Paul Krugman eats a little crow, admitting that so-called “new Keynesians,” including himself, were fudging the numbers to support the notion of an efficient market, guided essentially by rational decisions, with a little help from the Federal Reserve. I say it is “a little crow” because for writing this long piece, he is praised; while other economists will eat their crow salted, his will be mixed in a casserole.
Keynesian economics assumes that the government will need to step in from time to time to create demand to resuscitate an economy when crises like the one we’re still in happen. It does so by incurring the debt that the private sector cannot or will not take on.
The economists who bear the brunt of Krugman’s criticism worry about this debt. And the trouble is, that despite absurd notions like, as Krugman phrased it, the Great Depression (of the 1930s) as the Great Vacation (suggesting that unemployment is voluntary), in a capitalist system, debt must be paid, some way, somehow. Even in the case where debts are forgiven, accounting rules require a write-off. The asset account of accounts receivable is reduced to reflect any debt deemed noncollectable. Debt comes at a cost to someone, be it creditors who perhaps should not have lent the money to begin with, debtors who perhaps should not have borrowed the money to begin with, or their heirs who are blameless in the original transaction.
Assuming the U.S. does not default and assuming the U.S. continues to spend money beyond its means, our descendants will have a considerable debt to pay which they did not incur. Hence a hysteria about saddling grandchildren with our debts. Against this, many will argue that the debt financed economic growth, making possible a standard of living which those grandchildren also inherit.
It is possible this will be muted a bit. Bill Clinton presided over the first federal budget surpluses in memory.
But the sums will never add up because the imperial elite are themselves in default to workers in their own countries and around the world, in default to their own countries and those around the world whose resources they have claimed a right to exploit, in default to the entire world for all those social and environmental costs that they don’t reflect on their books. In short, developing countries must pay their debts. Working people must pay their debts. But capitalists pay merely a fraction of what they owe.
This is because hardly anyone questions the right of the wealthy to control resources. The answer for anyone so importune as to ask is that obviously the rich purchased those rights. But this begs the question, for in the beginning, someone asserted a claim to those rights, without ever themselves having had to purchase them, in order to sell them.
And with those rights came a something more than a free pass on what sensibly are responsibilities, responsibilities to compensate the rest of us for additional education and infrastructure costs to support their profit-making enterprises, responsibilities not to harm the rest of us through environmental degradation, responsibilities to compensate the rest of us for their appropriation of resources which are in fact our common inheritance.
Because only a fraction of debts are recognized, debt becomes unsustainable, the rich grow richer, and the poor grow poorer. And because the rich are now so rich, and the rest of us are now so dependent upon them, they have an influence on political decision making which exacerbates the problem and which ensures that a full reckoning will likely never occur.
Yet Keynes’ answer to economic difficulty is to incur more of a particular kind of debt without any consideration for the other kinds of debt, in order to preserve growth in an economic system that celebrates class discrepancies. Krugman ultimately argues for the preservation of this system; his failure to challenge it ensures that his views are within a narrow range of acceptable discourse and are therefore suitable for publication.
This is a system that celebrates greed. It assumes that the best interests of a particular class will always in the end be the best interests of society even as that class enhances its own gains by using its purchasing power to minimize what it pays others. Ask anybody who works for tips: the rich are almost always the worst tippers. This system celebrates competition and rewards the winners while neglecting the costs to the losers.
Peter Kropotkin, early in Mutual Aid: A Factor of Evolution, in his critique of competition, attributes to Charles Darwin a view that “the fittest are not the physically strongest, nor the cunningest but those who learn to combine so as mutually to support each other, strong and weak alike, for the welfare of the community.” Kropotkin sought to learn from animals in the wild, possibly anthropomorphizing them, but showing again and again how animals not only cooperate but seem to care for each other even in circumstances where no evolutionary advantage can be discerned.
Our competition is a race to exhaust the planet. The myth that everyone can succeed presumes unlimited resources, but those resources occur in a finite space. And it is a myth that not even those who succeed in this system believe. As G. William Domhoff illustrated in “The American Upper Class,” as reprinted in Great Divides: Readings in Social Inequality in the United States (edited by Thomas Shapiro), in fact the wealthy go to great lengths to preserve the discrepancy between themselves and those “below.” Were there in fact equality of opportunity, they could not hope to succeed.
Krugman likens markets to casinos and criticizes those economists who rely on gamblers to set values. But in his analogy, he neglects the role of the house, the elite in those halls who calculate payoff percentages and set the odds, those who given a sheer volume of transactions can ensure that they always win while gamblers who fail to stop will eventually end up destitute.
In a larger rendering of this analogy, we cannot help but observe that those who led us into this crisis have been sheltered from the calamity. While those of us who succumbed to the lure of capitalism, perhaps by taking on debt we shouldn’t have, perhaps doing the only thing we could see to survive in a society where honest means to a living have become rare, perhaps by failing to rebel against a system so obviously rigged against us, have been left to twist in the wind.