We are in the midst of the greatest failure of capitalism since the other Great Depression.
Yet what you hear from purblind capitalists, libertarians, and others who drank Ayn Rand's Kool-Aid is that capitalism didn't fail. It just wasn't implemented properly. America failed. (I especially love that one, coming from patriotic right-wingers.) All that socialistic government intervention must have knocked the wheels off the cart.
And Communists will tell you that in the Soviet union, Communism didn't fail. The Soviet Union failed to maintain a proper communist ideology.
When reality does not for the theory, it's always reality that is wrong.
But for the reality-based, it was all so predictable. Hyman Minsky was a macro-economist who took Keynes seriously, and thought about the world as it is, not as Milton Friedman would like it to be. He described the inherent instability of capitalism, and predicted the bubble-burst and the aftermath we are now enduring. But Minsky was the son of Menshevik socialists and spent the prosperous 60's studying poverty. At that time macroeconomics was falling under the spell of the Chicago School, and Keynes was not so much forgotten as deliberately ignored. But not by Minsky. When he delved into finance he refused to water down the Keynsianism, and concluded that capitalism was bound to run off a cliff. This was a message nobody wanted to hear, and Minsky was relegated to relative obscurity. After his death in 1996, the only economists to have remembered him seem to be Paul Krugman and Brad DeLong
All of which is preamble to this excellent article by Stephen Mihm in today's Boston Globe.
I read a few of the accompanying comments. They are astounding. All that idiocy in my second paragraph above - it's in there. Wow!
Update: Krugman has been getting a lot of flack (a lot of flack*) over his recent article on how the macroeconomists missed the coming collapse. It's all of a piece, I think.
Update 2: This article by David Altig of the Atlanta Fed., linked above,* seems to me to be just all kinds of wrong. No time to go into it now. Commentors are pretty critical, but I'm coming at it from a different perspective.
9/15 Update 3: Compare my third paragraph with John Cole's last. I'm lovin' this. Via LGM.
Your assignment: Find the flaws in logic in Altig's article.
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8 comments:
Depends where you're sitting, really. The lending crisis and mortgage market may seem catastrophic, yet the crisis was bipartisan produced. Bill Clinton signed off on Gramm's de-reg/privatization plans, really). Bush certainly took advantage of the situation, and I'm no supporter of GOP economics, but the Dems were warned about F-mac, and mortgages, and did little or nothing. It's a combination of factors.
I agree with some interventionism ala FDR recovery programs. That said, Keynes seems like a typical anglo rat, a pal of Churchill, shifted from left to right (and for some time blessed the fascists). I'd nearly hang with authentic marxists rather than supply-siders or the Keynesians.
Really both De Long and Krugman seem fairly moderate. Yes, they support interventionism of various sorts--however they rarely take on corporate excess and corruption, or the stock market. At some point distributive Justice enters the picture.
I will never defend Clinton's conservatism. Certainly, it laid the groundwork for Bush. And to say both parties are branches of the same corporatocracy is to utter a fundamental truth.
The remarkable thing is the vicious and blatantly dishonest response from the right to Krugman's article, which I think will earn its own post.
Cheers!
JzB the left-leaning trombonist
Blogger-crats tend to forget that liberal does not equal leftist. Berube, or KOS, the DNC, Al Frankens, Barney Franks, Digbyites--that's liberal. Im not saying the liberal tradition is entirely worthless. But it's mostly centrist. There are liberal republicans obviously.
Leftism is another matter. Marxists and anarchists, even bad rocker sorts of anarchists, are not "liberals." Chomsky's not really liberal; nor was Ed Abbey, or Kropotkin back in the day. There are different varieties of marxism as well. Bolshevik marxism had little to do with the sort of bland, sentimental liberalism typical of US demos. VI Lenin and Co started the party off by banning the SRs--sort of liberal feminists and bourgeois socialists.
