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Their Brains Have Been Mismanaged With Great Skill

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Krugman on austerity in the UK, a terrible idea that has worked out horribly in practice:

How could the economy thrive when unemployment was already high, and government policies were directly reducing employment even further? Confidence! “I firmly believe,” declared Jean-Claude Trichet — at the time the president of the European Central Bank, and a strong advocate of the doctrine of expansionary austerity — “that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”

Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs. Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.” He then called on President Obama to “do a Cameron” and pursue “a radical rollback of the welfare state now.”

Strange to say, however, those warnings from economists proved all too accurate. And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron.

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  • Jeffrey Kramer

    A Modest Proposal: every pundit who appears on TV is introduced with a short list of the predictions and recommendations they made one or more years ago. This also appears by the side of every columnist’s photo.

    • SamR

      An excellent idea. I’d also suggest that any time a pundit makes a prediction on TV, the host request a date or date range by which time the pundit believes this prediction will occur.

      Mark the date (or the end of the range), and if the prediction is important enough, invite the pundit on the week after it passes to talk about why their prediction was wrong, if this error caused the pundit to reevaluate the predictions they make, and why we should listen to them in the future given their past errors.

      • hylen

        “a date or date range” – usually one Friedman Unit, no?

  • R Johnston

    I’ve long wondered how it is that the religious worshipers of “free” markets reconcile their belief that markets are driven to efficient equilibria solely by the actions of rationally self-interested actors with their belief that irrational government policies, policies that fit no model in which they might directly induce expansionary behavior, will be so strongly offset by the Confidence Fairy’s influence over “free” markets that implementing irrational policies will actually result in expansion.

    The Confidence Fairy theory of markets is in direct and absolute contradiction to the hard-core rational actor theory of markets adopted by the same people who believe in the confidence Confidence Fairy. It directly relies on the assumption that market actors sufficient to move markets and set equilibria act against their own rational self interests, that market movers’ confidence is somehow more important than the numbers they get when they plug market conditions into their market models.

    The Confidence Fairy is, in the end, conclusive evidence that “free” market fundamentalists simply don’t believe in the concepts of economic models and economics as an empirical study at all. It really and truly is religion to them.

    When fresh water economics is finally taught in the theology department rather than the economics department the world will have become a much more sensible place.

    • DrDick

      Sorry to tell you this, but “free market” zealots are only concerned that corporations and the wealthy be free to rape, pillage, and loot at will, without hindrance or consequences to themselves. Everything else is just smoke and mirrors.

      • R Johnston

        Surely that’s what their underlying motivations are, or at least those of the leadership. I’m just saying that the intellectual structure they use to try to justify their beliefs and to propagandize their beliefs among the stupid is blatantly self-contradictory and entirely religious in nature, without any intellectual merit at all or even the feigning of the appearance of intellectual merit.

        You’d think that they could do better in terms of faking a justification for their sociopathic desires, but apparently there aren’t even any smart sociopaths among them.

      • I actually spent quite a bit of time – several years, actually – arguing politics and economics with libertarian market fetishists, and I assure you: these people are True Believers.

        To the point that they take their “dyanamist,” “free market” theories about the economy and try to apply them to other areas of life. If that’s not the definition of a true ideologue, I don’t what is. They’re like the Soviet scientists who were so into Marxism that they started imagining dialectical processes into everything.

        • Clark

          Lysenko was right, dammit!

    • It directly relies on the assumption that market actors sufficient to move markets and set equilibria act against their own rational self interests, that market movers’ confidence is somehow more important than the numbers they get when they plug market conditions into their market models.

      This is very similar to the “job creators” theory of economic growth – the belief that economic activity happens as a result of very wealthy people and corporations feeling empowered, without reference to underlying demand.

      It’s also similar to the theory, popularized especially in 2009 and 2010, that the reason banks weren’t lending and companies weren’t investing in capital improvements and hiring was because of uncertainty about regulation and taxes and public policy – as opposed to, you know, nobody having money to spend.

  • wengler

    Nice to see Broder wasn’t a hypocrite on this issue and removed himself from the ‘welfare state’ rather quickly.

  • The “funny” thing is that so many of the specific austerity moves were found to immediately (and esp. over the long term) to cost more than the status quo, not counting their general effects on the economy. Selling off the forests? Whoops, they generated income! Cap or cut the housing benefit? Whoops! Throw thousands of families out of their homes and onto….local government aid which ended up costing more AND immiserating the families AND hurting the housing market.

    Student fees? “We planned that the average fee would be about 7000GBP, but, shocker, once one uni went 9000GBP there was a run not to be seen as cheap. It’s not like we couldn’t look to the US to see how university pricing works! Whoops! We didn’t set enough aside for the loans and whoops people are trying to get in before the fee rise and whoops whoops whoops”.

