Ed,
At 09:17 02/08/2010 -0400, you wrote:
Who's ranting? When it comes to employment, I don't see it as being
primarily about mass producing consumer goods. There are many things that
could be done to get people working and a Keynesian approach would
probably be needed to get them to be done. American cities, roads,
bridges and other vital pieces of infrastructure need to be rebuilt.
Try it if you want. But Japan tried heavy Keynesian spending for a decade
and somewhat less in the following -- but they were no better off after 20
years than at the beginning.
Doing this might not employ all of the unemployed, but those who would
have work would spend a lot more money on groceries, housing and other
things they can't afford right now. Small businesses would benefit,
multipliers would come into play and at least part of the currently
depressed American world would reawaken. So, I tend to agree with Krugman
-- bring Keynes back into the picture and let's see what happens.
You'll get more of what we've had in the last 30 years -- declining real
wages for average people (at least for those in work).
Why, as Krugman argues, isn't government doing anything? It may be the
nature of the Obama administration. Obama's opponents sit there staring
at him and all he does is stare back at them. "Yes we can!!" is long
gone. And so much now is about the forthcoming elections. Being
perceived to be doing the right thing (really, doing nothing) will stand
a better chance of getting votes than doing something would be.
Raising tax revenues by getting people working could be important in terms
of dealing with the deficit. Eliminating tax breaks for the rich could
also be important. The European powers may be in a deflationary mode
right now, but why should America be?
And going back to some kind of gold standard arrangement is not the
answer. It simply wouldn't work. It didn't work in the past,
Can you tell me when and where it didn't work?
so why should it work in today's far more complex world.
The gold standard worked for England for 150 years and most of Europe for
80 on average and also for America for about 40 years -- all with no
inflation whatsoever. All was cut short by the First World War when so much
money was needed that it had to be printed. But then, later, when
governments tried to go back onto a gold standard they did so without
taking the subsequent inflation of the pound, dollar, mark, etc into
account. Result? More inflation -- and even more so after Nixon cut off
even international trade surrencies from gold in 1971.
As more and more Chinese, Middle East oil exporters and big investors'
money goes into gold and not dollars or government bonds, you can be
certain that gold, as currency, is quietly re-asserting itself. All the
Western banks are now grimly hanging onto what gold they still have because
it's their only one sure asset they have these days. It can only mean one
thing. We're going to revert to a gold standard -- or another reliable
world currency -- sooner or later, whether after yet another chaotic
episode like 2008/9 or by international agreement -- as China is calling
for -- remains to be seen.
Keith
Ed
----- Original Message -----
From: <mailto:[email protected]>Keith Hudson
To: <mailto:[email protected]>RE-DESIGNING WORK, INCOME
DISTRIBUTION, ,EDUCATION
Sent: Monday, August 02, 2010 2:13 AM
Subject: [Futurework] Usual Krugman rant
Paul Krugman is off on a typical rant this morning in the New York Times.
He observes that unemployment will probably grow in the years ahead but
says that there is "growing evidence that governing elite just doesn't care?"
Of course they care! They care for their own skins in the coming years.
Every conceivable type of government cares about unemployment, and has
done so throughout history if it wants to maintain power and sleep easy.
Paul Krugman refuses to entertain the idea that high and growing
unemployment is structural. Why? Because, even after writing hundreds of
op-eds over the years, he still thinks that Keynesianism can supply the
solution. It might have done so in the 1930s when there was still a large
tranche of still-expensive consumer goods awaiting mass production and
purchase by a substantial proportion of the population. That's no longer
the case. There's no long line of desirable consumer goods visible ahead
of us. As regards existing goods, automation still proceeds.
So "Congress is sitting on its hands" is it? And the Fed is not
repeating inflation out of some sort of malignant obduracy, is it? (At
least there are some officials who learn from their mistakes!) What's
needed is not emotionalism on Krugman's part but some objective analysis
in order to restore his status as a Nobel prize-winning economist and not
a tub-thumper.
Well, I'll give him some pointers. What we need -- and pretty soon, too
-- is a total currency reform so that all advanced governments can write
off their existing debts and not cripple our children and grandchildren
with paying for their profligacy in the past few decades. And, from then
onwards, a currency system that will make governments keep to sensible
annual budgeting. We also need a substantial educational reform so that
there'll be a demand pressure to expand or share the most interesting and
highly-paid jobs. We also need substantial administrative/political
reform so that we don't have a system whereby politicians have to
selectively bribe this or that section of the electorate in order to
remain in power.
Keynes himself said something to the effect that governments always fall
prey to outmoded ideas of a previous generation of economists. Well . . .
that applies to economists, too.
Keith
Keith Hudson, Saltford, England
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Keith Hudson, Saltford, England
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