What Real Economic Stimulus Looks Like

Via Brad DeLong and Jamie Galbraith, here’s what real economic stimulus looked like:

If the banking system is crippled, then to be effective the public sector must do much, much more. How much more? By how much can spending be raised in a real depression? And does this remedy work? [E]conomist Marshall Auerback….

“[Roosevelt’s] government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.”

In other words, Roosevelt employed Americans on a vast scale, bringing the unemployment rates down to levels that were tolerable, even before the war—from 25 percent in 1933 to below 10 percent in 1936, if you count those employed by the government as employed, which they surely were.

If you’re in a hurry, check out DeLong… He will give you the shorthand. If not, and want a more in-depth view, be sure to read Galbraith’s column. He was one of a few progressive economists that called the game early (March 2009), and in hindsight was pretty much spot on in his analysis. Galbraith’s piece is both a good primer on the history of how Obama’s economic team reacted to the crisis, and a prescient analysis of Geitner’s banking plan, identifying weaknesses in the plan then now playing out. The article is invaluable for understanding why we are struggling still with high unemployment and little movement to implement policy to put people to work. The Obstructionistas in Congress and in the States have by choice given us a socially devastating slow recovery, instead implementing policy that cuts both revenue and spending, prolonging the crisis for millions rather than mitigating its effects on Main St and the middle class. Intent on shrinking government to the size it can be drowned in a bathtub, as Grover Norquist famously quipped, the Norquist tax pledge has held hostage the politicians who signed his pledge to cut taxes to draconian measures shouldered by the unemployed, the elderly, children, the poor and the sick.

Focusing on the short-term, the Obstructionistas have turned common sense and precedent on their heads, giving the American middle class stones when what they have asked for is bread. When government can borrow at negative real interest rates to finance infrastructure projects and help relieve cash strapped State and municipal budgets, there is no better time to take advantage of cheap credit to help create jobs, spur demand, and get people back to work. The prevailing “wisdom” runs counter to such common sense, and the suffering continues. By choice… The slow recovery is because of politics, little else… And from the politics comes this:

For the first time since the 1930s, millions of American households are financially ruined. Families that two years ago enjoyed wealth in stocks and in their homes now have neither. Their 401(k)s have fallen by half, their mortgages are a burden, and their homes are an albatross. For many the best strategy is to mail the keys to the bank. This practically assures that excess supply and collapsed prices in housing will continue for years. Apart from cash—protected by deposit insurance and now desperately being conserved—the American middle class finds today that its major source of wealth is the implicit value of Social Security and Medicare—illiquid and intangible but real and inalienable in a way that home and equity values are not. And so it will remain, as long as future benefits are not cut.

Who, then, claiming to identify with the American middle class, would in their right mind propose cuts to Social Security and Medicare? As it turns out, the President’s Simpson-Bowles “cat food” Commission, the Tea Party caucus in Congress, a presidential candidate, and scads of candidates for lesser office… you get the idea… just about everyone except those progressives that have an appreciation for history and what has gone before.

More on recession dynamics here. And be sure to read this recent post, A Manifesto for Economic Sense.

A Manifesto for Economic Sense, and Why We Need One…

Why are policy makers so immune to doing the right thing when it comes to creating and following policy that will ease the current unnecessary crisis of unemployment and reign in the forces that have taken the world into the financial and economic crisis we still face? Here are two views offered to help understand the problem. First a look at what the problem really is and what policy makers can and should do immediately, and then a look at the hubris and criminality policy makers, particularly those on the right, refuse to acknowledge and address that is exacerbating the problem.

From www.manifestoforeconomicsense.org:

A Manifesto for Economic Sense

More than four years after the financial crisis began, the world’s major advanced economies remain deeply depressed, in a scene all too reminiscent of the 1930s. And the reason is simple: we are relying on the same ideas that governed policy in the 1930s. These ideas, long since disproved, involve profound errors both about the causes of the crisis, its nature, and the appropriate response.

These errors have taken deep root in public consciousness and provide the public support for the excessive austerity of current fiscal policies in many countries. So the time is ripe for a Manifesto in which mainstream economists offer the public a more evidence-based analysis of our problems.