    Yet the conservatives just had a high water mark level of support. It really doesn’t help that Milliband is really awful. (His treatment of unions sucks and promising to Keep Up The Awesome Austerity makes him distinct from Cameron…how?)

    • Murc

      It’s remarkable how dysfunctional Britain became in such a very, VERY short time. I underestimated the Tories greatly. To be fair, while I expected the Liberal Democrats fecklessness, that of Labor has surprised me. Say what you will about Tony Blair, the man knew how to sniff the wind, and right now the Commonwealth is crying out for a tack to the left.

      • Hell, Gordan Brown was more charismatic than Millaband.

        Millabend is going out of his way to not work with unions, even a little bit. There hasn’t been an action that he hasn’t found some way to tut tut (or almost, but not quite, tut tut). The unions are super geared up and all he can say is “tone it down”!

        • Murc

          Going out of his way to not work with unions would make sense if it were electorally popular in some way, and it might be forgivable if he were excellent on all other matters, but neither of those things seems to be the case.

          As near as I can tell from his career, Ed Miliband seems to have some vestigial concern for the laboring classes of Britain, but to resent that they think that, as the founding and central members of the party named after them, they have the cheek to demand to influence said party. That’s the rightful province of men like Ed Miliband, who spent years playing the inside game to be where he is.

          A few people whose opinions I trust have spoken up about Ed Balls, but I confess to not knowing much about the men except that ‘beaten in a leadership race by Ed Miliband,’ which doesn’t inspire a ton of confidence.

          • John

            Not to worry, the other, even less left wing Miliband is waiting in the wings!

            • mds

              Yeah, I still sometimes wonder how much Ralph Miliband beat them and broke their toys growing up, the way both of his boys go out of their way to piss all over his grave.

              • IM

                It a political dynasty of the labour party, right? Perhaps that is the problem: dynastic politics.

        • Bart

          And Brown has that carefully cultivated deep voice that the Brits so admire. Is there an instructional voice school over there?

    • ploeg

      You say that all as if it was a bug rather than a feature. If you “prove” that government doesn’t work, people will want much less of it.

      • Uncle Kvetch

        If you “prove” that government doesn’t work, people will want much less of it.

        Yes. A thousand times yes.

      • R Johnston

        Sadly, if you prove, without scare quotes, that you want to get in the way of government working and kill government dead if you have the chance, there are an abundance of circumstances under which people will still vote you into office.

    • Dave

      “Cap or cut the housing benefit? Whoops! Throw thousands of families out of their homes and onto….local government aid which ended up costing more AND immiserating the families AND hurting the housing market.”

      You write as if these things have actually happened. Since this very week they are still being debated in Parliament, perhaps you have not been paying enough attention?

      • Ok, I see where your misreading came from. By “ended up” I didn’t mean that it had happened, but that “upon close analysis it was projected that it would…”

        Hope that clarifies.

  • Uncle Kvetch

    His treatment of unions sucks and promising to Keep Up The Awesome Austerity makes him distinct from Cameron…how?

    It would be nice if our media devoted a bit more attention to the upcoming elections in France, where François Hollande’s campaign really is bucking the austerity trend, and it looks like he could well end up making Sarko a one-termer as a result.

    (On second thought, maybe it wouldn’t be nice, since the coverage from our media would probably consist of “hurr, washed-up soshulists surrender monkey jerry lewis hurr.”)

    • Malaclypse

      You forgot “cheese-eating.”

      • rea

        No–as my 12-year old points out, the French austerity program cut the cheese . . .

        • Tirxu

          That is an heresy. The only way we will ever cut the cheese is with a knife, preferably one that cannot be ever used to cut anything else.

          • Hogan

            Another English tip.

            • Tirxu

              Oh. I thought it was intended to mean that austerity would deprive us of our beloved cheeses.

              Well, lesson learned.

              Thanks.

    • Tybalt

      Now Merkel is being brought to France so she can electioneer directly for Sarko. The ship’s rats are getting very panicky.

      • R Johnston

        They have insufficiently developed capability to appreciate the importance of economic modeling in order for them to quality as panicky rats.

    • Tirxu

      I am not sure about my english (srsly). “Bucking (the austerity trend)” means “not going along with”, right ?

      If so, I think you are a little overenthusiastic about François Hollande. He may not be touting austerity as much as Nicolas Sarkozy, but he is very much saying that we have to reduce deficits now. I hope that he does it only to be considered a VSP, but I would not bet on it.

      • Hogan

        “Bucking (the austerity trend)” means “not going along with”, right?

