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Economists Agree: Failed Policies 'Making a Total Mess of a Solvable Problem'
To be an economist of my stripe these days — basically a Keynes-via-Hicks type, who concluded as soon as Lehman fell that we were in a classic liquidity trap with all that implied — is a bittersweet experience, with the bitter vastly greater than the sweet.
Economists and public commentators Paul Krugman, Robert Reich, and Joseph Stiglitz have all railed against the failed economic policies pursued by the White House and Congress. They are not alone in their critiques, but their voices certainly feel lonely as the dominant political culture continues to avert its eyes from their prescriptions. The good news, such as it is, is that our underlying model has performed very well. Interest rates have stayed low despite large government borrowing; crowding out has been totally absent; huge increases in the monetary base have not been highly inflationary.
The bad news is that policy makers almost everywhere have failed dismally, and seem determined not to take on board the lessons of experience, either historical or what we’ve learned the past few years. As Joe Stiglitz says,
When the recession began there were many wise words about having learnt the lessons of both the Great Depression and Japan’s long malaise. Now we know we didn’t learn a thing. Our stimulus was too weak, too short and not well designed. The banks weren’t forced to return to lending. Our leaders tried papering over the economy’s weaknesses – perhaps out of fear that if we were honest about them, already fragile confidence would erode. But that was a gamble we have now lost. Now the scale of the problem is apparent, a new confidence has emerged: confidence that matters will get worse, whatever action we take. A long malaise now seems like the optimistic scenario.
Robert Reich, talking to people in the administration, says that there has been a deliberate decision to focus on the wrong issues, knowing that they’re the wrong issues:
So rather than fight for a bold jobs plan, the White House has apparently decided it’s politically wiser to continue fighting about the deficit. The idea is to keep the public focused on the deficit drama – to convince them their current economic woes have something to do with it, decry Washington’s paralysis over fixing it, and then claim victory over whatever outcome emerges from the process recently negotiated to fix it. They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia.
And in Europe, says Kantoos Economics, a low inflation target has become a sacred icon even though all evidence – including the experience under the gold standard! — says that this will be fatal:
I sincerely do hope that I read the wrong newspapers and missed all those European economists and commentators screaming all these things (or even better: that I am wrong). But whenever I try to hear something, there is just silence – or Axel Weber lashing out at Olivier Blanchard. Meanwhile, European policy makers and central bankers are wrecking one of the most fascinating projects in human history, the unity and friendship among the countries of Europe. This is beyond depressing. Way beyond.
I’m still trying to make sense of this global intellectual failure. But the results are not in question: we are making a total mess of a solvable problem, with consequences that will haunt us for decades to come.
34 Comments so far
Show All"I’m still trying to make sense of this global intellectual failure. But the results are not in question: we are making a total mess of a solvable problem, with consequences that will haunt us for decades to come."
One can only wonder who profits by it? Make no mistake someone is. I for one am tired of equating the DOW with the societal health of this nation. It's more a cancer on our body politic. It's behavior in the last few days just proves to me that it's not capable on any intellectual rationale.
Indeed. WHO profits?
Who benefits during these times of economic crisis?
Who wins with 'public' austerity? Austerity may wreck the general economy but it makes bankers purr.
Stop pretending we are all in the same damn boat.
The rich are steaming past in a luxury liner toasting each other with champagne while everyone else is left to fend for themselves in a leaky rowboat in the middle of the Pacific.
Krugman, Reich & Stiglitz all seem to be 'good chaps' but they seem to have an aversion to discussing bluntly that this is, in essence, a class war. Krugman and Reich will fuss and fume that it is the Republicans that are behind it all.
Stiglitz seems far more candid.
He has a pretty frank article in Vanity Fair (of all places):
http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105
http://www.sfbayguardian.com/politics/2011/04/05/case-class-warfare
"Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul."
Additionally, as Jim points out, Krugman and Reich have been particularly lax in failing to point out the tremendous social and economic costs of the American military empire. (Of course the real victims are the people of Iraq and Afghanistan, etc. slaughtered in these invasions.)
Again, Stiglitz has written extensively about the true costs of these wars and deserves kudos for his research.
http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article3419840.ece
Follow the money - UP. The money isn't disappearing, it is redistributing to billionaires, war profiteers, globalists, banksters, and politicians. The only problem the people on the planet have is the class war that is being waged against them by all the aligarchs. Partisans on both sides of the "house of pleasure" need to wake up and take both parties out.
