The center left economists and dogma
Does anyone on earth have a tougher job than economists of the center-left? Think about it. They’re confronted with a seemingly impossible puzzle – come up with an intelligent sounding policy that will reasonably create decent living standards for everyone, all while remaining strictly cemented within the dogmas of free trade, free capital mobility, inviolability of corporate power, orthodox finance, and orthodox taxation. Simply put, they’re expected to develop viable solutions for the vast majority in a social system where the top 5 or 10% own everything, but without disturbing the latter’s power or life style. What an intellectual challenge! It’s almost certainly impossible of course and no real solution has been found in the 160 year history of industrial capitalism.
How about war one may ask. War provided full employment during the World Wars and has greatly enhanced employment from Korea and Vietnam up through today. Spending on the war machine is one potential solution but, unfortunately for the center-left, it’s really a rightist idea not easily defended by card carrying center-leftists. There’s also a deeper irreconcilable problem, though, even beyond the millions who may be slaughtered or the possible destruction of the planet. It’s that, since war spending must ultimately be funded via orthodox finance or orthodox taxation, there’s an inherent limit on the number of people who can be helped in this way.
How about bubbles like we had in the late 20’s, the 80’s, the late 90’s, and the 2000’s? While they do provide short term alleviation between the crashes and are probably the best the system can ever achieve, they clearly don’t qualify as viable solutions to the puzzle.
So, what’s a center-left economist to do? Paul Krugman, with apparent seriousness, proposes slightly stretching the definition of “orthodox finance” and keeping interest rates low for a while and thereby hopefully fostering a bit of inflation. The inflation will, according to Krugman’s mathematical models, incent the owners of capital to “invest” their hoards and thereby improve the lot of the majority. He doesn’t tell us what they’d invest in but we can assume it would probably be real estate yet again. Krugman also proposes increasing government debt to be spent on ‘infrastructure’ and more teachers, to be offset with austerity and higher taxes sometime in the future.
We must give Krugman a failing grade here as his ideas are just pie in the sky. Low rates have existed in Japan for decades and they’ve created neither inflation nor investment; there’s little reason to think it would be different in the US. And his idea of pushing austerity into the future a few years is just dodging the question – what happens if the economy is still stuck then? Are debts to keep mounting? Krugman offers us no solution to the puzzle.
Let’s turn then to Jeffrey Sachs, an economist who sits high on a prestigious perch at Columbia despite, we might note, the disastrous neo-liberal policies he helped hoist on Latin America and Russia in the 80’s and 90’s. He offered us the other day a promisingly entitled “Economic Policy Beyond Gimmicks” and, like so many center-left articles, it starts well:
“The economy is dead in the water. Obama has no plan but to wait for the upturn. Mitt Romney’s plan to cut taxes would be disastrously worse, plunging us into a deep financial and social crisis.
It’s long past time to face basic facts. America’s economic problems are structural and will not be solved by more tax cuts, quantitative easing, or short-term stimulus. Neither party offers real solutions, though the Republicans’ policies would drive us much faster to ruin.”… “A structural crisis requires long-term strategies.”
But his solution is lame. Our “recovery” must be “investment led” he tells us.
“We need long-term investments in human capital (skills) and in key infrastructure such as low-carbon energy systems, smart grids for cities, cutting-edge information and management systems for low-cost integrated healthcare delivery, and inter-city fast rail.”… “Our specialist scientific agencies are still doing amazing things right before our eyes this year: exploring Mars and unlocking the complex mysteries of the human genome. We could be doing a lot more to solve our social and economic problems and to re-establish our prosperity if we put our confidence back into science, technology, advanced training, and public-private partnerships.”
Sachs’s solution doesn’t pass muster as he doesn’t demonstrate how his proposed spending would lead to widespread decent living standards, how it would fit within financial or tax orthodoxy, or, if we are to consider them “investments”, how they could possibly be profitable.
Let’s turn, finally, to Thomas Friedman, a prominent “centrist” non-economist. I bring him in only to demonstrate how psychologically dangerous the puzzle can be. Friedman, I fear, is losing his mind as he struggles with the realization that the puzzle perhaps can’t be solved.
“Technology and globalization are wiping out lower-skilled jobs faster, while steadily raising the skill level required for new jobs.” A CEO , he notes, will “only hire someone — anywhere — if you absolutely have to, if a smarter machine, robot or computer program is not available.” “The trend is that for more and more jobs, average is over. Thanks to the merger of, and advances in, globalization and the information technology revolution, every boss now has cheaper, easier access to more above-average software, automation, robotics, cheap labor and cheap genius than ever before. So just doing a job in an average way will not return an average lifestyle any longer.”
His prime solution is ever expanding education so that at least the above average can compete in the global arena. The competition for living standards will be so desperate, he tells us, we should consider following Estonia and teach our 1st grade children to program computers.
I don’t think we can really give Friedman a grade for his attempts since he’s not really playing the game. Remember, the game is to find a solution so that everyone lives well while sticking within dogma. He’s discovered that the majority (by definition “average”) will inevitably fail and is therefore just offering advice on how the lucky few can compete in an obviously lunatic world.
We’ll stop here. We find that all center-leftists are of the same basic mold – their solutions encompass some combination of education, infrastructure, technology, increased debt now versus austerity tomorrow, inflation, or slightly increased taxes. None can succeed because the basic dogmas won’t allow them to.
We can’t have true progress until we directly confront the basic dogmas. But if we drop them for just a moment and consider the puzzle as solely one of providing decent living standards for all, we discover that actual solutions become reasonably possible.
What is the content of a decent living standard? We can’t list them all but, without getting too philosophical, it would certainly encompass things like nutritious food, a sound home and furnishings, decent clothes, free time to enjoy friends and family, quality health care, education, a clean environment, etc. Would not an honest analysis of the problem lead us to conclude that if a distressingly high number of people lack these things, then an obvious path would be to either expand production in these areas or identify the factors that are keeping them from being sufficiently produced? Does not a lack of such basic goods in an economy of massive productivity indicate a serious malfunctioning? Is it not absurd to claim that a reasonable way to provide better clothes, for example, is to increase inflation or to fly to Mars or to build high speed trains or to teach 1st graders how to program computers? How ridiculously indirect! Why not just produce the clothes?
The great roadblocks are the fundamental dogmas; when they’re accepted as inviolable, then all possible solutions, by their nature, must be indirect. And not only indirect, often they’re actually backward. So we find serious sounding people claiming that the way to improve living standards in the inner cities, for example, might be to build fast trains between them, or the way to improve the lot of the masses is to reduce their retirement income and health benefits, and so on.
If we truly want fast trains or missions to Mars, then by all means let’s do it. The same if we really want our 1st grade children to learn how to program computers. But let’s do it for direct reasons and not as a pathetically indirect way to achieve something that’s so easily doable directly if we just question the dogmas.
By never endingly offering absurdly indirect solutions to basic problems while refusing to confront the dogmas, the center-left presents itself not just as another pillar of the status quo, but as a potent enemy of true progress.