New Krugman:
A Permanent Slump?
But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?
You might imagine that speculations along these lines are the province of a radical fringe. And they are indeed radical; but fringe, not so much. A number of economists have been flirting with such thoughts for a while. And now they’ve moved into the mainstream. In fact, the case for “secular stagnation” — a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between — was made forcefully recently at the most ultrarespectable of venues, the I.M.F.’s big annual research conference. And the person making that case was none other than Larry Summers. Yes, that Larry Summers.
And if Mr. Summers is right, everything respectable people have been saying about economic policy is wrong, and will keep being wrong for a long time.
More here.
So, of course, in concluding that the establishment's conventional wisdom on economics, that is, conservative economics, is just wrong, Krugman offers the solution: good old fashioned Keynesianism, getting money into consumer hands in order to boost demand to a level such that it becomes self-sustaining. And I fully agree with him. But what interests me is how the political establishment seems just fine with keeping things the way they are, with what now appears to be permanent high unemployment, and anxiety, long hours, low pay, and absolutely no prospects for a better life for everybody else lucky enough to have a job, or two, or three, as the case may be.
This necessarily prompts a question. What good is capitalism, anyway? I mean, if this is the best the system can do, why on earth do we think it's the GREATEST THING EVER?
Having grown up during the Cold War, the point always made to me is that, while noble in intent, socialism, and its militant version communism, simply cannot increase material prosperity for a society the way that capitalism does. Well, okay. It's impossible not to note that the Dow just hit 16,000. And the rich just keep getting richer. So sure. Capitalism creates wealth like no other economic system ever devised by man. I mean, in some respects, we're just booming. Why, then, do most Americans continue on their long, sad path toward third world status? Shouldn't capitalism be doing its magic thing making us the GREATEST COUNTRY EVER?
Well, according to orthodoxy, that's exactly what capitalism ought to be doing. Except it's not. And I'm pretty certain at this point, after years and years of doing so, that deregulating business, cutting taxes for the rich, and scaling back, yet again, on spending for social programs is NOT going to make things any better. Indeed, as Krugman observes, it's the same old bullshit that's gotten us into this fine mess we're in now.
And that's what gives me the answer to my question about capitalism. In short, we can have winner-take-all capitalism, with corporate control of government, and all the cronyism that comes with it, or we can get back to what once seemed to work pretty well during the period between WWII and the Carter Administration: highly taxed well regulated capitalism, a capitalism that continues to act as an economic engine, but one much less likely to destroy the country, one that spreads around society the value that workers create. I mean, that's the deal when you get right down to it. Today's capitalists have perfected their ability to pocket virtually ALL the prosperity that capitalism creates, and they use that wealth to lock in their control of everything. Yesterday's capitalists, in stark contrast, were kept on the straight and narrow by a ruling establishment much wiser than the one we have today, or, at least, an establishment that wasn't bought off by corporate campaign cash and other favors. Obviously, I'm much more fond of yesterday's capitalism.
So, then, what good is capitalism? Clearly, it depends on how you do it. One way, the way we're doing it right now, isn't good for much at all. In fact, it's pretty bad. The other way, the way we used to do it before we let the inmates start running the asylum, actually did quite a bit of good. Somehow, some way, we need to rein capitalism in again, such that, instead of making all of us serve the system, we make the system serve all of us.
We've got a lot of work to do.
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