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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Jill Stein on Change: Not Just Something to Believe In

If Pres. Obama and the Democrats talked this talk and walked this walk, they would be giving me something to vote for. Come to think of it, that’s exactly what Jill Stein of the Green Party is giving me.

Graeber: “In America…the Entire System Is Built on Legalized Bribery”

This video interview with David Graeber of Occupy Wall Street by Italian activist, comedian and blogger Beppe Grillo covers a range of subjects this blog has also covered, focusing on debt, political power and direct democracy.  The questions appear in written Italian, but most should be fairly clear to anyone with high school-level familiarity with the romance languages, and those that aren’t Graeber answers very straightforwardly and clearly. (One thing he discusses that I’m not familiar with is the Italian 5 Star movement, of which Grillo is a leader.)

Graeber’s view of the American system is essentially captured by the quote which is the title of this post. I think it’s an accurate view. What do you think? I also greatly appreciate his proposed antidote to  the poison in the US system, which is for the people to act as though they are free and have power. That is what Occupy Wall Street is all about.

Graeber: Why Austerity Reflects a Sham Morality

In an interview with David Johnson of Boston Review, anarchist/activist/anthropologist and author of Debt: The First 5,000 Years David Graeber makes a key point about the “morality” behind austerity movements that is destined to be missed by all influential economists, bankers, presidential candidates and media pundits, but which no one interested in ethics , politics, or economics should miss (my emphasis):

David Johnson: What inspired you to write the book?

David Graeber: It came out of the strange moral power that debt has over people. So many times you’re talking to people about the depredations of the International Monetary Fund in the third world, telling these horrible stories about the thousands of babies dying of preventable diseases because people aren’t allowed to maintain malaria-eradication campaigns or basic health services due to austerity measures and debt servicing, and people respond, “Well, yeah, but you can’t say they don’t owe the money. People have got to pay their debts, come on!” That common-sensical notion not only that it’s moral to pay one’s debt, but also that morality essentially is a matter of paying one’s debts can bring people to justify things that they would never think to justify in any other circumstance. For the most part, decent people tend not to think killing lots of babies is justifiable under any circumstances. But debt somehow changes all that. Why is that?

Let’s try to really pay attention to that question, because as citizens of the modern democratic-capitalist world, we are very well-educated to gloss over it. Continue reading

Must Read: David Graeber’s “Debt: The First 5,000 Years”

I’m reading a book that is so good, so well-written, so relevant to the zeitgeist, that I can confidently recommend it to anyone who reads, though I’m just a bit more than halfway through it myself: Debt: The First 5,000 Years by David Graeber.

Before I tell you why you should go now and buy, borrow or reserve this book and get reading, I’ll call your attention to an interview Graeber gave the British magazine The White Room which gives an interesting peek into his background and main political ideas. Graeber, a well-respected anthropologist,  is becoming better known as one of the influencing thinkers behind #occupyWallStreet. A couple of sentences from the introduction of the White Room interview beautifully make a point about OWS that I less successfully try to make when people criticize its “fuzziness” and lack of demands:

…Graeber has put the spotlight on the anarchist principles of the Occupy movement, explaining that the lack of concrete demands is part of a pre-figurative politics. The protestors act as though they are ‘already living in a free society’, and thus refuse to accept the legitimacy of existing political institutions and legal order – both of which, he says, are immediately recognised in the placing of demands. Continue reading

#OWS Economics: Neofeudal Reality and the Free Market Myth

A little follow up to the last post about Damon Vrabel and his critique of neoclassical economics.

After concluding the Renaissance 2.0 series of lectures, Vrabel wrote a farewell on his blog at his Council for Spiritual, Psychological and Economic Renewal, explaining why he was no longer going to keep posting on the world situation. Among his reasons:

As I said in previous articles, IF we participate in the system, I’m not opposed to it at all. How could I be? I’d be a tyrant if I wanted to force hundreds of millions of people to change their behavior. And the fact is, that “IF” was answered long ago. We Americans have chosen the material benefits of being managed by the financial system for generations. We like demand-side freedom, i.e. choosing between Coke and Pepsi, but don’t want supply-side freedom. We like the supply-side to be taken care of for us. We love the benefits that come from it being imperially run—the credit card always works, the gas station is always open, our water faucets and light switches do what they’re supposed to do, the markets keep going up (oops…maybe not). All of our economic needs are outsourced to others, so we have the luxury of spending our time pursuing wants. And if these types of benefits are good for us, they’re good for the rest of the world. We have no moral authority to stand opposed just because we’re now going to lose our privileged position—a rather childlike perspective.

Do I detect some sarcasm? Many of the items Vrabel ticked off as buying our disinterest in changing the imperial system are, of course, threatening to stop working in the near-long term, if they haven’t already stopped working for many of us, which is why, I suspect,  #OWS has resonated so deeply so fast.

In any case, perhaps responding to the Arab spring and certainly responding to questions from viewers of Renaissance 2.0, Vrabel returned to YouTube with a new series titled “Debunking Money.” Again, I highly recommend it to anyone wanting to understand how the world really works and why we, the people (or the peasantry, as the case may be), are experiencing a diminution of our liberties. In this series, Vrabel makes explicit his rejection of various ideas from the left and right, including Austrian school economics and Milton Friedman’s neoliberalism.

The lesson below is particularly interesting as it debunks the notion, popular among Libertarians and popularized by Ron Paul, that “ending the Fed” is a viable solution to the problem. Vrabel says the American people would be “cutting their own throat.” If you have difficulty following this, I strongly suggest starting from the first video and hanging on his every word, if possible. Not to say this is the ultimate truth, of course, but it is certainly much closer to the truth than anything you will be hearing from Republicans or Democrats:

Debt Society in Need of a Revolution

A couple of nights ago, as I was following links deeper into the blogosphere in search of a possible explanation for why #occupyWallStreet has sprung at this moment and where it might go, I came upon a series of videos by Damon Vrabel, a self-described “post-neoclassical economic philosopher”, for a “course” he calls Renaissance 2.0 that purports to explain money in a way it isn’t usually thought about by philosophers on the left or right. I’m not particularly clever with money or economics myself, so I was curious to see if Vrabel, whom I’d just watched in a very interesting interview with Max Keiser (it’s in three parts, with part 2 here and part 3 here), could help me get a handle on it. I recommend the whole series.

Here is the first part:

Continue reading