Playing With the Pundits – Why We Keep Making Mistakes

Today Paul Krugman returns to his oft-repeated mantra that recent badly chosen economic policies have vindicated Keynesian economics both in the US and in Europe.  Specifically, Keynes argued that government spending should be cut during economic booms, not during economic slumps – that it should be countercyclical to the economy.  Krugman asserts that the disastrous results of Europe’s new commitment to “economic austerity” (and, to a lesser extent, our failure to enact a sufficiently large economic stimulus package back in 2009), validate this basic Keynesian principle.

I read Krugman’s column as yet another reminder that human evolution did not gift us with a brain designed to be very good at either (i) dealing with very complicated situations, or (ii) events that take place on something other than the human scale.  To be sure, our brains can learn to handle complicated situations and events on macro and micro scales, but learning how to do something is not the same as instinctively knowing how to do something.

 

The 1%’s European Coup

The last thing the world needs at a time like this is democracy.  That is what got us into this mess in the first place.  People wanting stuff, and voting for people who said they’d give ‘em that stuff, without showing they’re working. 

            --Comedian Andy Zaltzman to John Oliver

            The Bugle, Ep. 173a

           

In yesterday’s Washington Post, Harold Meyerson wrote about “The Growing Tension Between Capitalism and Democracy.”  Meyerson pointed out that

Over the past year . . . capitalism has fairly rolled over democracy. Nowhere is this more apparent than in Europe, where financial institutions and large investors have gone to war under the banner of austerity, and governments of nations with not-very-productive or overextended economies have found that they could not satisfy those demands and still cling to power. The elected governments of Greece and Italy have been deposed; financial technocrats are now at the helm of both nations. . . .  It’s as though the markets throughout Europe have had enough with this democratic sovereignty nonsense.  (emphasis added)

Essentially, Meyerson is arguing that the entwined financial system of the Eurozone now gives “financial technocrats” more power to dictate any particular Eurozone country’s fiscal policies than that country’s own citizens have. 

But as much as Meyerson’s description should be enough already to give one pause, I think framing the situation in this way actually understates the significance of what we are witnessing:  a European political and economic coup by the global 1%.

OWS Perspectives: Matt Taibbi

Matt Taibbi has a new piece up over at Rolling Stone explaining his own evolving understanding of the Occupy Wall Street Movement titled "How I Learned to Stop Worrying and Love the OWS Protests."  It's quite good, and you should link over to click it out.

This passage, in particular, struck me as fairly on-the-money:

. . . .  I originally was very uncomfortable with the way the protesters were focusing on the NYPD as symbols of the system. After all, I thought, these are just working-class guys from the Bronx and Staten Island who have never seen the inside of a Wall Street investment firm, much less had anything to do with the corruption of our financial system.

But I was wrong. The police in their own way are symbols of the problem. All over the country, thousands of armed cops have been deployed to stand around and surveil and even assault the polite crowds of Occupy protesters. This deployment of law-enforcement resources already dwarfs the amount of money and manpower that the government "committed" to fighting crime and corruption during the financial crisis. One OWS protester steps in the wrong place, and she immediately has police roping her off like wayward cattle. But in the skyscrapers above the protests, anything goes. 

This is a profound statement about who law enforcement works for in this country. What happened on Wall Street over the past decade was an unparalleled crime wave. Yet at most, maybe 1,500 federal agents were policing that beat – and that little group of financial cops barely made any cases at all. Yet when thousands of ordinary people hit the streets with the express purpose of obeying the law and demonstrating their patriotism through peaceful protest, the police response is immediate and massive. There have already been hundreds of arrests, which is hundreds more than we ever saw during the years when Wall Street bankers were stealing billions of dollars from retirees and mutual-fund holders and carpenters unions through the mass sales of fraudulent mortgage-backed securities. 

It's not that the cops outside the protests are doing wrong, per se, by patrolling the parks and sidewalks. It's that they should be somewhere else. They should be heading up into those skyscrapers and going through the file cabinets to figure out who stole what, and from whom. They should be helping people get their money back. Instead, they're out on the street, helping the Blankfeins of the world avoid having to answer to the people they ripped off.

I think that -- on the level of pure symbolism if nothing else -- this gets to the heart of what so many people now feel about the American political/socio-economic system.

Paul Krugman is fond of describing the federal government as "an insurance company with an army."  For a lot of Americans -- and not just those actively protesting -- our "free market capitalist system" increasingly looks like nothing more than a loan company backed by an army of button men.

When such organizations do business in bars and restaurants, we call them "the Mob."  When they do business in boardrooms and the halls of Congress, we call them "Wall Street."

Oh! The Stupid Things I Hear! No. 3

Goddammit.

So I’m listening to the Diane Rehm “Friday News Roundup” (the BBC’s Katty Kay filling in for Diane) this morning and the initial topic is the new jobs report, which shows that 80,000 jobs were added last month:  104,000 new private sector jobs, offset by a loss of about 24,000 public sector jobs.

First I hear Ron Elving, senior Washington editor for NPR News, make the incredibly stupid claim “that’s not bad, but it’s not great either.”  No, that’s friggin terrible.  Look . . .  the United States needs to add about 150,000 new jobs every month just to stay even with population growth.  So a jobs report showing that we created about ½ that amount last month means that October was utterly horrible.  Telling the American public that “we added 80,000 jobs” without putting that figure into context is just journalistic malpractice.

But far, far worse was what Elving said next. 

2012: Who the Hell Are We?

Via John Aravosis over at Americablog I found this press pool report from Sunday:

At his first fundraiser in San Jose, President Obama took aim at Republican presidential candidate Rick Perry, without naming the Texas governor by name, and was critical of the recent GOP debates.  He said the 2012 election will be “a contest of values.”

“Some of you here may be folks who actually used to be Republicans but are puzzled by what’s happened to that party . . . .  I mean, has anybody been watching the debates lately?  You’ve got a governor whose state is on fire denying climate change,” he said to applause.  “It’s true.  You’ve got audiences cheering at the prospect of somebody dying because they don’t have health care and booing a service member in Iraq because they’re gay.

“That not reflective of who we are,” Mr. Obama said.  “This is a choice about the fundamental direction of our country.  2008 was an important [elec]tion.  2012 is a more important election.”

Yes, please . . . more of this.

Wealth Condensation: Why the Rich Get Richer

Back in the late 19^th century an Italian engineer-turned-economist named Vilfredo Pareto was coming up with some interesting notions regarding wealth distribution.  Pareto had noticed that quite a bit of Italy’s wealth seemed to be concentrated in the hands of only a few people.  After some diligent work, he determined that approximately 20% of the population owned about 80% of the land.  It was the beginning of an inquiry into why it is that in every human population – every single one – the majority of that population’s wealth concentrates itself in the hands of a very few people.