        Right.

      • Uncle Kvetch

        he is very much saying that we have to reduce deficits now

        That’s true, and in that sense you’re correct that he does accept the Very Serious framing. But at least he’s arguing that a short-term expansionary policy will bring better long-term deficit reduction.

        • Uncle Kvetch

          Mind you, I’m not all that “enthusiastic” about Hollande. It’s more a case of it being an instructive contrast to the UK (and, to an extent, the US).

        • Tirxu

          I think that there is a consensus about the need for long-term debt reduction, but I don’t think that Hollande advocates expansionary deficit even for the short-term.

          Mind you, he advocates extra spending, saying it will be more than offset by reductions in fiscal deductions and an increase of the marginal tax rates.

          About his chances for the election, the feeling in France is that Sarkozy is in very bad shape and that there would be no way for him to win, but for two things.

          First, Sarkozy is very strong in a campaign, and everyone more or less expects him to pull some extraordinary tricks in the three remaining months.

          Second, the french electoral system has some interesting quirks, so if Sarkozy and Le Pen get the most votes in the first turn, there will be no candidate from the left in the second turn (as in 2002). By the way, there are some ways that this kind of stuff could be prevented, but there is absolutely no chances of it happening, since an intelligent system would elect the centrist candidate (in this case, Bayrou), and neither the UMP nor the PS want to have that.

      • Anticorium

        It is a sign of the power of all internet traditions that you might stumble over “bucking the trend”, but know exactly what a VSP is.

  • c u n d gulag

    Where, oh where, are “The Sex Pistols?”

    I’d love to hear what they’d scream about “Austerity in the UK!”

    And Joe Strummer and “The Clash” would probably have a great time writing about today’s world. I can almost hear “Wall Street and Thieves.”

    • c u n d gulag

      Actually, having thought about it, “Police and Thieves” still fits.
      As do a lot of their songs.

      • Furious Jorge

        Much of the Clash’s catalog is timeless.

      • Bill Murray

        Of course Police and Thieves was written by Junior Murvin and Lee Perry. Hate and War was a Strummer/Jones song, though

    • Uncle Kvetch

      Ever get the feeling you’ve been cheated?

  • TT

    I would argue that the purpose of austerity is to teach people who is in charge. If you beat ordinary people down to such an extent then who knows, maybe they’ll just accept the final and complete destruction of the social safety net. After all, what are they going to do about it?

    • I think that’s certainly some of it, but I doubt it’s a central driver with most of the Eu folks at least for their own populations. (Germany vs. Greece is a different matter.)

      I think it’s pretty clear that they really do believe in confidence fairies and really do think that their policies are working, or at least working better than the alternatives. That they are “brave” (i.e., inflict pain on voters) is a sweetener, not the core. Cf. the 50% tax bracket on high incomes. The Tory’s really really believe in the hairshirt.

      • mds

        The Tory’s really really believe in the hairshirt.

        The rank-and-file Tories believe in the hairshirt. Just like the city councillors in Troy, Michigan who rejected a federally-funded transportation center centered on their Amtrak station because of the federal deficit. “No, we can’t have nice things, because times are tough.” Davey “Posh Boy” Cameron and his inner circle, on the other hand, know exactly what they’re doing to the shreds of social democracy that haven’t already been destroyed by Thatcher and Blair. Their hairshirts are made from Angora.

        • While there is practically no ill I’m not willing to believe of them, I wonder whether their beliefs are really so naked. Does Cameron really have it as a deep seated, personal goal to destroy the NHS? (I mean, the way Bush et al really did have a deep seated, personal goal to invade Iraq?)

          Again, their willingness to tax as well as cut is indicative of something.

          • DrDick

            I think it is probably a mix of the two. For Cameron et al., it is a positive good and necessity that the peasants should suffer.

          • R Johnston

            In the whole evil vs. stupid debate, in the end it very rarely matters which side wins. The prescription either way–keep them far away from either public or private levers of power in order to keep them from harming other people–is the same, and the hope for correcting the underlying condition is exceedingly slim in either case. Occasionally you can make a successful emotional appeal to the malicious stupid and convert them to the harmless stupid, and occasionally you can force the hand of evil towards the benign by constricting its options, but for the most part evil and stupid are going to lead you to the same place in the end.

          • mds

            Again, their willingness to tax as well as cut is indicative of something.

            That they know how much of their support comes from tax exiles? That they are willing to use their awareness of the marginal utility of money to rich people to provide cynical cover for all the “shared sacrifice”?

            Does Cameron really have it as a deep seated, personal goal to destroy the NHS?

