Why America is Confused

Here is the start of a post by Dean Baker on his Beat the Press blog that incisively identifies why the average American is completely confused about the economy, the role of big business, and who politics works:

David Brooks Is Projecting His Self Indulgence Again

Undoubtedly projecting from the fact that he can draw a nice 6-figure income for little obvious work, David Brooks complained in his column:

"Today, the country is middle-aged but self-indulgent. Bad habits have accumulated."

For the most part the column is a confused diatribe against the Obama administration's economic policies with a lecture on moral rectitude thrown in for good measure. He starts by condemning the efforts to stimulate the economy by telling readers:

"Today, Americans are more likely to fear government than be reassured by it.

"According to a Gallup survey, 64 percent of Americans polled said they believed that big government is the biggest threat to the country. Only 26 percent believed that big business is the biggest threat. As a result, the public has reacted to Obama’s activism with fear and anxiety. The Democrats lost 63 House seats in the 2010 elections."

One might think that the fact that the Obama administration relied on a stimulus that was only designed to lower the unemployment rate by 1.5-2.0 percentage points might have played a big role in the election defeat. (Read the number of jobs the stimulus was projected to create, not the baseline forecasts for the economy.) If the government had used bigger stimulus to get the unemployment rate down to say -- 7 percent -- it is difficult to believe that the Democrats would have suffered such a big defeat last year, in spite of people's fear of big government.

After dismissing the stimulative policies of the Great Depression, Brooks then gives us a beautifully crafted grand misunderstanding of economics comparing the economy today with the economy of the Progressive era:

"the underlying economic situations are very different. A century ago, the American economy was a vibrant jobs machine. Industrialization was volatile and cruel, but it produced millions of new jobs, sucking labor in from the countryside and from overseas.

"Today’s economy is not a jobs machine and lacks that bursting vibrancy. The rate of new business start-ups was declining even before the 2008 financial crisis. Companies are finding that they can get by with fewer workers. As President Obama has observed, factories that used to employ 1,000 workers can now be even more productive with less than 100."

The fact that factories can produce large amounts of output with 100 workers is in fact evidence of economic vibrancy, not the opposite. This is called "productivity growth." It is the main measure of the economy's ability to raise living standards through time. The fact that 100 people in a factory can produce the same output as 1000 people did 30 years ago means that we are potentially much richer than we were 30 years ago. We can have the other 900 people doing other productive work. Alternatively, we can all work many fewer hours.

Whether or not this productivity growth generates jobs depends on the structure of the economy. If the productivity growth translates into wage growth, as was the case with the very rapid productivity growth of early post-war period, then it is likely to be associated with a vibrant jobs machine. On the other hand, if the One Percent pocket most of the benefits of productivity growth, then we may have real problems of stagnation and lack of job growth, since the Bill Gateses of the world will probably not increase their spending much if they get another billion or two. The key issue here is the distribution of the gains of productivity growth, a simple fact that totally escapes Brooks.

Go read the whole article. There is much more to learn from Dean Baker.

One reason why Americans keep electing the right wing Republicans is because the media is dominated by fools with a glib and seductive writing style like David Brooks. I confess that I was seduced by his book Bobos in Paradise but I've since had the scales fall from my eyes. Brooks is a seductive writer much like William F. Buckley. It is easy to be seduced by those who dismiss the gritty reality and instead focus on grandiose generalities that blame the victim and put robber barons on pedestals.