Sunday, January 18, 2009

Beyond Growth: The Rise and Fall (and Posthumous Return) of Political Keynesianism

by the Sandwichman

The ghost of Montagu Norman notwithstanding, the fact that there are bad -- or even stupid -- arguments against something is not, in itself, a good argument for it. Some sort of stimulus package is, at this point, a foregone conclusion. Whether or not StimPack™ '09 is "big enough" or whether or not it will work as intended are questions the Sandwichman will leave for more learned Thebans to debate. What Sandwichman wonders is "what's growth got to do with it... do with it?"

Once upon a time, Keynesian policy was about "full employment", defined as a balance between the number of job seekers and the number of positions available. Then economic growth came to be seen as a prerequisite for attaining full employment. Then full employment was defined downward to the so-called natural rate or the non-accelerating inflation rate of unemployment (NAIRU). Now, even that natural rate seems too high a target for fiscal policy to aim at all at once. Full employment has become an empty promise.

Meanwhile, starting back as early as the 1950s, with John Kenneth Galbraith's The Affluent Society, questions began to emerge about the social and/or environmental efficacy of economic growth as a prime policy objective. Doubts compounded in the 1970s, with the Club of Rome's Limits to Growth and Fred Hirsch's Social Limits to Growth.

Now suddenly, after 30 years of neo-liberal orthodoxy -- a regression Hirsch presumed was unthinkable -- we're being beamed back to the pre-Reagan era for a refreshing blast of old-time Keynesian pump-priming. Happy days are here again! What am I missing? All those insights into the inherent contradictions of Keynesian demand management. The stuff about conservation of resources and the distinctions between the material economy and the positional economy.

What if the StimPack™ '09 answers we have are for problems people don't have? "They've got other problems and we don't have any answers."


BruceMcF said...

It goes without saying that the employment policy in a steady state sustainable economy will involve a job guarantee ...

... after all, the Overton Window has been slid so far away from looking out onto reality that what gets said involve a choose of better or worse fantasies.

The analogy has been made that if a drunk driver gets in an auto accident, you first stitch him up and set his leg, and get back to him about his drinking later.

OTOH, while the referral to counseling on the drinking problem might wait, you don't fix him a stiff drink while he's getting the X-ray.

Much of the stimulus is long overdue spending on things that should have money spent on them ... though, considering $30b for highways, $6b for buses and $4b for rail, in many cases not as much spending as there should be ...

... bu the tax cuts and the TARP giveaways to banks without strings attached seem to be very much a case of the hair of the dog that bit you.

Sandwichman said...

The analogy has been made that if a drunk driver gets in an auto accident, you first stitch him up and set his leg, and get back to him about his drinking later.

Seems to me the main idea behind the StimPack is to arrange a loaner vehicle for the drunk before he has a chance to sober up.

TheTrucker said...

There seems to be a lot of people in the various Usenet groups talking about the fact that no matter how you inject money into the bottom of the economy (increase public works, cut the work week, stimulus checks, whatever) the money will simply leave the USA in exchange for foreign goods or foreign oil or be used to pay down debt.

It seems to me that we are more in need of tariffs and excise taxes than we are in need of progressive income taxation. Will it do any good to stoke an economy that doesn't really exist? It is going to take a long time to rebuild all that has been destroyed by free trade.

Sandwichman said...

Can you explain how cutting the work week will "leave the USA in exchange for foreign goods."