  • The causes. Many policy makers insist that the crisis was caused by irresponsible public borrowing. With very few exceptions – other than Greece – this is false. Instead, the conditions for crisis were created by excessive private sector borrowing and lending, including by over-leveraged banks. The collapse of this bubble led to massive falls in output and thus in tax revenue. So the large government deficits we see today are a consequence of the crisis, not its cause.
  • The nature of the crisis. When real estate bubbles on both sides of the Atlantic burst, many parts of the private sector slashed spending in an attempt to pay down past debts. This was a rational response on the part of individuals, but – just like the similar response of debtors in the 1930s – it has proved collectively self-defeating, because one person’s spending is another person’s income. The result of the spending collapse has been an economic depression that has worsened the public debt.
  • The appropriate response. At a time when the private sector is engaged in a collective effort to spend less, public policy should act as a stabilizing force, attempting to sustain spending. At the very least we should not be making things worse by big cuts in government spending or big increases in tax rates on ordinary people. Unfortunately, that’s exactly what many governments are now doing.
  • The big mistake. After responding well in the first, acute phase of the economic crisis, conventional policy wisdom took a wrong turn – focusing on government deficits, which are mainly the result of a crisis-induced plunge in revenue, and arguing that the public sector should attempt to reduce its debts in tandem with the private sector. As a result, instead of playing a stabilizing role, fiscal policy has ended up reinforcing the dampening effects of private-sector spending cuts.

In the face of a less severe shock, monetary policy could take up the slack. But with interest rates close to zero, monetary policy – while it should do all it can – cannot do the whole job. There must of course be a medium-term plan for reducing the government deficit. But if this is too front-loaded it can easily be self-defeating by aborting the recovery. A key priority now is to reduce unemployment, before it becomes endemic, making recovery and future deficit reduction even more difficult.

How do those who support present policies answer the argument we have just made? They use two quite different arguments in support of their case.

The confidence argument. Their first argument is that government deficits will raise interest rates and thus prevent recovery. By contrast, they argue, austerity will increase confidence and thus encourage recovery.

But there is no evidence at all in favour of this argument. First, despite exceptionally high deficits, interest rates today are unprecedentedly low in all major countries where there is a normally functioning central bank. This is true even in Japan where the government debt now exceeds 200% of annual GDP; and past downgrades by the rating agencies here have had no effect on Japanese interest rates. Interest rates are only high in some Euro countries, because the ECB is not allowed to act as lender of last resort to the government. Elsewhere the central bank can always, if needed, fund the deficit, leaving the bond market unaffected.

Moreover past experience includes no relevant case where budget cuts have actually generated increased economic activity. The IMF has studied 173 cases of budget cuts in individual countries and found that the consistent result is economic contraction. In the handful of cases in which fiscal consolidation was followed by growth, the main channels were a currency depreciation against a strong world market, not a current possibility. The lesson of the IMF’s study is clear – budget cuts retard recovery. And that is what is happening now – the countries with the biggest budget cuts have experienced the biggest falls in output.

For the truth is, as we can now see, that budget cuts do not inspire business confidence. Companies will only invest when they can foresee enough customers with enough income to spend. Austerity discourages investment.

So there is massive evidence against the confidence argument; all the alleged evidence in favor of the doctrine has evaporated on closer examination.

The structural argument. A second argument against expanding demand is that output is in fact constrained on the supply side – by structural imbalances. If this theory were right, however, at least some parts of our economies ought to be at full stretch, and so should some occupations. But in most countries that is just not the case. Every major sector of our economies is struggling, and every occupation has higher unemployment than usual. So the problem must be a general lack of spending and demand.

In the 1930s the same structural argument was used against proactive spending policies in the U.S. But as spending rose between 1940 and 1942, output rose by 20%. So the problem in the 1930s, as now, was a shortage of demand not of supply.

As a result of their mistaken ideas, many Western policy-makers are inflicting massive suffering on their peoples. But the ideas they espouse about how to handle recessions were rejected by nearly all economists after the disasters of the 1930s, and for the following forty years or so the West enjoyed an unparalleled period of economic stability and low unemployment. It is tragic that in recent years the old ideas have again taken root. But we can no longer accept a situation where mistaken fears of higher interest rates weigh more highly with policy-makers than the horrors of mass unemployment.

Better policies will differ between countries and need detailed debate. But they must be based on a correct analysis of the problem. We therefore urge all economists and others who agree with the broad thrust of this Manifesto to register their agreement at http://www.manifestoforeconomicsense.org, and to publically argue the case for a sounder approach. The whole world suffers when men and women are silent about what they know is wrong.

