“Looking For Mister Goodpain”: The Doctrine That Has Dominated Economic Discourse Is Wrong On All Fronts
Three years ago, a terrible thing happened to economic policy, both here and in Europe. Although the worst of the financial crisis was over, economies on both sides of the Atlantic remained deeply depressed, with very high unemployment. Yet the Western world’s policy elite somehow decided en masse that unemployment was no longer a crucial concern, and that reducing budget deficits should be the overriding priority.
In recent columns, I’ve argued that worries about the deficit are, in fact, greatly exaggerated — and have documented the increasingly desperate efforts of the deficit scolds to keep fear alive. Today, however, I’d like to talk about a different but related kind of desperation: the frantic effort to find some example, somewhere, of austerity policies that succeeded. For the advocates of fiscal austerity — the austerians — made promises as well as threats: austerity, they claimed, would both avert crisis and lead to prosperity.
And let nobody accuse the austerians of lacking a sense of romance; in fact, they’ve spent years looking for Mr. Goodpain.
The search began with a passionate fling between the austerians and the Republic of Ireland, which turned to harsh spending cuts soon after its real estate bubble burst, and which for a while was held up as the ultimate exemplar of economic virtue. Ireland, said Jean-Claude Trichet of the European Central Bank, was the role model for all of Europe’s debtor nations. American conservatives went even further. For example, Alan Reynolds, a senior fellow at the Cato Institute, declared that Ireland’s policies showed the way forward for the United States, too.
Mr. Trichet’s encomium was delivered in March 2010; at the time Ireland’s unemployment rate was 13.3 percent. Since then, every uptick in the Irish economy has been hailed as proof that the nation is recovering — but as of last month the unemployment rate was 14.6 percent, only slightly down from the peak it reached early last year.
After Ireland came Britain, where the Tory-led government — to the sound of hosannas from many pundits — turned to austerity in mid-2010, influenced in part by its belief that Irish policies were a smashing success. Unlike Ireland, Britain had no particular need to adopt austerity: like every other advanced country that issues debt in its own currency, it was and still is able to borrow at historically low interest rates. Nonetheless, the government of Prime Minister David Cameron insisted both that a harsh fiscal squeeze was necessary to appease creditors and that it would actually boost the economy by inspiring confidence.
What actually happened was an economic stall. Before the turn to austerity, Britain was recovering more or less in tandem with the United States. Since then, the U.S. economy has continued to grow, although more slowly than we’d like — but Britain’s economy has been dead in the water.
At this point, you might have expected austerity advocates to consider the possibility that there was something wrong with their analysis and policy prescriptions. But no. They went looking for new heroes and found them in the small Baltic nations, Latvia in particular, a nation that looms amazingly large in the austerian imagination.
At one level this is kind of funny: austerity policies have been applied all across Europe, yet the best example of success the austerians can come up with is a nation with fewer inhabitants than, say, Brooklyn. Still, the International Monetary Fund recently issued two new reports on the Latvian economy, and they really help put this story into perspective.
To be fair to the Latvians, they do have something to be proud of. After experiencing a Great-Depression-level slump, their economy has experienced two years of solid growth and falling unemployment. Despite that growth, however, they have only regained part of the lost ground in terms of either output or employment — and the unemployment rate is still 14 percent. If this is the austerians’ idea of an economic miracle, they truly are the children of a lesser god.
Oh, and if we’re going to invoke the experience of small nations as evidence about what economic policies work, let’s not forget the true economic miracle that is Iceland — a nation that was at ground zero of the financial crisis, but which, thanks to its embrace of unorthodox policies, has almost fully recovered.
So what do we learn from the rather pathetic search for austerity success stories? We learn that the doctrine that has dominated elite economic discourse for the past three years is wrong on all fronts. Not only have we been ruled by fear of nonexistent threats, we’ve been promised rewards that haven’t arrived and never will. It’s time to put the deficit obsession aside and get back to dealing with the real problem — namely, unacceptably high unemployment.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 31, 2013
“The Big Fail”: Too Many Republicans Responsible For Economic Failure Retain Power And Refuse To Learn From Experience
It’s that time again: the annual meeting of the American Economic Association and affiliates, a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.’s in search of jobs), books and ideas. And this year, as in past meetings, there is one theme dominating discussion: the ongoing economic crisis.
This isn’t how things were supposed to be. If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now we’d be talking about how the great slump ended, not why it still continues.
So what went wrong? The answer, mainly, is the triumph of bad ideas.
It’s tempting to argue that the economic failures of recent years prove that economists don’t have the answers. But the truth is actually worse: in reality, standard economics offered good answers, but political leaders — and all too many economists — chose to forget or ignore what they should have known.
