where does the money go instead? Oh, yeah: unjustifiable, undeclared wars, bailing out huge corp.s, etc.
"... slow erosion of the U.S. dollar ..."
What is the cause? There MUST be one.
"... the 'paralysis of the European project'..."
There must be a reason. You think government economic policy MIGHT have something to do with both?
This has gone on a long time, not a few years. Krugman's idea it is due to a year or two of "austerity" is ridiculous. U.S. gov. spent more last year than ever. The trend has been ever upward.
Krugman's smarmy "austerians" comment -- we know exactly who he means -- could not possibly be the problem because "austerian" policies have not actually been practiced.
Again Krugman's analyses fail to reflect reality, according to actual numbers you can find in the daily paper. The guy's a political hack, not an economist.
(I am doubly amused to find that I have been marked down for telling easily verifiable truths. That in itself is very informative.)
While Denmark has a RELATIVELY longer coast line than the US, the US has a lot more coastline and zero in off shore wind electricity generation.
It's true enough that money hasn't gone to where it should instead of wars and the pockets of the Rmoney types.
The biggest mistake is to claim that we haven't been practicing austerity. I give you TX as Exhibit A where 10% of its education budget has been cut with laying off tens of thousands of teachers, where several towns have laid off their police forces and many others have cut back, where the whole women's health program has been eliminated, where Medicaid has been cut drastically... And apparently from what I've read, every other state with a republican government is suffering the same thing. Check out Wisconsin. Their public education is suffering as badly as Texas'.
Now how can this be? If they are making more jobs in Texas then all the other states, how can it be as bad as you are claiming? Answer is...it isnt My sister Barb and her husband lives in the Dallas-Ft Worth area.
And to say that we haven't been practicing austerity is no mistake. Just look at the damn numbers. They are public and you can get them just about anywhere. I repeat: the United States government spent more money last year than EVER in the history of this country. That is hardly austerity.
And what difference does it make if Texas has tightened its belt, if the Federal government is spending the money anyway, and inflating the rest so what you have left is worth less?
The fact that Medicaid has been cut is also of no consequence, because once again: the Federal government spent MORE money last year than the year before, and the year before that, and so on clear back to the founding of this country. It has NEVER spent so much. Krugman's "austerity" simply doesn't exist, and that one number is all you need to know to prove it.
Let those bailouts build labor employing public works, fast-rail, offshore wind-power, repair roads & other infrastructure and above all stop propping up war & spoace machine builders create jobs, not jobs for high-techers. Stop trying to export overproduction of mechanization to further impoverish the underdeveloped.
The Stel Industry in this country was great as the big guys bought up little "puddler" steel makers and formed conglomerates. They never created any of the businesses on their own. Small business were bought up to make big businesses.
The economy of today, with less manufacturing will not work the same way. 71% of GDP when the economy was good was consumer spending. Once again, it is clear that it is a bottom up system and should be treated as such. George H.W. Bush called Supply Side Economics a Voo Doo idea. He was right.
There was perhaps a time, the 1930s, when demand stagnation was a cause of the problem, but now it is a symptom. Krugman fails to attack the causes.
In my view, the causes are imperialism and a non-productive economy, in terms of consumer goods. Imperialism has destroyed our consumer sector as much as cheap overseas labor. We invest in armaments and produce some of the best in the world. The failure to invest in consumer production or to encourage it, along with tax policies favoring outsourcing of labor and outflows of capital are major parts of our systemic failure. Mainstream economists do not often mention the war-machine as a cause of our problems. Krugman doesn't. He writes for the jingoistic NYT. What would one expect?
Krugman's assertion that "austerity" measures haven't worked is worse than disingenuous, it's facetious. Look at the actual amount of money that the U.S. government has in fact spent, up to and including last year. It has gone up EVERY year.
There have been no "austerity" measures of any significance that have been followed to any real degree, to date. Maybe they have been called for in future years, but that hasn't happened yet, so it cannot be the cause of our problems.
Just look at the bottom line, man. It proves Krugman wrong. This isn't genius material.
I simply used the lump sum because that one number is all one needs to prove Krugman wrong. No further argument was necessary.
What we need is a sustainable model--and the best example is "NATURE'S ECONOMY" on which our economy is built. Ecosystems are flexible and adaptable yet can maintain a steady state--they are self-correcting through systems of feedback.
Nature has repeatedly given indications of partial collapse-- e.g. the dead zone around the mouth of the Mississippi River.
Austerity doesn't work because it interrupts the flow of trade.
In sustainable systems in nature there is a constant "trade" of oxygen and carbon dioxide between plants and animals.
Capitalism is making the same mistake as Marxism--assumi ng that the economy is the bedrock foundation, whereas the environment and human community are the foundations on which the economy is built.
I agree with you but I would offer one minor correction: your "Ponzi Capitalism" -- which is a pretty apt description, really, but I think its connection to Crony Capitalism should not be overlooked -- is not actually Capitalism at all. Rather, it is a bastardization of Capitalism that renders many of the normal market forces of actual Capitalism moot.
Quote:No, it isn't, because "Ponzi Capitalism" and "Crony Capitalism" aren't really Capitalism. They represent serious DEVIATION from real Capitalism. Your argument that we need a sustainable model is one I agree with. And that means getting back to real Capitalism. And THAT means getting rid of Keynesian government-inte rventionist policies, and revolving Crony doors. In all of modern history, the more the government has tried to meddle in and control the economy, the worse the economy has been.
Icelanders refused to be held hostage to a debt that was NOT THEIRS! And they are recovering just fine.
Straight out of Naomi Klein's The Shock Doctrine, in my opinion the most important book for understanding the mess we're in.
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