Friday, October 14, 2011


From the New York Times, Nobel Prize winning economist Paul Krugman on how the Republican understanding of economics has gone much further into voodoo territory than was ever thought possible:

Rabbit-Hole Economics

In the real world, recent events were a devastating refutation of the free-market orthodoxy that has ruled American politics these past three decades. Above all, the long crusade against financial regulation, the successful effort to unravel the prudential rules established after the Great Depression on the grounds that they were unnecessary, ended up demonstrating — at immense cost to the nation — that those rules were necessary, after all.

But down the rabbit hole, none of that happened. We didn’t find ourselves in a crisis because of runaway private lenders like Countrywide Financial. We didn’t find ourselves in a crisis because Wall Street pretended that slicing, dicing and rearranging bad loans could somehow create AAA assets — and private rating agencies played along. We didn’t find ourselves in a crisis because “shadow banks” like Lehman Brothers exploited gaps in financial regulation to create bank-type threats to the financial system without being subject to bank-type limits on risk-taking.

No, in the universe of the Republican Party we found ourselves in a crisis because Representative Barney Frank forced helpless bankers to lend money to the undeserving poor.


The Great Recession should have been a huge wake-up call. Nothing like this was supposed to be possible in the modern world. Everyone, and I mean everyone, should be engaged in serious soul-searching, asking how much of what he or she thought was true actually isn’t.

But the G.O.P. has responded to the crisis not by rethinking its dogma but by adopting an even cruder version of that dogma, becoming a caricature of itself.

More here.

During the financial implosion of 2007, I really did have a sense that it was all over for neoliberalism. I mean, I wasn't sure how it was all going to work out, but it seemed totally obvious that one of the most foundational assumptions of this economic point of view, that markets are self-regulating, was exposed as bullshit for all to see. I had no idea what conservatives were going to be considering as a replacement economic philosophy, but I was becoming more certain every day that there was no way they could continue with the views they'd had for over three decades.

I really should have known better.

Conservatives simply doubled down on their bullshit economics. It took me awhile to understand what was happening. In my world, the real world, concrete events had proven once and for all that standard Republican tropes about the economy could no longer be trusted. In the conservative world, concrete events didn't matter. Just a little fiction here, a little fiction there, and bang! There was, indeed, a financial collapse, but...lo, and was all the liberals' fault. By the time I understood this dynamic, the Tea Party was driving the Republicans toward yet another electoral victory in 2010.

Like I said, I should have known better: these are the same people who, in spite of masses of evidence to the contrary, took us to war in Iraq because of weapons of mass destruction that didn't exist. The same people who insist that climate change isn't real, or that if it is real, isn't man made. The same people who think the world is only five thousand years old. The same people who think President Clinton murdered Vince Foster and ran cocaine through Arkansas for Colombian drug cartels. The same people who endlessly preach about government spending being out of control, but when in control of Congress took a surplus and turned it into a trillion dollar deficit. And then blamed the Democrats for it. The same people who think that withholding birth control information in lieu of religious "abstinence" will lower unwanted pregnancy and STD rates. And on and on and on.

It is no surprise at all, in hindsight, anyway, that conservatives totally ignored definitive proof of neoliberalism's fictitious nature. They've been practicing this for years now. They've become experts at believing whatever feels right and then insisting that everybody else believes, too. No surprise. They're good at this.

I just never imagined they would be able to pull it off on such a grand scale.