The story, at this point, is fairly straightforward. The financial crisis led, through several channels, to a sharp fall in private spending: residential investment plunged as the housing bubble burst; consumers began saving more as the illusory wealth created by the bubble vanished, while the mortgage debt remained. And this fall in private spending led, inevitably, to a global recession.
For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar.
So what can be done? A smaller financial shock, like the dot-com bust at the end of the 1990s, can be met by cutting interest rates. But the crisis of 2008 was far bigger, and even cutting rates all the way to zero wasn’t nearly enough.
At that point governments needed to step in, spending to support their economies while the private sector regained its balance. And to some extent that did happen: revenue dropped sharply in the slump, but spending actually rose as programs like unemployment insurance expanded and temporary economic stimulus went into effect. Budget deficits rose, but this was actually a good thing, probably the most important reason we didn’t have a full replay of the Great Depression.
But it all went wrong in 2010. The crisis in Greece was taken, wrongly, as a sign that all governments had better slash spending and deficits right away. Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that “the idea that austerity measures could trigger stagnation is incorrect.”
Well, someone was incorrect, all right.
Of the papers presented at this meeting, probably the biggest flash came from one by Olivier Blanchard and Daniel Leigh of the International Monetary Fund. Formally, the paper represents the views only of the authors; but Mr. Blanchard, the I.M.F.’s chief economist, isn’t an ordinary researcher, and the paper has been widely taken as a sign that the fund has had a major rethinking of economic policy.
For what the paper concludes is not just that austerity has a depressing effect on weak economies, but that the adverse effect is much stronger than previously believed. The premature turn to austerity, it turns out, was a terrible mistake.
I’ve seen some reporting describing the paper as an admission from the I.M.F. that it doesn’t know what it’s doing. That misses the point; the fund was actually less enthusiastic about austerity than other major players. To the extent that it says it was wrong, it’s also saying that everyone else (except those skeptical economists) was even more wrong. And it deserves credit for being willing to rethink its position in the light of evidence.
The really bad news is how few other players are doing the same. European leaders, having created Depression-level suffering in debtor countries without restoring financial confidence, still insist that the answer is even more pain. The current British government, which killed a promising recovery by turning to austerity, completely refuses to consider the possibility that it made a mistake.
And here in America, Republicans insist that they’ll use a confrontation over the debt ceiling — a deeply illegitimate action in itself — to demand spending cuts that would drive us back into recession.
The truth is that we’ve just experienced a colossal failure of economic policy — and far too many of those responsible for that failure both retain power and refuse to learn from experience.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 6, 2013
“Mitt’s Magical Thinking Foreign Policy”: How Many Wars Is Romney Committing Us To?
Mitt Romney’s hailed foreign policy speech combined magical thinking and mendacity, with promises or threats to maintain, restore, escalate or commence military involvement in Afghanistan, Iraq, Syria, Libya and Iran, at minimum. Speaking at the Virginia Military Institute, Romney had to have his audience of cadets wondering how many wars he’d commit them to if elected.
Ironically, in a speech most passionate about making sure there’s no “daylight” between the U.S. and Israel, Romney repeatedly hailed VMI graduate George Marshall, the former secretary of state who famously opposed Harry Truman’s recognizing the state of Israel in 1948.
Romney used the tragic killing of Libyan Ambassador Christopher Stephens Sept. 11 to paint a picture of a region made more dangerous by Obama’s alleged weakness and fecklessness. “Americans are asking how this happened. I’ve come here today to offer a larger perspective on these tragic events,” he pompously proclaimed. But as he hailed “the massive protests in Benghazi” by thousands of Libyans outraged by Stevens’ killing, he seemed not to notice that it was exactly those forces Stevens, Obama and Secretary of State Hillary Clinton had worked to support and strengthen in their Libyan military and diplomatic policy.
Certainly the administration has to answer questions about and be held accountable for the security problems that led to Stevens’ killing, but Romney seemed not to understand that Stevens died trying to empower the Libyan people who supposedly inspired Romney. He spoke of Stevens as though he were some rogue hero rather than a career diplomat committed to implementing a policy directed by Obama. He accused the president of “not partnership but passivity” in dealing with freedom-loving citizens in Libya and elsewhere in the Middle East, and once again pulled out the “leading from behind” slur as though it was stated presidential policy rather than an offhand, anonymous quote in a New Yorker story from almost a year ago. He didn’t say that the president goes around apologizing for America, though, so that’s something.
But he did tell one big lie, insisting Obama hadn’t signed a single free trade agreement, when in fact he’s signed three, with South Korea, Panama and Colombia. Romney also committed himself to seeing a “peaceful, prosperous Palestine” living side by side in peace with Israel, even though he had earlier dismissed the possibility of a two-state solution at his famous Boca Raton fundraiser. “I look at the Palestinians not wanting to see peace anyway, for political purposes, committed to the destruction and elimination of Israel, and I say there’s just no way,” he told his wealthy donors.“[S]o what you do is, you say, you move things along the best way you can. You hope for some degree of stability, but you recognize that this is going to remain an unsolved problem … and we kick the ball down the field and hope that ultimately, somehow, something will happen and resolve it.”
