"At many stages in the advance of humanity, this conflict between men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress" (Theodore Roosevelt, 1910)
Economists are the new public intellectuals of the age. In more prosperous times, they rarely enjoy that status or play that role. Economics is, after all, a dismal science. In good times, issues linked to the production of new wealth invariably take a back seat to those triggered by the consumption of wealth already in existence. Prosperity brings into view the expertise of the more hedonistic social sciences: psychology, sociology, marketing and the like. It pushes economics aside. But in the immediate wake of the Great Recession, with unemployment unacceptably high and the welfare state now under serious assault on both sides of the Atlantic, the views of economists are currently everywhere - particularly the views of conservative economists prepared to link unemployment to welfare itself. These are troubled times and we are in danger, if we are not careful, of slipping into a mindset that gives those conservative views a credibility that the nature of economics as a discipline ought properly to preclude.
The danger is that we might yet find ourselves believing that the choice we face is one between harsh but unavoidable economic realities (established for us by the superior knowledge and training of economics as a discipline), and over-ambitious and ultimately self-indulgent welfare aspirations (sustained by scholarship elsewhere in the humanities and social sciences that is somehow less scientific than that on offer from economists). We are in danger, that is, of being hoodwinked by a well-organized corps of conservative intellectuals into the view that the only solution to persistent unemployment is the widespread and immediate rolling back of the modern welfare state. Nothing could be further from the truth.
The current fault lines within public policy do not lie on the borderline between economics and the other social sciences. They lie firmly within the discipline of economics itself.
There is not one economic view, no matter how often Fox News implies that there is. There are many economic views, each one of them rooted in a distinct school of economic thought. Historically those schools were well represented inside each major department of economics. These days, in universities in the United States at least, many of those departments have slipped dangerously into an orthodoxy of a neo-classical kind. Other sorts of economists (Schumpeterian, Keynesian and adherents to various schools of radical economics) are still to be found, of course. If Paul Krugman is right, they are still more plentiful in universities on each coast of the United States than in the center of contemporary America. But no matter where located, even Keynesian economists these days no longer enjoy the leading position which they occupied in academia a generation ago; and that is to our huge cost.
Economists anchored in those very different schools of thought disagree not simply on the nature of modern economies, though they definitely disagree on that. They also profoundly disagree with each other on matters as vital to the status of economics as an academic discipline as the appropriate organizing assumptions, methodologies, evidence and associated policy preferences of economics itself. And they differ too in the social interests that their arguments serve: or - in what is the same thing seen the other way round - in their capacity to direct public policy to the advantage of some sections of the community and to the disadvantage of others. There is nothing policy-neutral about the clash of thought between particular schools of economic thought, and let no one claim that there is. There never has been, and there certainly is not now.
Economics, politics, interests and values necessarily hang and fall together: and economists who claim otherwise - any who offer their expertise as entirely objective and value-free - certainly mislead their audience, and possibly also themselves. In a complex modern capitalist society with powerful divisions of interests between classes, ethnicities and genders, economists (like other intellectuals) cannot avoid their work reinforcing some of their interests more strongly than they do others. As Antonio Gramsci wrote long ago, intellectuals have a vital role to play, articulating and disseminating class interests. Each class has its own organic intellectuals - class warriors in the battle for the hearts and minds of an entire society. The 1% of Americans sitting at the top of the income ladder certainly has its own organic intellectuals. The rich have them in abundance. The 99%, by contrast, are less well-endowed.
• Take, for example, the recent report by the Congressional Budget Office on trends in income inequality in America between 1979 and 2007, or the recent refinement by the Census Bureau of its measurement of the contemporary U.S. poverty level. Both organizations paint a similar picture of intense hardship at the base of American society. So what was the response to those reports from the many economists based in either the Cato Institute or the Heritage Foundation? Was it to concede the existence of unacceptable levels of inequality and poverty, and to urge public policy initiatives to deal with both? No it was not. Instead the Cato Institute's Alan Reynolds moved quickly to challenge the notion of excess income at the top: claiming its marked diminution after 2007 and the distortion of the pre-2007 data by the CBO's misunderstanding of how rich people pay taxes. The Heritage Foundation, for its part, issued its own poverty measure, listing the number of cars, televisions, VCRs, microwaves, phones and coffee makers to be found in the average poor household. All this, as Robert Rector and Rachel Sheffield put it, to correct for "sensationalism, exaggeration and misinformation," and to demonstrate that "the living standards of the poor have improved steadily for decades." No conservative organic intellectuals there!
