June 29, 2010

Paul Krugman's Wild Week

Noted Nobel Laureate and New York Times columnist Paul Krugman recently threatened Germany with U.S. Congressional action, followed that with a threat of trade sanctions against China for its currency manipulations, and then threw a tantrum in the form of an essay because no one is listening to his demand that the federal government dump some more stimulus money on the U.S. economy. Since we won't listen, he told us we were in for a Depression.

Krugman is kind of like a guy in a bar at 2 a.m. who's been spoiling for a fight all night long and can't find an opponent, so at last call he just starts hurling insults in all directions.

He may be right about the Depression, depending on how it's defined. Some definitions I've read set the bar at about 25% unemployment, a standard reached during the Depression of the 1930's. It's worth noting that Roosevelt tried everything to lift the country out of the Depression, including massive stimulus and public works, yet nothing really worked until after World War II, when the world lay in ruins (except the USA) and the Marshall Plan maintained the home industries at war pitch. What Krugman leaves out in his simplistic insistence on simply spending money in an undirected way is that the U.S. economy, prior to 2007, was running on the fumes of debt-propulsion. I think the United States is in much worse shape, vis-a-vis the rest of the world, than we were in, say, in 1937. We have this weird "consumerist" economy, one that requires 10.3 hectares (about 25 acres) of Earth's surface in order to supply the "basic resources" (and deal with the waste), most of it plastic junk, generated by each American citizen. Compare this to the figure for Germany (5.3) or to the average for China and India (1.0 hectare). The German "austerity" which Krugman is whining about is simply a cultural value; they're more efficient, less wasteful and more productive, and Krugman thinks that is unfair.

It's because Krugman, like all the "name" American economists, is a growth fetishist. That's all they ever learned and all they believe in: the economy has to keep growing, even if that simply means a greater transfer of wealth to the upper fractions of one percent of the population. The GDP must increase.

Well, not really. We would be very fortunate if the average American enjoyed a quality of life comparable to life in Germany or France, and they manage such a life while using much less energy, and generating much less waste, per capita than their American counterparts. Thus, the GDP could contract, and contract substantially, while the overall quality of life in the United States improved, if the national economy were reoriented toward productive work, fair wealth distribution and environmental sustainability built on a no-growth framework. We don't do these things because this country is the way it is, but blaming Germany or China for our problems is just stupid.

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