CEO Mitt also seemed to think he can order other countries around, insisting he would get our European allies to spend more on defense, complaining that only three of 28 NATO nations spend what they are committed to on the military. Good luck with that. Mitt’s magical thinking was also in evidence as he promised to counter Iran’s military support for Syria’s Assad with … something. “It is essential that we develop influence with those forces in Syria that will one day lead a country that sits at the heart of the Middle East,” he insisted, sounding a little Palinesque.
Just before the speech, a Romney adviser told reporters that the former Massachusetts governor would consider sending combat troops to Libya – a reversal of Obama’s policy as well as his own earlier opposition to direct military involvement there. There were vague hints of more military intervention in Syria. Romney also accused Obama of abandoning Iranian dissidents who protested the 2009 election, but never said what he’d have done to support them. He expressed unhappiness with the exit of American combat troops from Iraq and seemed unsettled about their scheduled departure from Afghanistan, yet he was almost as vague about what he’d do differently as he is when it comes to which tax deductions he’ll eliminate.
Yet it’s possible Romney’s own advisers don’t know any more about his real plans than what he laid out in his speech. The New York Times revealed Monday that several of them say “they have engaged with him so little on issues of national security that they are uncertain what camp he would fall into, and are uncertain themselves about how he would govern.” They aren’t sure he’s even reading his foreign policy papers they write, and one told the Times:
Would he take the lead in bombing Iran if the mullahs were getting too close to a bomb, or just back up the Israelis? Would he push for peace with the Palestinians, or just live with the status quo? He’s left himself a lot of wiggle room.
Perhaps fittingly for a guy who has staffed his foreign policy team with Bush retreads, Romney got high praise from former Defense Secretary Donald Rumsfeld, who tweeted: “Terrific, comprehensive speech by Gov. Romney at VMI. He knows America’s role in the world should be as a leader not as a spectator.”
By: Joan Walsh, Editor at Large, Salon, October 8, 2012
“Strap The Horse To The Car Top”: Mitt Needs A Photo-Op During His Pandering Tour
A 3-pointer at a gym full of U.S. troops in a war zone, or a crowd of 250,000 at a speech in Europe — neither is likely, and certainly not necessary. But Mitt Romney needs a helicopter moment for sure.
Four years ago, Barack Obama — a former state senator with mere months in the U.S. Senate who had no foreign-policy experience whatsoever — went overseas to bolster his credentials as potential commander in chief. He traveled to Iraq, Afghanistan, Israel, Jordan, Germany, France and England. In the midst of two active wars, Obama met with the prime minister of Iraq and the president of Afghanistan and was famously photographed with Gen. David Petraeus, the top military commander in Iraq, in a helicopter over Baghdad.
Dan Schnur, a former aide for GOP nominee Sen. John McCain (R-Ariz.) — then strongly preferred by voters over Obama on foreign-policy and defense matters — wrote in The New York Times that because the Iraqi prime minister announced support for the same timeline for U.S. troop withdrawal from Iraq that Obama outlined, a Bush administration official was heading to multi-nation talks with Iran and a consensus was emerging in favor of a stronger military presence in Afghanistan, “the three most important pillars of Mr. Obama’s international platform had been endorsed from a variety of unexpected sources.” Schnur added, “That’s a pretty good way to start a trip.”
The optics overpowered the picture of McCain back home — puttering around on a golf cart with former President George H.W. Bush — but the substance of Obama’s foreign-policy agenda made headlines as well.
Romney has arrived in England for the Olympic Games before he heads to Israel and Poland on his foreign trip, where he, too, hopes to build confidence and comfort among voters back home in his leadership ability abroad. Like Obama, he lacks experience, but unlike Obama he has yet to lay out a clear vision or even broad plans for how he would handle our most pressing foreign-policy challenges. In his speech to the Veterans of Foreign Wars in Nevada on Tuesday, Romney blasted the president’s foreign-policy record, suggested Obama has betrayed the nation by allowing leaks of classified information for political gain and lambasted cuts to military spending Obama has supported and that all GOP leaders and most of their rank and file in Congress voted for as well. Romney extolled the greatness of America, and said he was “not ashamed of American power,” but wasn’t specific.
After criticizing Obama two years ago for “announcing the day he’s pulling out” of Afghanistan, Romney suddenly announced in his speech Tuesday that he too would advocate withdrawal from Afghanistan in 2014. His exact words: “As president, my goal in Afghanistan will be to complete a successful transition to Afghan security forces by the end of 2014.” Had he been on his way to the site of our nation’s longest-ever war, Romney would have spent the entire trip explaining his flip-flop.