These economists probably are smart but how can they be trying to make sense of it if they are afraid to say "WAR ECONOMY" and complain about "Lessons not learned"?!
When will they ever learn? When they learn to say WAR ECONOMY it will be a start.
I'll be waiting, but the riots of revolution will probably come first.
Failing economy...failing empire; fascist amerika continues to slaughter its way into the abyss ! Nothing will save the imperialist empire. Get ready to pick up the pieces; the opportunity for a peaceful nation will be there !
I am as ready as I'll ever be. The WRONG WAR's pieces are already here and falling like rain.
As I recall in a survey course on Amerikan History, the logical conclusion of a War Economy is that you cannot have both "guns and butter." And given the recent Debt Deal, I see no reason to doubt that assertion.
A "War Economy" has always been and will always be A False Economy...
What investment return is in A bomb spent in A New York second, blowing up A building in the next...I see no lastingly beneficial "Economy" or economical investment here....
Jim,
They cannot say the phrase "War Economy" because that would not look good on a resume. They would lose clout in Washington and may never get a job again. It's politics, only politics.
"I’m still trying to make sense of this global intellectual failure."
Hmmm, why does this ring a bell?
Allow me to substitute a word for you, Mr. Krugman.
"I'm still trying to make sense of this global INTELLIGENCE failure."
Now after what major event did we hear THAT little mantra, huh?
Why, it couldn't have been an event that even though spectacularly horrendous also seemed to allow the richest and most powerful among us to grow even more rich and powerful, huh?
Rational people all over the world finally "made sense" of the global "intelligence" failure after 9/11 by correctly determining that it was a staged event, a false flag attack carried out by elements of the United States government and others against the people of the United States to further the agenda of the fascist elites within the halls of power.
No other explanation can possibly make sense of all of the anomalies and the preposterous claims of the official explanation of that day.
Same goes for this seeming idiocy.
There is only your inherent trust/belief in the "system" that is holding you back from realizing that this economic "event" is simply another stage in the consolidation of wealth and power by the inhuman scum who seek to lord it over all of us.
It is not about the money at this point. The powers at be have all they will ever need. It is about Power and Control.
With the economies failing globally, what better time to introduce a global currency.
Healthy systems seek the power to determine their own outcomes, it's referred to as 'self-determination.'
So when you hear over and over again that the most powerful of these systems are inexplicably stupid, that's the wrong analysis.
Not stupid. Corrupt. And long overdue for replacement.
I guess 'corrupt' is apt. I would say greed and a lack of empathy are more exacting in describing the economic problems overtaking much of the world. In Europe the Germans are not overly keen about sending their dough to help out their weaker neighbors. Quite naturally the Germans will be quick to notice that some of their neighbors were spending much more than their taxes were bringing in. I suppose they hope that 'austerity' will be a teachable moment, but too often it is mere punishment without results of value. Here in America the poor are very often vilified as lazy and stupid, while at the same time perverting Christianity with "the Lord helps those who help themselves." By the way, that phrase works beautifully both as a put down for the poor, but also as a 'greed is good' value system.
The Administration's failed policies must be accomplishing something.. fess up experts. What?
"They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia."
Good luck with that strategy.
It's pretty hard to be distracted from the real issues when you're looking for a job, and your personal economic situation is "anemic."
It doesn't take a political genius to figure out that the President has no plan to solve the unemployment problem.
As Ross Perot used to say, "When you get a clue, send up a flare!"
The Reich quote is an interesting one.
"They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia."
Neither Wall Street nor the major corporate powers are particularly interested in the jobless rate. Many of the companies now awash in billions in profits reached those goals by slashing jobs and/or exporting them to cheaper labor zones.
High unemployment in the U.S. allows them to depress wages, cut benefits, etc. because they can draw from a large pool of desperate Amerikans.
They are interested in keeping the taxes on the plutocracy and corporations--themselves -- as low as possible. In many cases their taxes are zero or even negative (taxpayers PAY them through various incentives).
They are also interested in privatizing public institutions (education), selling off public lands and infrastructure, etc. because these are profit opportunities for them to cash in on. They are also interested in slashing the social safety net--social security, medicaid, pensions, all public benefits -- because they don't need these and they are viewed as a waste of resources.