• Or take another example. One consequence of the ending of TARP money - the stimulus package designed by the Bush Administration, continued by Obama and roundly criticized by conservative economists as ineffective - has been a sharp decline in the revenues reaching state treasuries. Public employment is accordingly now falling. Teachers are losing their jobs, and in very large numbers. So what has been the Heritage Foundation response? To publish a report jointly authored by their own Jason Richwine and Andrew G. Biggs from the American Enterprise Institute, demonstrating that public sector teachers are actually overpaid. Overpaid indeed to the tune of 52 percent of "fair market levels, equivalent to more than $120 billion overcharged to taxpayers each year." No matter that both the Bureau of Labor Statistics and the Economic Policy Institute have argued convincingly that federal and state employees suffer a wage gap compared to their private sector equivalents. No, the experts at Heritage beg to differ, and chose this moment of public sector retrenchment to publicize their case for teacher compensation reduction.
• Then of course we have the famous Norquist "no new taxes" pledge and the associated lack of enthusiasm in conservative circles for government regulation of private industry - the daily Republican decrying of the entrepreneurial "uncertainty" caused by over-active government. Leave everything to the market, we are told: unregulated markets know best. All that, of course, in spite of the fact - as President Obama made so clear in his speech in Kansas - that it was inadequately regulated financial markets that alone got us into this recession; and that the theory of trickle-down economics underpinning the insistence on "no new taxes" does not stand up well to empirical testing. Trickle-down economics under George W. Bush, after all, gave us the least amount of job growth in any U.S. business cycle since World War II. There is plenty of evidence out there pointing to the neutral effect on economic growth of well-designed government regulations. There is also plenty of evidence pointing to "certainty" rather than "uncertainty" as being currently the major blockage on new investment: the certainty, that is, of a lack of demand in consumer markets kept impoverished by the very austerity packages so favored by the conservative economists wedded to the Republican cause. There is plenty of evidence - just not evidence that organic intellectuals of the Right choose to consider and concede.
Such intellectuals continue to perplex me: less about their conservatism than about their humanity. I struggle to understand what makes someone get up in the morning, go to work, and spend the day helping to bring down still further the already low salaries of public school teachers. Nor do I understand what kind of well-paid intellectual responds to the depth and ubiquity of U.S. poverty by seeking to minimize its existence.
Maybe the conservatism of so many neo-classically trained economists has something to do with the poverty of the underlying premises of neo-classical economics itself. Certainly the grasp on reality enjoyed by such economists is hardly improved by a propensity to assume in their models a level of individual rationality, and a capacity for short-term interest calculations, that is literally beyond the capacity of ordinary human beings to deliver. Not that the fault lies with general humanity. It does not. Even Francis Fukuyama, the one-time doyen of the neo-cons who famously granted neo-classical economics the capacity to be right "approximately eighty percent of the time," was adamant that, even so, there was "a missing twenty percent of human behavior about which neoclassical economics can give only a poor account." Twenty percent was perhaps generous: there is really no hope for adequate social analysis from an approach to economic life that so misunderstands the full complexity of human motivation, and that fails to grasp the remarkable extent to which even short term interests are shaped by the social context and institutional parameters into which individuals find themselves involuntarily inserted.
Or perhaps - more prosaically - conservative economists find themselves able to be so critical of teacher salaries or of official measurements of poverty only because they themselves have no direct experience of either public school teaching or poverty. Certainly it would be fascinating to see how quickly economists based in the Heritage Foundation stopped using the ownership of old and broken-down cars as evidence of affluence if, instead of writing about the American poor from the safe distance of their warm offices, they actually experienced that poverty at first hand. Perhaps they should try living for a prolonged period of time in a North Carolina county with 20 percent unemployment and nothing but minimum wage work as far as the eye can see, without even a school diploma and perhaps a young child to support alone. No poverty? Easy to live the American Dream? Really? Somehow, I doubt it.
So what is it about modern economics that allows conservative forces in the United States to draw so heavily, and with so little public criticism, on the support of certain economists for their egregious policies? Lots of reasons, no doubt, but this one at least: the excessive credibility, given within both the academy and the wider community, to the maxims of the neo-classical school. We have far too many neo-classical economists playing the unchallenged role of public intellectuals these days. We have far too few Schumpeterian, Keynesian and radical economists engaging in a similar and a balancing activity. It is not simply that right-wing economists are well funded and carefully positioned to disseminate their values in the guise of economic truth - though that is clearly part of the problem. It is also that the counter-voice of more progressive economists is not heard in the same volume and with the same confidence and authority; and is not heard because those counter-voices are not raised with a similar degree of determination and regularity.