You probably know this, but I find it amusing when some suburban commuter type logs on to KOS, Inc (sponsored by Chevron and other corps) and fancies himself some real radical, dude.
Everything exists in a context. Politically, in the current U.S., liberalism is almost non-existent. Leftism isn't even a specter.
That's why I say - and have for years - that Clinton, and now BHO, are centrist conservatives. In a world that made sense, they would be Republicans.
A bit off topic, but - One of the great disappointments of my lifetime has been seeing 60's leftists turn into conservatives as they aged.
Another has been the conservatism of the gen-Xers.
There is lots of room on the left for a new type of political voice. But the corporations own the system. I don't think a third party ever has a chance. Short of revolution - which I mean literally: blood in the streets*, or a major 30's style depression, It's basically hopeless.
JzB
__________________
* But armed revolution, if it comes will be from the right.
At your recommendation, I read the Minsky article. I'd say I agree with Minsky's views. He basically felt that crisis would be inevitable. So do I. The difference is that I embrace it. Minsky himself seemed to doubt that you could break the business cycle. Or the crisis cycle. He said "There is no solution that can be transformed into a catchy phrase and carried on banners."
So what do you do? You either clamp down on human behavior like a vice, regulating it six ways to Sunday, or you just accept reality, leave people their freedom and let people have interesting lives full of both triumphs and failures.
Nathan -
Do you insist in seeing the world as either-or, black and white?
Reality is painted in shades of grey.
The need is not to break the business cycle. The need is to smooth it.
You equate regulation with over regulation and loss of freedom. But real life is full of compromises. You do this every day in your own life, with family, friends, and co-workers.
There is an optimum level of regulation, just as there is an optimum level of freedom in personal activity. Your right to swing your arms ends somewhere beyond the end of my nose.
I wish you well - but, really, I feel like I'm talking to the dining room table.
Cheers!
JzB
I hear you. You don't need to be rude comparing me to a table. A certain level of courtesy would greatly enhance your powers of persuasion.
I never purported to be black and white. Here I just acknowledged that I thought Minki's work was good. Furthermore, I do not see government fiscal intervention as necessarily bad. I simply believe that to reduce the risk of crisis to 0 would cost too much for me in terms of other non-tangible goods such as freedom. In the article the author said "Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that perfection, like stability and equilibrium, are mirages" So why wouldn't you adopt my outlook to "embrace" the fact that crises will occur?
And since you just did say that the goal is only to smooth the bumps, then isn't it just an argument of degrees? I never said the intervention should be zero and you apparently don't believe it should be 100%. Where is the balanced center? This is moral and political question because it cannot be answered completely analytically. Non-tangible goods are subjective. I've seen unemployment cause some desirable non-tangible benefits. Something tells me that you wouldn't place the same value on some of those intangibles. So why do you think that you and Krugman, et al, are the best judges of where the balanced center is?
You'll have no argument from me that some amount of regulation enhances freedom. Freedom based regulation is simply, like you said, the act of preserving inalienable rights.
I've made a study of freedom and invite you to comment on one of my posts on taxation
Nathan -
Sorry about being rude. I have given up on trying to persuade you. The dining room table reference comes from Barney Frank.
I do accept the fact that crises will occur. That doesn't mean I have to embrace it, though. While suffering is inevitable, I don't like it, I don't wish it on anybody, and I do not consider it to be - in and of itself - a good thing.
I never claimed to know where the balanced center is. To the best of my knowledge, neither has Krugman. We claim it exists, and that the quest to find it is both noble and appropriate, and that it is not being undertaken.
Your comments have lead me to believe that you see the world in black and white terms. My interpretation, sure - but you haven't shown me much nuance.
Your next to last paragraph looks like a string of non sequiturs.
I've seen unemployment cause some desirable non-tangible benefits.
Care to elaborate?
Also, I have idea what you mean by freedom based regulation.
Cheers!
JzB the suddenly poite trombonist
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