The Big Shrug

New Krugman:

For more than three years some of us have fought the policy elite’s damaging obsession with budget deficits, an obsession that led governments to cut investment when they should have been raising it, to destroy jobs when job creation should have been their priority. That fight seems largely won — in fact, I don’t think I’ve ever seen anything quite like the sudden intellectual collapse of austerity economics as a policy doctrine.

But while insiders no longer seem determined to worry about the wrong things, that’s not enough; they also need to start worrying about the right things — namely, the plight of the jobless and the immense continuing waste from a depressed economy. And that’s not happening. Instead, policy makers both here and in Europe seem gripped by a combination of complacency and fatalism, a sense that nothing need be done and nothing can be done. Call it the big shrug. 

Even the people I consider the good guys, policy makers who have in the past shown real concern over our economic weakness, aren’t showing much sense of urgency these days. For example, last fall some of us were greatly encouraged by the Federal Reserve’s announcement that it was instituting new measures to bolster the economy. Policy specifics aside, the Fed seemed to be signaling its willingness to do whatever it took to get unemployment down. Lately, however, what one mostly hears from the Fed is talk of “tapering,” of letting up on its efforts, even though inflation is below target, the employment situation is still terrible and the pace of improvement is glacial at best. 

And Fed officials are, as I said, the good guys. Sometimes it seems as if nobody in Washington outside the Fed even considers high unemployment a problem. 

More here.

Krugman offers some explanations for why the institutions and individuals most concerned with the economy couldn't seem to care less about persistent high unemployment: lack of policy inertia, monetary hawks who have replaced the now discredited fiscal hawks, and my favorite, the fact that citizens don't matter in Washington, not in the way that the banks and corporations do.  All of this, of course, doesn't even amount to excuses, let alone good reasons for settling in and accepting that millions of Americans are now essentially useless to the economy through no fault of their own.

Whatever the explanation, though, it is completely clear that the American establishment is in the process of abandoning the implicit social contract between capitalism and the people.  That is, our economic system has for many decades been sold to us as the best one that could possibly exist because, in short, it delivers the goods, consistently, and in ways that other systems cannot.  Soviet Socialism, for instance, functioned, to an extent, for a very long time, but with a much lower standard of living for most people than existed in capitalist countries.  Sure, we've always had some poor people, but capitalism is an expanding pie, a rising tide lifting all the boats, and all that good stuff.  Just you wait, poor people, because capitalism is going to do its thing, and you won't be poor for long.  All you have to do is accept our assumptions, go find a job, any job, work hard, and your standard of living will improve.  Just trust us.

Since WWII, that very much seemed to be the case.  Wages improved.  Working conditions improved.  Middle class families could send their kids to college, go on vacations, have access to health care, all with a single bread winner.  Then came the 70s.  Wages stagnated.  Job security deteriorated.  Good middle class jobs became ever scarcer.  By the time the Soviet Union fell, and capitalism no longer had any real competitor, the last vestiges of the social contract were disappearing, as women entered the work force in droves, not because of feminism, but because they had to in order to make family ends meet.  As middle class families desperately attempted to maintain their lifestyles with the new easy-to-obtain credit cards the Banksters rammed down our throats.  As the cost of housing soared.  As the cost of health care soared.

Nobody in power has given a crap about this for thirty years, so why should they give a crap about it now?  The social contract was apparently always a ruse, a propaganda concept intended to make us hate socialism, and when it became clear that capitalism didn't have to use it anymore, the play-acting ended.  Screw the workers.  We don't owe them jobs.  We don't owe anybody anything.  And gimme my f'ing money.

It seems to me that if capitalism can't deliver the goods, if it is an economic system which, by design, exists solely to benefit only a relative few Americans, at the expense of everybody else, then it's time to find another system, one that DOES deliver the goods.

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