Friday, September 14, 2012


New Krugman:

The iPhone Stimulus

What I’m interested in, instead, are suggestions that the unveiling of the iPhone 5 might provide a significant boost to the U.S. economy, adding measurably to economic growth over the next quarter or two.

Do you find this plausible? If so, I have news for you: you are, whether you know it or not, a Keynesian — and you have implicitly accepted the case that the government should spend more, not less, in a depressed economy.


Instead, the reason JPMorgan believes that the iPhone 5 will boost the economy right away is simply that it will induce people to spend more.

And to believe that more spending will provide an economic boost, you have to believe — as you should — that demand, not supply, is what’s holding the economy back. We don’t have high unemployment because Americans don’t want to work, and we don’t have high unemployment because workers lack the right skills. Instead, willing and able workers can’t find jobs because employers can’t sell enough to justify hiring them. And the solution is to find some way to increase overall spending so that the nation can get back to work.


Yet far from using public spending to support the economy in its time of trouble, our political system — driven by a combination of ideology, exaggerated deficit fears and Republican obstructionism — has moved to make the depression worse. Yes, unemployment benefits and food stamps are up, because so many more people are in need; but government employment has plunged, as has public investment.

More here.

Many years ago, I read Noam Chomsky asserting that the Wall Street Journal is probably the best paper in the United States, in spite of its psychotic editorial section. The Journal can print the truth, he observed, because businessmen need facts in order to do business, and they don't need any spin because, being businessmen, they already agree with capitalism and pro-business values. That is, the propagandizing is in the op-ed section; the news, real, hard news, however, is in the rest of the paper.

This has always fascinated me because the easy conclusion to make from Chomsky's observation is that businessmen have split personalities. On the one hand, they buy all the bullshit political neoliberal "trickle down" rhetoric in terms of who they support for elected office; on the other hand, they also have their feet in the real world because to deny reality is to lose money. And that's exactly what this analysis from JP Morgan economists seems to be about. You have leaders from the finance industry, indeed, JP Morgan leaders, continually supporting Republican economic positions, continually insisting the economy is weak because of taxes, or regulation, or lazy workers, whatever, all the bullshit. But their actual economists are saying the exact opposite: weak consumer spending is keeping the economy down. So they have a political position, and they have an economic position, and they're just not the same thing.

Richard Nixon once said, "We're all Keynesians now." And, of course, in terms of tribal self-identification, he ended up being wrong--his entire party became entranced by Milton Friedman, the anti-Keynes. But in terms of how actual businessmen work within the actual economy, he may very well have been right.