And why we need economic common sense…

Matt Taibbi contributing editor of The Rolling Stone magazine, and Yves Smith, author of Econned, and creator of the blog http://www.nakedcapitalism.com, explain against the backdrop of JP Morgan’s recent loss on (now estimated at nearly $9 billion) of bets hedging the bank’s investment positions, how Wall Street with Mafia-like fixing of bids, continuing government largess in corporate welfare propping up operations, and expertise at gaming the system with depositor funds epitomizes the greed that has played it’s role in destroying municipal, state, and national budgets, causing so much suffering through the resulting austerity measures, bailouts for the wealthiest, reductions in safety net protections to the elderly, children, the disabled, and the poor. Republican senators fawned over JP Morgan CEO Jamie Dimon in hearings earlier in June, ignoring JP Morgan’s record of criminal abuse evident in the fines paid for illegally foreclosing mortgages of military service men and women serving overseas, or for bid-rigging for municipal bonds and CDO fraud for which they paid fines of $228mil and $153mil, respectively, last year. Being too big to fail (privatizing profits, while socializing the risks inherent in gaining those profits) is apparently the neo-liberal corporatocracy the current crop of “trickle-down” economic faith-healers believe is the “American way” to freedom and liberty…

How Much Inequality?

A brief essay by Daniel Little on the website UnderstandingSociety asks the following questions, examining the issues of inequality in income and opportunity from moral, social justice, social cohesiveness, and utilitarian perspectives, with links to additional writings on each view.

How much inequality is too much?  Answers range from Gracchus Babeuf (all inequalities are unjust) to Ayn Rand (there is no moral limit on the extent of inequalities a society can embody). Is there any reasoned basis for answering the question?  What kinds of criteria might we use to try to answer this kind of question?

Ayn Rand’s novels appear to have infected a large number of people with the notion that moral considerations of inequality in a society are inappropriate when compared to the rights and motivations of the individual, which argument is helping fuel the divisive gridlock on economic matters policy makers are facing in States and the Federal government. The author of a budget proposal lacking a moral compass, Paul Ryan, is awarded a “fiscal responsibility” award, while legislation to aid job creation and to continue benefits for millions of the long-term unemployed is routinely blocked, growing an underclass of otherwise productive workers unable to return to their former areas of expertise or income levels. The States under growing budget constraints choose to cut revenues, primarily for those at the top of the income scale, while they reduce spending, placing the burden of strangled government on the shoulders of the unemployed, the elderly, children, the sick, and the disabled. It is not hard to see the moral inequality of these actions, and as Joseph Stiglitz in his commentary and latest book, The Price of Inequality, How Today’s Divided Society Endangers Our Future, points out social cohesiveness is at risk as those in the vice of unequal policy and advantage in society reject and resist such policy. (More here.)

America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.

And the driver of this alienation…? The “anything goes” philosophy from the right that has promoted security force violence against students and demonstrators protesting the effects of inequality, too big to fail industries that privatize their profits while socializing the risks they take to realize their profits, and unresponsive government unwilling and unable to represent the vast majority of people in their societies. Can we do better? Let us hope so…

The Great Recession

At the end of April PBS’s investigative unit Frontline began showing the first of their four part series,  Money, Power and Wall St. Each one hour segment  is worth paying close attention to. I developed a greater appreciation for how collateralized debt obligations (CDO’s) and credit default swaps (CDS’s) are created, traded, and how the market for these derivatives — private, proprietary, opaque — contributed to (if not created) the financial crisis and continues to create enormous risk today. Several of the economists and public officials that I have looked to to gain understanding of the crisis, and have found to be progressively minded and extremely knowledgeable, Robert Reich, Joseph Stieglitz, Paul Krugman, Jared Bernstein, are featured along with a number of other smart, informed, highly credible players in the drama that unfolded. The role of Occupy Wall Street is featured prominently is this discussion, especially in the last hour with interviews of the Occupiers, former Wall St. traders, involved with Occupy the SEC and whose workgroup is offering public comment on the rule-making process surrounding the Frank-Dodd legislation.

The Derivative Markets

The phenomenal profit to be made from securitizing mortgages for a growing derivatives market drove both unscrupulous and unwitting lenders to write mortgages as fast as they could that many borrowers simply couldn’t afford, or similarly didn’t understand as to the terms to which they were agreeing. Predatory lending and aggressive markets in derivatives largely fueled a worldwide housing bubble, which when bursting caught up millions of people stuck with out-sized mortgages worth more than the homes they had financed. This derivatives market is to this day a largely unregulated shadow banking industry, which in 2010 held assets of $13 trillion, $3 trillion more than the regulated, public, commercial banking system held in loans.