The Obama administration has pretty much followed this game plan. Their version of it is perhaps not as brutal as the Republican plan (e.g. Ryan) but it is the same plan. The Obamanites will try to hide the bitter taste of the 'medicine' with a teaspoon of sugar (rhetoric mainly).
They trust that with an immense influx of corporate and Wall Street cash, they will convince the public that up is down, day is night, etc. -- and that the Republicans are worse.
The Obamanites did not attack the banks, Wall Street, the corporate oligarchy, etc. because you do not bite the hand that feeds you (if you are a smart dog).
They did not launch a major jobs program because that would have risked alienating their patrons. The rich understand pretty well what is in their best interests -- at least in the short term. The Amerikan public, in their view, is far easier to bamboozle with a 'marketing' campaign.
For a radical--to the roots--analysis of the national and global economic situation, do read Michael Hudson who teaches at the U. of Missouri, KC and once worked on Wall Street. He sees the global financial elite pushing us all into endless debt peonage. And the moves and plans by the oligarchy endlessly push in this direction. The current attacks on public services, union workers, Social Security, Medicare and Medicaid are all part of the plans as the rich and powerful, like the barons, princes, kings, and dukes of old, aim to own and control everything and charge a rent or fee for use of what we have bought and paid for as publicly built and owned facilities but would now be owned by capitalists. In short Hudson is willing and able to think and analyze in radical ways that Krugman, Reich and Stiglitz find unthinkable.
"I’m still trying to make sense of this global intellectual failure".
Mr. Krugman:
Since politics are inherently part of your realm, it is not appropriate for you to merely shrug your shoulders, throw up your hands and roll your eyes in disbelief. Making "sense of it" is an important part of the economist’s job. It’s no mystery. Globally, the pols are playing the game exactly the way they get paid to play it (here, I include Mr. Obama). One can determine who pulls the strings by merely observing who the current winners and the losers are. It is disingenuous to pretend you don't understand. Contrary to your assertions, we are not dealing with a global intellectual deficit. Rather, we stand over-run by rich and powerful laissez faire capitalists with "survival of the fittest" attitudes. It is they who are in control. It is they who stand to gain from our austerity. As an economist you might tell people: if your goal is fascism, oligarchy or anarchy, you have put the right people in charge; if you do not want those things, throw the bums out--ALL of them.
For Americans, it might also be time to re-write their constitution. One place to start would be to establish some democratic oversight and control over the Supreme Court, whose current majority holds that buying elections is the first amendment right of everyone, including corporations..
Thanks, Dorothy. Indeed, no mystery at all, Krugman only makes sense of what his outsize salary allows him to. After all, he's an elite club member, a Nobel laureate like the POTUS and Kissinger. ---[new paragraph]---
For a flash moment there I too thought maybe, just maybe, they're beginning to get it, as when Krugman paraphrased Reich: "...there has been a deliberate [White House] decision to focus on the wrong issues, knowing that they’re the wrong issues." ---[new paragraph]---
Eureka! I thought for a fleeting instant. Could it be that these guys finally read the Shock Doctrine? Are they at last beginning to grasp this great game of rigged-market cannibalism, the creative destruction of disaster captialism---making the economy scream, terrorizing the sheep---and concentrating power in the hands of a 'worthy' elite? ---[new paragraph]---
But no, sadly, it's just more of the same bankrupt liberal ideology after all: "they're really well meaning, only just mistaken, not evil. Obama has good intentions; he's not a really a consummate, pathological liar and war criminal, just a cowardly idiot, a confused eunuch getting bad counsel. But still, we have to suppport him no matter what. What choice do we have? Otherwise the Mormon hatchet man, or theocrat Perry will take over." ---[new paragraph]---
Veal-pen economists like Krugman and Reich serve a key purpose for the power elite as the loyal opposition---providing the right amount of off-stage noise to keep the audience entranced in the play. They and most journalists are a critical part of the problem.
Throwing Krugman and Reich in with "most journalists" is a phrase that could only come from someone who is farther left than 99% of Americans. This statement is really worse than useless. It's simply howling at the moon over the very disappointing situation our world is in. Trying to discredit people such as Krugman and Reich leaves what? an obscure communist here? an unknown socialist there? Do we wish EVERY economist would preach austerity? Your thinking could well lead to anarchy and an ill wind blowing a charismatic devil into control. Frustration can become a terrible thing.
