Krugman Trashes Austerity’s Phony Morality Economics

DAVOS/SWITZERLAND, 24JAN08 - Jean-Claude Trich...

DAVOS/SWITZERLAND, 24JAN08 – Jean-Claude Trichet, President, European Central Bank, Frankfurt, captured during the session ‘Systemic Financial Risk’ at the Annual Meeting 2008 of the World Economic Forum in Davos, Switzerland, January 24, 2008. (Photo credit: Wikipedia)

Apropos of a current theme of this blog, that the powerful Austrian school of economics that has supplanted Keynesianism as the go-to ideology of our government and, more and more, both political parties, is rooted in the same Nietzschean stew of pro-winner, anti-loser sentiment that appealed to the Nazis, Paul Krugman has a piece in the current New York Review of Books that devastates the “austerian” contention that Keynesianism feeds the Beast, while austerity corrects naughty economic behavior. His main support for his argument is the recent discovery of severe flaws in the methodology of two studies most often cited by austerians, one by Harvard profs Carmen Reinhart and Kenneth Rogoff and the other by Italy’s Alberto Alesina and Silvia Ardagna, purporting to show that government spending that exceeds 90% of GDP in the wake of a depression or financial meltdown is catastrophic for the economy in question.

David Stockman’s The Great Deformation … [is] an immensely long rant against excesses of various kinds, all of which, in Stockman’s vision, have culminated in our present crisis. History, to Stockman’s eyes, is a series of “sprees”: a “spree of unsustainable borrowing,” a “spree of interest rate repression,” a “spree of destructive financial engineering,” and, again and again, a “money-printing spree.” For in Stockman’s world, all economic evil stems from the original sin of leaving the gold standard. Any prosperity we may have thought we had since 1971, when Nixon abandoned the last link to gold, or maybe even since 1933, when FDR took us off gold for the first time, was an illusion doomed to end in tears. And of course, any policies aimed at alleviating the current slump will just make things worse.

In itself, Stockman’s book isn’t important. Aside from a few swipes at Republicans, it consists basically of standard goldbug bombast. But the attention the book has garnered, the ways it has struck a chord with many people, including even some liberals, suggest just how strong remains the urge to see economics as a morality play, three generations after Keynes tried to show us that it is nothing of the kind. Continue reading

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The Idle Rich and the Working Stiff: Nietzche von Hayek on Capital v. Labor

Corey Robin, whose Nation piece on Nietzsche and Hayek I referred to here, posted this comparison of the two thinkers’ ideas on class on his own blog. They support his contention that Hayek was more in tune with Nietzschean philosophy than commonly supposed. Whatever you think of Robin’s thesis, it is instructive at least to see the contempt or, at least, casual dismissal of the worth of the working class in Hayek’s musings.

Corey Robin

Nietzsche, Human, All Too Human:

Culture and caste.—A higher culture can come into existence only when there are two different castes in society: that of the workers and that of the idle, of those capable of true leisure; or, expressed more vigorously: the caste compelled to work and the caste that works if it wants to….the caste of the idle is the more capable of suffering and suffers more, its enjoyment of existence is less, its task heavier. (§439)

My utopia.—In a better ordering of society the heavy work and exigencies of life will be apportioned to him who suffers least as a consequence of them, that is to say to the most insensible, and thus step by step up to him who is most sensitive to the most highly substantiated species of suffering and who therefore suffers even when life is alleviated to the greatest…

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Also Sprach Hayek: Nietzsche and the Libertarians

Friedrich Wilhelm Nietzsche

Friedrich Wilhelm Nietzsche (Photo credit: risu)

Whatever has value in our world now does not have value in itself, according to its nature—nature is always value-less, but has been given value at some time, as a present—and it was we who gave and bestowed it.

Friedrich Nietzsche, The Gay Science (1882)

Value is therefore nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs, that is, to our lives and well-being.

Carl Menger, Principles of Economics (1871)

Corey Robin has a fascinating, very long post up at The Nation on the possible (or even likely)  connections between Nietzsche and the Austrian school economists (Hayek, von Mises and their American disciples). He’s added a bit at Crooked Timber, where a lively discussion is underway.

Here’s his opening:

In the last half-century of American politics, conservatism has hardened around the defense of economic privilege and rule. Whether it’s the libertarianism of the GOP or the neoliberalism of the Democrats, that defense has enabled an upward redistribution of rights and a downward redistribution of duties. The 1 percent possesses more than wealth and political influence; it wields direct and personal power over men and women. Capital governs labor, telling workers what to say, how to vote and when to pee. It has all the substance of noblesse and none of the style of oblige. That many of its most vocal defenders believe Barack Obama to be their mortal enemy—a socialist, no less—is a testament less to the reality about which they speak than to the resonance of the vocabulary they deploy.

The Nobel Prize–winning economist Friedrich Hayek is the leading theoretician of this movement, formulating the most genuinely political theory of capitalism on the right we’ve ever seen. The theory does not imagine a shift from government to the individual, as is often claimed by conservatives; nor does it imagine a simple shift from the state to the market or from society to the atomized self, as is sometimes claimed by the left. Rather, it recasts our understanding of politics and where it might be found. This may explain why the University of Chicago chose to reissue Hayek’s The Constitution of Liberty two years ago after the fiftieth anniversary of its publication. Like The Road to Serfdom (1944), which a swooning Glenn Beck catapulted to the bestseller list in 2010, The Constitution of Liberty is a text, as its publisher says, of “our present moment.”

The benefit of Robin’s article is that it doesn’t dismiss libertarian thought out of hand, as most leftist critiques might be tempted to do, but takes it very seriously and digs deep into its roots, showing precisely where the ancestral ideas that gave rise to our right-wing, market-obsessed American brethren diverged from the extremist right-wing ideology of the fascists in Germany. Libertarians may find the article unsettling, if they take Robin’s arguments as seriously as he takes theirs. Most Americans, left or right, may find it a disturbing read. I certainly did. Continue reading