Thursday, May 24, 2012

Paul Krugman: We Could End This Depression Right Now

An interview about the Nobel Prize winning economist's new book, from AlterNet:

JH: I want to encourage people to read the book, but can you just give readers a sense of what you think is the most important thing policy makers should be thinking about doing right now?

PK: The moral of the book is: this doesn’t have to be happening. This is essentially a technical process; it’s a small thing. It’s like having a dead battery in a car, and while there may be a lot wrong with the car, you can get the car going remarkably easily, if you’re willing to accept that’s what the problem really is.

First and foremost, what we have is an economy that just doesn’t have enough spending. Consumers are hobbled by debt, corporations don’t want to spend if they don’t see consumer demand. Somebody has to step in and spend, and that somebody is the government. The government could – and by all means let’s talk about forward-looking, big projects -- right away get a big boost in the economy just by reversing the big cutbacks that have taken place in state and local governments these past three years. Get the schoolteachers rehired and get the policemen and firefighters back on the beat. Fill those potholes that have been developing in New Jersey and I believe all over America. We’d then be most of the way back to a decent economy again.

More here.

And then, as Krugman has explained at length in his New York Times columns and elsewhere, once the economy is growing again, the tax base necessarily grows as well, which puts the deficit in a much more manageable position, one that can be fixed without inflicting savage austerity on the most vulnerable in the population. Classic Keynesianism.

Unfortunately, this is a narrative that is either not understood or flat out rejected by the people who have the power to actually do anything about it. Even more unfortunately, the people rejecting it don't ever seem to offer any real reasons why they're rejecting it. And that's one of several reasons I'm so attracted to Krugman's understanding of economics: there are simply no compelling counterarguments out there addressing his assertions. I mean, it would be one thing if establishment figures, on Capitol Hill, Wall Street, and in the press, took on his arguments directly, but I've never seen it. Sure, people dismiss him, say he's wrong, and even, incomprehensibly, proclaim that he doesn't know what he's talking about, despite his Nobel Prize. But they don't take him on. Not really. Such counterarguments may very well exist somewhere out there, but they've never crossed my path. As far as I can tell, Krugman is like Chomsky in that he pisses people off, but nobody really wants to have a real argument with him.

So, for my money, Krugman's economic analysis stands uncontested and makes the most sense. If you're not reading his books and columns, you really have no idea what's going on.