Another apologist and timid shill of lesser-evilism --- well paid I trust. Refusing to see who Obama really is, a wolf in sheep's clothing, goes to the heart of the problem and is itself "worse than useless". That is exactly my point about Reich and Krugman and the rest of the dead liberal class, as Hedges aptly describes it, who certainly must know better by now. Continuing to give war criminal Obama pass after pass after two and a half year of obvious collusion with Wall Street and the MIC is indeed a critical part of the problem. ------------------
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.” - Upton Sinclair --------------------
Reich in his comfy acedemic sinecure just shrugs when asked why Obama refuse to challenge the GOP again and again, affects genuine confusion. Krugman pretends not to see it too. I think Stiglitz is further along, but cautious. Michael Hudson Steven Keene and others finally see it all too clearly. ----------------------
"Your thinking could well lead to anarchy and an ill wind blowing a charismatic devil into control." Charismatic devil? Oh my, I'd say we're already there: that describes your hero rather well, actually. Look at the choices the oligarchy has presented us, Greg: their own Trojan dark horse, their plantation Pharaoh and willing war criminal, versus Snidely Whiplash villains or vacuous theocrats on the GOP side. It's a setup and I have no doubt yours and Wall Street's golden boy is a lock . . . unless of course unwahsed rabble like me have anything to say about it. --------------------
"Those who make peaceful revolution impossible will make violent revolution inevitable." - John F. Kennedy, 1962 --------------------------
Wake up, Greg, and take a good hard look at reality, the multiple unwinnable wars, the neolib market, insolvent and leveraged beyond cure, etc. If you're not outraged, you're really not paying attention. Please read Shock Doctrine so that the scales may fall from your eyes. ------------------------
Excuse me while I go howl at the moon. It does make me feel better, but just maybe some of the pack might hear and answer.
Yes, I agree with a great deal of what you say. I've read Shock D and I'm in the middle of watching the documentary. You have obviously not been paying attention to Krugman. I've read virtually every word he has written in his columns and blog for the last decade. He's been tearing his hair out over Obama's stupid economic policies. Obama is horrible. The republicans are worse. Your 'already there' comment shows your feeble imagination. Things could get tremendously worse. Now, pardon me while I howl at the moon in private.
Good one, Greg, well done! I'm cut to the quick, devastated, and will never again question your sage reprimand. [Sorry, no paragraph breaks!?] Really though, don't slink off to howl in private; that too is part of the problem --- too many Americans leading lives of quiet desperation, afraid to even post their real names in public. []
However, "feeble imagination" with respect to "charismatic devil" is rather a cheap shot, ad hominem ---and a useless and counterproductive argument. But speaking of a frail imagination, FYI, the devil of which we speak does not generally appear with horns, trident, barbed tail, and a bad case of rosacea. He may in fact be in VP Biden's words, "nice looking, clean-cut and articulate" with an appealing mocha complexion that Boehner surely envies. That's what I and many others here have been trying to point out to people who consistently say Obama and Dems are the lesser evil. []
In hindsight, it's been obvious throughout history (which we ignore at our peril) that evil often disguises itself as virtue: "Satan himself masquerades as an angel of light"; and false prophets try to pass themselves off as one of the flock, covered in fleece, which "inwardly are ravenous wolves. You will know them by their fruits." And when we taste the fruit of Obama-Reid-Pelosi, we find it to be bitter poison. The "lesser evil" is actually greater. []
I'm sorry for touching a nerve with respect to Krugman, a great, gifted economist, and no doubt a beloved professor to many. I generally agree with his progressive socioeconomic philosophy, and I do believe he's a decent man. But in refusing to call a spade a spade, he and most journalists now are a key part of the problem. I believe they, like Elizabeth Warren have been skillfully sidelined in comfortably-stocked veal pens like the Neocon NYT, and thus rendered blind to the political reality that America's current leadership, with few exceptions, are thieves, killers, slavers and rapists, and the system itself is irredeemably corrupt. []
If we don’t want London, Syria, Libya, Norway, Yemen, Chile, Somalia, etc., in the Homeland we need to recognize that, talk about it publicly, and call out our overpaid “intelligentsia” who prefer or pretend not to see it. I don’t believe I’m on a 1% lunatic commie fringe where you’ve pegged me (I'd vote Libertarian before I vote Democratic). And I’m not advocating anarchy or violent revolution, but I see it as inevitable if we don’t call out the elite publicly for malpractice, including the so-called professional left.