That situation has to change, and change rapidly. The President cannot do the heavy lifting alone, and one speech in Kansas, however good, will not be enough. Nor can a handful of already active progressive economists (people like Paul Krugman, Robert Reich, Alan Blinder, Dean Baker and Joseph Stiglitz, ), important as their writings are, be expected to carry the full burden of this crucial counter-offensive alone. There is too much at stake for that. There are progressive economic truths that the average American voter needs to hear over and over again before he/she next heads to the polls. Truths about the self-defeating and self-serving consequences of yet more deregulation, tax concessions to the rich and the culling of public services; and truths about the crucial role that greater equality can play in restoring both immediate American prosperity and the long-term realization of the American Dream. These are not truths that we should allow conservatives to dismiss as just the views of a few well-known liberal economists. It is vital that the American electorate know now that many economists hold these views; and the only way to demonstrate that is for those many economists to enter the public square and say very loudly and very often that they do.
This is no time, therefore, for progressive economists to stay silent in the study. With a presidential election looming that might bring a Newt Gingrich or a Mitt Romney into the White House, it is time for the voice of each and every progressive economist to be organized, heard and disseminated widely. Because if it is not, we might well end up not simply with a Republican president but with what would be even worse - every branch of the U.S. government back in the hands of the neo-cons. Do we really want another round of Middle Eastern military adventurism, with the United States this time taking out Iran? I certainly hope not. But here's the rub. The upcoming election will not be settled on foreign policy questions. It will be settled on issues of unemployment, taxation and economic growth. If progressive economists don't win the battle for the hearts and minds of the American electorate on the purely economic issues, more than socially-unjust economics will prevail in Washington DC. No: it falls on progressives to win the economic argument to make sure that conservatism doesn't sweep the board across the whole policy agenda. As I say, there is much at stake.
The dark forces of reaction are on the march again, supported in their advance by what Paul Krugman once rightly called "the product of the Dark Ages of macroeconomics in which hard-won knowledge has been forgotten." Doing nothing, saying nothing, simply lets those dark forces win by default. The OWS movement had created an audience for progressive explanations of, and solutions for, income inequality and bank irresponsibility. If progressive economists do not bring their skills to the table now, that audience will be wasted, and all the American electorate will hear will be the miscalculations and nonsense of the Heritage people. The Heritage Foundation knows well enough the importance of the hour, so why is that lesson lost on so much of the left? Disappointment with the moderation of the Obama administration may be keeping many former supporters silent on the sidelines: but this is not the moment to allow requirements for perfection to drive out support for the imperfect and the good. It is not the moment for silence from the economic left. It is exactly the opposite. It is the moment for all of us with the requisite skills to make a sustained contribution to the creation of a progressive economic consciousness in contemporary America. If we do not, and if we do not do it quickly, then heaven help us all after November 2012!
First posted, with full academic citations, at www.davidcoates.net
Why the allusions to Medieval Age military structures? Because the financial backers of these institutions are pursuing every underhanded tactic possible to reinstate a form of economic feudalism in our country, as well as the world, that would rival that of pre-Black Death Europe.
How so? In the century that spanned the Black Death, real wages in Europe rose by about 25%, while returns to capital fell. This happened due to...
(a) the precipitous decline in the labor force over this period, and
(b) the dismantling of laws that restricted wages, and
(c) relaxation of laws that tied peasants to the land.
http://wps.aw.com/aw_perloff_microecon_5/85/21983/5627815.cw/content/index.html
http://www.bbc.co.uk/history/british/middle_ages/black_impact_01.shtml
How are US workers being subjected to an analogous REVERSAL of the improvement in labor market conditions experienced by British Medieval period peasants following the Black Death? Here are some likely cuplrits:
1) China's entry into the WTO under favorable tariff rates versus the US fueled the migration of 230 million rural Chinese to cities seeking jobs resulting from the export boom to US. This dramatically increased the effective competitive labor pool for US manufacturing jobs.
2) The GOP is working feverishly to reduce the collective bargaining rights of public employees in a period when private employment and wages are seriously depressed due in part to (1). This will reduce the government's support of working and middle class wages in the periods (economic crises) when these groups are most vulnerable to financial strains.