This shadow banking system trades derivatives in private, proprietary transactions and counter bets which wiped out unsuspecting investors not only in mortgage markets, but created turmoil for cities in the US and Europe, and for nations such as Greece, Ireland, Spain. A complicated deriviatives deal in Italy by Bear Stearns left the city of Casino in debt to the financiers at Bear. Goldman Sachs profited by the hundreds of millions from derivative deals with Greece, helping propel Greece into the civil turmoil discussed below in the posting Dignity. The bank runs that ensued in the turmoil of late 2008 and 2009 depleted some of the largest Wall St. banks of their already thin, over-leveraged capital reserves, freezing credit, and very nearly initiating a second Great Depression. Nearly $8 Trillion in emergency loans by the Federal Reserve to banks around the globe prevented a much more serious crisis from enveloping the world economy.

An Occupier

Additional at length interviews by some of the contributors are also worth taking in. Cathy O’Neil wanted to be a mathematician since she was in her early teens. Her academic path lead her from UC Berkeley to Harvard to MIT and post-grad training. After joining a hedge fund company and coming to see the basic immorality of the prevailing attitude on Wall St. she left her firm to take up risk analysis. As a former “quant,” an analyst who understood the statistical models used to gauge trends traders reacted to Ms. O’Neil brought to the alternative banking working group of OWS her expertise with risk management and how the system can and does get gamed. She has been working with the sub-group Occupy the SEC to submit public comment on the Volker Rule which is meant to regulate the extent to which commercial and investment banking in a single firm might overlap. A step in the right direction to the reinstatement of Glass-Steagall-like protections, which provided a clear separation of commercial and investment banking, the Volker Rule as part of the Frank-Dodd Financial Reform Act may help Frank-Dodd be an effective piece of reform legislation. If watered down too much, by banking lobbyists and the loopholes they argue for, the legislation will be weak and unable to reign in the predatory nature of Wall St. investment banking.

 

Another additional at length interview worth your attention is by Phil Angelides, head of the Financial Inquiry Commission that investigated the crisis and who has advocated deep reform measures to address the ongoing threat, as serious a threat as before the crisis that in his words “hasn’t ended.”

Some may view this series as “too establishment,” as too much an endorsement of a system thoroughly broken… I view this as a good starting place to begin to understand the history, knowing no historical depiction is ever 100% correct. I encourage folks to have a look and take from this what they will.

GOP Rep. Paul Ryan’s Budget in Need of Absolution

From Solidarity Notes (Albany, NY) June, 2012

Georgetown Priests and Faculty Take Issue With GOP Rep. Ryan’s Budget Plan

Republican Rep. Paul Ryan, a Roman Catholic, claims that his budget is in keeping with the traditions of his faith, as he cuts social programs, attempts to cut or eliminate parts of Social Security, Medicaid, and Medicare—but there are those who disagree with him on all of his attempts to make life easier for the rich and for Corporate America.

The following is a letter that met Ryan when he recently went to Georgetown University in Washington to explain how his budget and policy views are beneficial to the people:

Dear Rep. Paul Ryan:

Welcome to Georgetown University. We appreciate your willingness to talk about how Catholic social teaching can help inform effective policy in dealing with the urgent challenges facing our country. As members of an academic community at a Catholic university, we see your visit on April 26 for the Whittington Lecture as an opportunity to discuss Catholic social teaching and its role in public policy.

However, we would be remiss in our duty to you and our students if we did not challenge your continuing misuse of Catholic teaching to defend a budget plan that decimates food programs for struggling families, radically weakens protections for the elderly and sick, and gives more tax breaks to the wealthiest few. As the U.S. Conference of Catholic Bishops has wisely note in several letters to Congress – “a just framework for future budgets cannot rely on disproportionate cuts in essential services to poor persons.” Catholic bishops recently wrote that “the House-passed budget resolution fails to meet these moral criteria.”

In short, your budget appears to reflect the values of your favorite philosopher, Ayn Rand, rather than the Gospel of Jesus Christ. Her call to selfishness and her antagonism toward religion are antithetical to the Gospel values of compassion and love.

Cuts to anti-hunger programs have devastating consequences. Last year, one in six Americans lived below the official poverty level and over 46 million Americans—almost half of them children—used food stamps for basic nutrition. We also know how cuts in Pell Grants will make it difficult for low-income students to pursue their educations at colleges across the nation, including Georgetown. At a time when charities are strained to the breaking point and local governments have a hard time paying for essential services, the federal government must not walk away from the most vulnerable.

