Thursday, July 7, 2011

Stiglitz on the Real Legacy of Ronald Reagan

Here are some bits from an excellent article by Nobel Prize-winning economist Joseph Stiglitz in Salon magazine:
Just a few years ago, a powerful ideology—the belief in free and unfettered markets—brought the world to the brink of ruin. Even in its heyday, from the early 1980s until 2007, American-style deregulated capitalism brought greater material well-being only to the very richest of the richest country of the world. Indeed, over the course of this ideology's 30-year ascendance, most Americans saw their incomes decline or stagnate.

Moreover, output growth in the United States was not economically sustainable. With so much of U.S. national income going to so few, growth could continue only through consumption financed by a mounting pile of debt.

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government. Alas, that has not been the case. On the contrary, a resurgence of right-wing economics, driven by ideology and special interests, once again threatens the global economy—or at least the economies of Europe and North America, where these ideas continue to flourish.

In the United States, this right-wing resurgence, whose adherents evidently seek to repeal the basic laws of math and economics, is threatening to force a default on the national debt. If Congress mandates expenditures that exceed revenues, there will be a deficit, and that deficit has to be financed. Rather than balancing the benefits of each government expenditure program with the costs of raising taxes to finance those benefits, the right seeks to use a sledgehammer—not allowing the national debt to increase forces expenditures to be limited to taxes.


Do we really need another costly experiment with ideas that have repeatedly failed? We shouldn't, but increasingly it appears that we will have to endure another one nonetheless. A failure of either Europe or the United States to return to robust growth would be bad for the global economy. The failure of both would be disastrous—even if the major emerging-market countries have attained self-sustaining growth. Unfortunately, unless wiser heads prevail, that is the way the world is heading.
The Republicans have no truly reputable economist who supports their "no taxes" agenda. Obama has no credibility because he has refused to listen to, let alone appoint, a credible economist to lead his efforts to get the economy going. Instead, all of them have quit. I'm assuming they simply gave up after trying for two and a half years to get a hearing and being rebuffed by Obama. Instead Obama uses his "gut instinct" about how government is "life a family" and needs to rein in its deficits and be cautious with its finances.

If Obama truly believes that governments should be like families, then why doesn't he also think that families should be like governments? Since state governments have taken the suicidal approach that deficits are forbidden they are currently shutting down services and laying off people. Well... families should behave the same way. No buying a house on credit. No buying a car on credit. Only "cash on the barrel head" like in the "good old days". (If that advice were followed the US economy would contract by about 50%, or a bigger contraction than the Great Depression.) If families showed the same "common sense" that the state governments have insanely decided to follow, then you will find that children will live in their parents homes until they are 40 or 50 years old. Marriages would be postponed until enough money is saved to buy a house for cash which means that when couples marry in the mid-forties they will be infertile. This will certainly make the "green" party wildly happy. Human populations will crash and we can hand the land back to Mother Nature where the greens assure us "it belongs".

I simply can't believe that uneducated and stupid views reign in the US. This is a great recipe to frog march America into banana republic status.

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