Again I use as analogy of both sides of the debate from these Economists that of a Slave Owner in a Slave economy of some 300 years ago.
The one type of Slave Owner (Sir Austerity) believes the best way to get more work out of the slaves and increase profits and return on investment is with regular beatings and use of the lash.
The other type (more Stimulus) believes one gets more work out of the slave if they allowed the basic stuff of life such as food and shelter and are taught to recognize they might lose the same unless they comply with the orders of their Overseers.
They both still support slavery and the OWNER class just as these economists support Capitalism and the ownership society .
Apparently a lot (meaning a majority) of the people (American voters) can be fooled all of the time. Otherwise, how can one explain why so many working class people continue to vote Republican when it is so obviously against their best interests. It wouldn't make any difference how many TV ads the Republicans ran if voters were alert, well-informed, and intelligent. But, they aren't.
Jim Shea
Please allow me to fix one sentence for you: " ...how can one explain why so many working class people continue to vote [for either coroporate party] when it is so obviously against their best interests[?]"
Previous posters have done well in showing how Krugman pulls up short: "we are making a total mess of a solvable problem," he says. "WE???" Do any of us have even the slightest influence on congress, the prez, the Fed? You know the answer.
"problem?" Its only a problem for the vast majority, no problem at all for the billionaires in charge.
Definitely "we" have a problem. OpEds by Krugman will in no way induce our Overlords to change course even slightly. "WE" could get behind a worker's party movement to push back against the reactionaries. If it weren't harder than blogging... (and I guess I'm here blogging, too).
I have a hard time understanding how all these Ivy-league educated experts and policy wonks came to be so bad at decision-making. Maybe they need, as a part of their education, to serve an internship in a ghetto or third-world nation, so they can see how their world-view looks from the other end.
_________________________________________
What all of us need to understand is that what is happening now is a power-grab for supremacy over the global economic system between three failed orthodoxies that were all designed to ultimately benefit the wealthy elite, and all three are unsustainable and unjust, and are destined for implosion: Keynesianism (government spending to spur the economy in the wake of a down business cycle), the Austrian School (laissez-fare, economic libertarianism, the market as God approach), and Neo-liberalism (which essentially advocates leaving private enterprise alone, as in light on regulations, and yet favors government playing a low-key but active role in shaping policy to benefit the wealthy, as in "free" trade, low taxes, etc.).
_________________________________________
Keynesianism is no good without creating a "democratic monetary system"; The Austrian Model is plagued by a morally obtuse philosophy bordering on religion; the advocates' of Neoliberalism are the most venal, and the biggest pusher's of economic inequality and environmental destruction.
Krugman says "I’m still trying to make sense of this global intellectual failure. "
And I'm still trying to make sense of the intellectual failure of a Nobel laureate like Krugman who can't see that this has NOTHING to do with "failure" -- intellectual or otherwise.
The people who orchestrated this whole thing have succeeded beyond their wildest dreams in pulling off the crime of the millennium: robbing trillions of dollars from the US Treasury -- with two Presidents of the United States (first Bush and then Obama) driving the getaway car.
"WE" could get behind a worker's party movement to push back against the reactionaries. If it weren't harder than blogging... (and I guess I'm here blogging, too).
HailCODEPINK we can do more than blog. We need a movement alright, but a movement that would really stick it up them - them being the ones that benefit from the toxic financial cocktail where only they reap the benefits. How about a movement of ordinary people who just stop paying their credit cards, stop paying their student loans, stop paying their mortgages? A lot of people need to commit to do this and to stand firm. That would make the big money barons lose a little sleep instead of it being us all the time! We need action. Not ridiculous action like what Londoners are doing but defined, deliberate and determined action (where no one gets hurt). And that would provide for us a bit of fun for a change (which it would be to see the wealthy worrying about their little plans being spoiled!) The London riots probably are due to people feeling helpless like there is no other way to express it other than loot and smash. But there ARE other ways. We must do something that is targeted and smarter. What does everyone here think? Stop paying the banks. Voting them out won't happen. Let's start putting out ideas for action.
This is what happens when a country makes stupidity and greed acceptable and admirable! You get a bunch of stupid, greedy people in charge!