While you often appeal to Catholic teaching on “subsidiarity” as a rationale for gutting government programs, you are profoundly misreading Church teaching. Subsidiarity is not a free pass to dismantle government programs and abandon the poor to their own devices. This often-misused Catholic principle cuts both ways. It calls for solutions to be enacted as close to the level of local communities as possible. But it also demands that higher levels of government provide help—“subsidium”—when communities and local governments face problems beyond their means to address such as economic crises, high unemployment, endemic poverty and hunger.

According to Pope Benedict XVI: “Subsidiarity must remain closely linked to the principle of solidary and vice versa.”

Along with this letter, we have included a copy of the Vatican’s Compendium of the Social Doctrine of the Church, commissioned by John Paul II, to help deepen your understanding of Catholic social teaching.

Respectfully,

(Signed by 90 priests and faculty members of Georgetown University, a Jesuit institution in Washington, D.C., at the end of April….)
I guess that means all those Congress members that voted for Ryan’s budget ought to be seeking forgiveness as well.

Nick Hanauer’s “Controversial” TED talk

So, really, who are the “job creators?” Not those the political class would have you believe… the hallowed 1%. The following TED talk is a simple, though not simplistic, explanation of how the economy really works so far as job creation is concerned, and why building and maintaining a strong middle class is so important. The feedback loop between business and the middle class is what creates jobs, not the incredibly wrongheaded economic ideas that have gained currency today, of an almost deified set of “job creators,” the very wealthy, an idea egged on by self-serving politicos, the corporate media, and economically unenlightened journalism.

Paul Ryan’s draconian and ridiculous budget Congressional Republicans have in lockstep backed, or Maine Governor Paul LePage’s and the Republican legislature’s cruel supplemental budget, both based on thoroughly discredited “trickle down” economic theories of Hayek and the “Chicago boys” channeling Milton Friedman, have been shown over and over to be a drag on the economy, slowing job creation, creating and extending misery for those under-employed or among the long-term unemployed.

Without an enlightened understanding of how our macro-economy works, things will only get worse. The redistribution of wealth and opportunity will continue to flow upwards, the middle class will continue to shrink creating an even larger underclass desperate for relief from those that seem to have no interest or ability in providing relief, their elected representatives. The current obsession with perpetual war, the security state, and a war economy that displaces useful manufacturing with armaments and weaponry serves the elite businesses that dominate the world economy. Governments captured by the elite in this mindset have little choice but to deliver… to the detriment of the masses who must comply in order to survive.

Have a look, and decide for yourself…

Dignity

What the financial crisis still rocking the world has taken from many middle and lower income people is not only their livelihoods, savings, or pensions, but their dignity. The Greek sovereign debt crisis has many causes, not the least of which are the structural weaknesses inherent in the European Union being an economic union but not a political union. The role of financial speculators such as Goldman Sachs has not been discussed in much depth in the mainstream corporate media, but its influences are without a doubt being felt along with the austerity imposed by the banking giants in Europe futilely, it would appear, trying to hold the EU together. If recent reports are correct, that will be increasingly difficult as the countries that make up that bloc retrench and weather the crisis that has yet to subside for a great many of the world’s people.

For one pensioner in Athens, the austerity imposed upon Greece by foreign creditors proved the last straw. Dimitris Christoulas , a retired 77 years old pharmacist took his own life in Syntagma Square in the center of Athens leaving the following note describing his actions:

In translation:

The collaborationist Tsolakoglou government has annihilated my ability  for my survival, which was based on a very dignified pension that I alone (without any state sponsoring) paid for 35 years.

Since my advanced age does not allow me a way of a dynamic reaction (although if a fellow Greek was to grab a Kalashnikov, I would be the second after him), I see no other solution than this dignified end to my life, so I don’t find myself fishing through garbage cans for my sustenance.

I believe that young people with no future, will one day take up arms and hang the traitors of this country at Syntagma square, just like the Italians did to Mussolini in 1945 (Piazza Loreto in Milan).

Dimitris’s death sparked riots in the streets of Athens as frustrated Greeks suffering under the heavy weight of austerity measures fought with police whom they accuse of being the enforcers of a fascist regime. The reference to “the collaborationist Tsolakoglou government” refers to the pro-Axis government of Georgios Tsolakoglou during the German occupation of Greece in 1941 – 1942. Chants following Dimitris Christoulas’s funeral included: “Fascists! Sons of Bitches! Here come the hangings!” When crowds descended on Syntagma Square an aggressive policeman opposing the mourners was badly beaten.