While in Israel with Prime Minister Benjamin Netanyahu, with whom Romney enjoys a decades-old friendship, Romney might offer a new policy prescription for stopping Iran from obtaining nuclear weapons that differs from the Obama administration. He might have ideas about how to depose Syria’s Bashar Assad.
Perhaps in Poland, as he criticizes the Russians, whom he has called “our No. 1 geopolitical foe,” Romney will announce just how he would counter Russian aggression in Eastern Europe and how he might convince the Russians — as well as the Chinese — to help the United States, Israel and our allies confront Iran and Syria.
Perhaps not. But the Israeli border of war-torn Syria would be the perfect spot for a helicopter ride with Netanyahu.
By: A. B. Stoddard, Editor, The Hill, July 25, 2012
“Condemned To Co-Exist”: The Radical Theory Of Evolution That Explains Democrats And Republicans
Why does the United States have two political parties that espouse such opposing philosophies? The Republicans fight for the conservative ideals of “individual rights — and the responsibilities that go with them,” from which flows the belief in limited government and few regulations. Democrats argue for the liberal notion that “we also rise or fall as one nation … I am my brother’s keeper, my sister’s keeper,” from which derives the support for social-assistance programs and universal access to health care. Why do these two parties — and the divided populations they represent — see “life, liberty and the pursuit of happiness” so differently? Is it cultural, or is there something innate in our biology that explains these differences?
Scientists have spent the last decade examining the physiology of political thought, but they have only succeeded in identifying the symptoms and not the root cause. So, forget about the MRI studies showing that Democrats and Republicans respond differently to fear, with greater or less blood flow to specific parts of the brain. Ignore the finding that conservatives have enlarged amygdalas, the part of the brain associated with anxiety and emotions, but that liberals have a larger anterior cingulate, which is associated with optimism. Skip over the research that says we inherit our politics from our parents. They all tell us the “how,” not the “why.”
The underlying reason for the eternal conflict between Republican “individual rights” and Democratic “we’re all in this together” is explained by a radical and magisterial theory of evolution outlined in Edward O. Wilson’s groundbreaking new book The Social Conquest of Earth. Wilson, who has dominated evolutionary thinking for the past 40 years, has synthesized a lifetime of work into a “theory of everything“. Greatly simplified, his argument is that two rival evolutionary forces drive human behavior: first, individual selection, which rewards the fittest individuals by passing along their genes; and second, group selection, in which the communities that work best together come to dominate the gene pool. Wilson argues that these two evolutionary forces are at work simultaneously, so that both self-serving and altruistic behaviors are constantly competing at the individual and at the group level. As he explains, “Members of the same group compete with one another in a manner that leads to self-serving behavior …. At the higher level, groups compete with groups, favoring cooperative social traits among members of the same group.” In other words, individuals with self-serving behaviors beat altruistic individuals, while groups of altruists beat groups of individuals with self-serving behaviors.
Extending this evolutionary theory, two competing forces are at work within the political organism: the “Republican genotype,” which favors individualistic behaviors, and the “Democratic genotype,” which favors altruism. Both forces are simultaneously at work at the individual and group levels. Different individuals — and different groups — will respond more or less to each of these forces depending upon the political and economic environment. The physiological differences between Democrats and Republicans in fear response, anxiety, etc., are simply symptoms of these competing genetic influences, and not the root cause of their divergent political beliefs.
If this theory is correct, it should be applicable not simply to Democrats and Republicans but to political parties around the world — that is, the general political structure of nations should split roughly into the “individualistic” versus “altruistic” models. In fact, most liberal democracies (i.e., where the voting is actually free and fair) have either a two-party system or a multi-party system having a dominant and a minority coalition, the two sides of which tend to split along those themes. In Britain, the Conservative Party argues for “putting more power in people’s hands” while the Labour Party highlights “social justice and strong community.” In France, the right-wing UMP (Nicolas Sarkozy’s party) puts individual “liberty and responsibility” front and center, while the Socialist Party (of François Hollande) believes that social equality requires the “redistribution of resources and wealth.” In Japan, the right-wing Democratic Party “values people’s individuality and vitality,” while the left-wing Liberal Democratic Party begins its constitution with a call for the “prosperity of mankind.”
Wilson’s theory of group and individual selection also accounts for the fact that political parties wax and wane in strength and influence, but that neither faction ever achieves total dominance. As he states, “The victory can never be complete; the balance of selection pressure cannot move to either extreme. If individual selection were to dominate, societies would dissolve. If group selection were to dominate, human groups would come to resemble ant colonies.”
In other words, Democrats and Republicans are not two sides of the same coin, but rather different parts of the same genome. One cannot dominate the other, nor can either live without the other. Like it or not, the two parties are condemned to coexist with one another.
By: Larrie D. Ferreiro, The Atlantic, June 11, 2012
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 