3) The easy-money fueled housing bubble that was abetted by Wall Street banksters has effectively tied millions of middle and working class households to their homes because of the resultant decreases in home equity relative to the down payments required to move.
http://factsanddetails.com/china.php?itemid=150&catid=11&subcatid
http://readersupportednews.org/news-section2/315-19/5046-rsn-special-coverage-gops-war-on-american-labor
http://econ.as.nyu.edu/docs/IO/19603/FaithKarahan.pdf
print and inflate......blame the dollar not buying what it used to on the rich.
Thanks for the response. A few points:
a) I realize how Keynesianism is supposed to work, with the surplus in good times to be used during the bad times and I understand that we do not have that surplus. That will explain why we are borrowing and running a deficit to fund it now, but why it is not working as the counter-cyclical stimulus ‘jolt’ that Keynes predicted.
b) You state, ‘It is the unwillingness to limit the boom that causes Keynesian economics theory problems.’
No…actually…its complicity in cerating bubbles is what is causing it problems, as well as the mal-investment and repurposing of labor that goes with it as Austrians economists already know.
You state, ‘Increasing demand through government spending does stimulate the economy…’
True. But, a) not enough to jump start the economy since NO sane business person is going to hire for full-time increasingly expensive positions based on short-term unsustainable payola, and b) even what little growth it does create, the multiple is most likely under 1, meaning it costs more in the future for the limited economic spark it creates now, and
The only hope is for the 99% to learn to see through the pr., and vote smart.
Vote for the Kucinich, Warren, Grayson CPC progressive Caucus folks, not the DLC, New democrats, pragmatic Progressive, Blue dogs, New American Foundation, Progressive Policy Council, Third Way DINOs.
But then vote for the Dems, including Obama in the general since the GOP/Tea are anti demo racy, anti republic, anti "the Beast" Tories. They are out to take away your very right to vote and reduce you to serfdom.
Oh, and watch "The Money Masters" learn about the domination by the banksters. They own the world. really. 260T$ from OUR FED.
Meanwhile, vast swathes of our society will sink into dystopia.
Capitalism is a terrible economic system, but it is superior to any other system that has been suggested. Socialism, as Thatcher said, works well until you run out of other people's money.
I am so tired of hearing how bad capitalism is. The system isn't bad, but their are some bad capitalists. We need to condemn the ones who played the systems at the expense of others....not the system itself.
OWS, for instance, tries to speak for the 99%. The VAST majority of that 99% do not rail against capitalism. Crony capitalism is not the same as free market capitalism. It is the opposite.
In 1994 the government budget deficit exceeded 15% of GDP. The response of the government was to cut spending and institute a multitude of reforms to improve Sweden's competitiveness. When the international economic outlook improved combined with a rapid growth in the IT sector, which Sweden was well positioned to capitalize on, the country was able to emerge from the crisis.
"One consequence of the ending of TARP money - the stimulus package designed by the Bush Administration, continued by Obama and roundly criticized by conservative economists as ineffective - has been a sharp decline in the revenues reaching state treasuries."
Correction: Obama did not use TARP to bail out profligate states and their Dem public employee unions. This money came from the Obama "stimulus" and then another bailout nominally directed at saving teachers' jobs, which mostly went toward paying off Medicaid bills.
To say that either the New Deal or the "Obama" stimulus ws a failure flies directly in the face of the empirial evidence. Then to talk about the "profligate states" and the "Dem public employee unions" as if either were true or a cause of the problem is equally wrong. Were all the states "profligate"? Do you include Texas, with its 31 billion dollar shortfall, yet staunchly right-wing Republican government? And what evidence is there that all of a sudden, in 2009, it was public sector wages which suddenly caused the implosion of state finances all over the country? And why, when the stimulus ended did unemployment all of a sudden tick up?
Of course, you didn't mention that the "Obama borrow and spend spree" was entirely the result of the massive Bush tax cuts, the 2 unfunded wars, the corrupt medicare part D legislation and the increase in safety-net payments due to the depression.
And the misinformation and disinformation in your comment just goes on to show that there are no legitimate arguments for any of the conservative economic policies at the moment.
Seventy percent of ARRA’s budgetary impact was realized by the close of 2010.
http://cboblog.cbo.gov/?p=2204
http://www.cbo.gov/doc.cfm?index=12185
The problem with our economy now is not spending. It is wages.