“I won’t pay.”

Renee Maltezou in ekathimerini.com writes:

Stunned Greeks asked if a flawed recipe of austerity cuts to save the country was pushing its citizens to the brink – and family and friends said that is exactly what Christoulas had hoped to accomplish.

“My father’s handwritten note leaves no room for misinterpretation. His whole life was spent as a leftist fighter, a selfless visionary,» his only daughter, Emy Christoula, 43, said in a statement.

“This final act was a conscious political act, entirely consistent with what he believed and did in his life.”

She recalled as a child attending a 1975 concert by Greek leftist composer Mikis Theodorakis, where she and her father sang together. For some dreamers, «committing suicide is not an escape but a cry of awakening», she said.

Friends and acquaintances describe Christoulas as a quiet and gentle man, but also a passionate leftist deeply shaken by the pain that the crisis had inflicted on his fellow citizens.

To many who knew him, «Makis» was a hero – a martyr who had jolted Greeks into asking whether spending and salary cuts prescribed by the foreign lenders in exchange for financial aid as Greece lurched towards bankruptcy had gone too far.

“The way he did it made the difference. It was a political act,» said 91-year old Thymios, a fellow-member of Christoulas’s neighbourhood association, who would not give his last name.

“Maybe the right thing would be to keep fighting but his act was symbolic: He went into the politicians’ ‘nest’ – parliament – and humiliated them.”

As foreign elites demand austerity in return for loans, and a compliant government bends to the wishes of those elites and enlists the security forces to enforce compliance from the public, a pensioner robbed of his pension commits a final act meant to preserve his dignity. The last book he read was Greece’s Pompeii, a comparison of Pompeii’s decadent, corrupt social system with modern Greece. Yet another stark example of the instability of inequality.

Growth, Inequality, Policy, and Power: Connecting the Dots

Another new Teach-In addition comes by way of a slideshow presentation given by Jared Bernstein of the Center on Budget and Policy Priorities during a talk in the Daniel Thursz Distinguished Professor of Social Justice Lecture series at the University of Maryland in March 2012. This is an easy to follow discussion of the causes of our present inequality and how the prevalent economic policy agenda is exacerbating inequality, a growth in poverty as opposed to fair economic growth, and a rise in children living in poverty.

The Top Ten (that profit from war… and why state and local budgets are in depression)

Military contractors lobby Congress and the Pentagon for contracts, and once they win the contracts they use some of that money to lobby Congress and the Pentagon for contracts, and once they win the contracts they use some of that money to lobby Congress and the Pentagon for contracts, and once they…

The Top Ten.

Haven’t we been warned that this might happen?

Another View on the Politics Prolonging the Lesser Depression

This VOXEU article discusses the politics that arise in the aftermath of financial crises on a broader scale, not just our current one.

Political environments appear systematically different in the aftermath of a financial crisis relative to before the crisis. This column argues that the ensuing gridlock and the delay in potentially beneficial policy reforms should come as no surprise.

Financial crises of all colours (banking, currency, inflation, or debt crises) leave deep marks on an economy. Deep economic contractions, both in output and employment, are systematic in the interim and in the aftermath of financial crises, as thoroughly documented in research by Reinhart and Rogoff (2009) and Reinhart and Reinhart (2010).

Sustained waves of volatility, often resulting in secondary crises (e.g. debt crises following banking crashes), are almost the norm in the post-crisis period (Reinhart and Rogoff 2011).

What exactly occurs in the aftermath of financial crises that makes recovering from such shocks so hard? This column argues that the answer may lie mostly with the politics, not the economics.

I might disagree with the authors that the Occupy movement is primarily a “leftist” movement, but the overwhelming weight of this analysis that the politics of the extremes are at play here is difficult to dismiss. With the dominant culture favoring the corporatist alignments of corporation, wealth, and the elite political class the extreme politics prolonging the current Lesser Depression, as Paul Krugman describes our present economic status, can be best described as that which favors inequality at the expense of the vast majority of the public in the world’s nations today. Austerity in Europe is pushing the EU into a recession, and while the Federal government in the US has largely avoided the drastic austerity crippling Britain, Spain, Ireland, Portugal,  and Greece states and local municipalities in the US are being forced into austere budget cuts that defy logic, are counter-productive to growth, largely rooted in extreme political economics espoused by both parties that for the past 40 years has helped create the difficulties and inequality we are now experiencing.

 

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