            Well, Andrew Lansley isn’t some backbencher, but Cameron’s chosen health minister, so yes. I mean, good grief, the House of Lords has revolted over how brutal the government’s proposals for the NHS are.

            Look, I’m glad that they’re willing to admit that some rich British people should pay some more taxes, as opposed to the GOP attitude. But then again, a comfortable majority of the US public wants to see rich people pay more taxes, so perhaps if we had a slightly less balkanized, fragmented electoral system, we’d at least see Republicans embracing tax hikes in exchange for gutting Social Security and Medicare.

            • Yeah, I don’t want to protest too much. That it’s in their ideological interest to be stupid in this way says a lot.

    • Linnaeus

      In other words, neofeudalism.

    • I have decided that it is simply no longer possible to think that the people who are demanding austerity can still believe it or are that stupid. At least not the elected officials.

      “Beat the masses down and show them who is boss. Cut their retirement and in the end those things that make our society what it is today. Then hire half to kill the other half.”

      Or am I just paranoid?

  • Joshua

    On NPR this morning there was a report about how the Eurozone economy is falling apart and governments are trying to push growth and austerity at the same time. “A careful balancing act” is how they put it. I would say “an impossible folly” but what do I know, I am not a highly paid Eurocratonomist.

  • mb

    We did do a sort of half-Cameron with a back-twist so we’ve ended up with just a partial belly flop instead of the full-on nasty landing Europe appears to have engineered.

    Now that the results of our various experiments in early 21st century economic disaster management are in and progressive approaches have been vindicated, conservatism and those who push it will be finally and completely discredited and confined to the trash heap of history. Amirite?

  • “And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron”

    What are you talking about?

    “Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will.”
    –Barack Obama, 2010 state of the union address

    As for cuts to Social Security, Medicare, or Medicaid, Obama offered those to the Republicans but they turned him down:

    http://www.politico.com/news/stories/0711/59711_Page2.html

    • Freezing government spending at the level it was boosted to by the largest Keynesian stimulus program in American history != austerity.

      Nor do feints, btw.

  • Dave

    I’m still unclear on the Krugmanite plan. Is it to keep borrowing larger and larger quantities of money forever, and hope nobody notices? UK aggregate indebtedness in March 2011 was 492% of GDP: http://www.bbc.co.uk/news/business-15820601

    I mean, if this is a sneaky plan to bring about the collapse of capitalism under its own weight, so be it, but if, as it appears, it’s an assertion that one can realistically generate a return to stable prosperity by continuing, and accelerating, a pattern of government financing that had already run a deficit in all but 5 of the last 35 years, and has so far accumulated over a trillion pounds in liabilities… Well, that’s something that needs a lot of water to help it down.

    • Joshua

      The Krugman plan is not to cut spending in bad times. The idea is that you cut spending in good times, and increase spending in bad times. Surely you know this?

      Look at the economic numbers and you’ll see that increased private sector hiring is being offset by cutbacks in government layoffs. The private sector can’t pick up those jobs, whereas it could in good times.

      We kind of had the right idea in the late 1990’s, then some rich good ol’ boy stole an election and fucked it all up.

    • Is it to keep borrowing larger and larger quantities of money forever, and hope nobody notices?

      OK, really? Really?

      You’re pretending, in 2011, not to understand that Keynesian economics support counter-cyclical spending?

      Really? Is Krugman’s argument really that incredibly unassailable that you have to pretend not to understand it?

      • Or 2012, even.

        Take it as a sign of how much I value you, that I treat you the same way as my checkbook.

    • UK aggregate indebtedness…a pattern of government financing

      One of these things is not like the other.

  • Obviously, the Republicans have picked up on this austerity line for no other reason than that it seems like a convenient argument for them to make right now, as they push for the same policies they always endorse, regardless of circumstances. It’s similar to how the Bush tax cuts went from the perfect response to a large surplus to “tax cuts raise revenues!” almost overnight.

    However, Republicans can say whatever they want; it doesn’t always get through to the mainstream. The reason this one has is because something kinda sorta similar to an austerity response to a recession – but with an incredibly important difference that the Republicans always leave out – actually worked out pretty well in the early 90s. The debt deal that Poppy Bush made with the Democratic Congress, and the restrained budgets that Clinton signed throughout his term, probably did contribute to the 90s being the longest peacetime economic expansion in history.

    The problem is, that spending restraint did not really kick in until several years after the recession was already over, and we were well on our way to recovery. The made the deals while the economy was still weak, but the deals were to keep spending restrained in future years, while the economy was growing. There is a word for spending restraint in a booming economy, and it’s not “austerity.” It’s “Keynesianism,” the same word that describes debt-financed spending stimulus during recessions and the early stages of recoveries.

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