Friday, August 19, 2011

"Karl Marx, it seems, was partly right..."

Well, there's something you only ever hear from economists when they're pooping their pants because the system is going in to meltdown. We heard it in the early 1990s and again when the financial crisis hit in 2008. And now Nouriel, who resists the delusional boosterism of pro-capitalist economics more than most, has reminded us that the "Old Moor" had a few things to say about capitalist crises and their inevitability. Of course, Roubini can't accept that Marx's conclusions were correct - "his view that socialism would be better has proven wrong" - so all that we're left with is TINA - there is no alternative. So, suck it up all you workers out there who are getting laid off and facing cuts to services and benefits.

But if Marx doesn't offer a solution - rational planning based on human need as determined by democratic control of the economy, rather than the control of unelected oligarchs and corrupt and decadent bond traders - then neither does Roubini. Within the same article he contradicts himself when prescribing a solution. First he writes:

Until last year, policymakers could always produce a new rabbit from their hat to reflate asset prices and trigger economic recovery. Fiscal stimulus, near-zero interest rates, two rounds of “quantitative easing,” ring-fencing of bad debt, and trillions of dollars in bailouts and liquidity provision for banks and financial institutions: officials tried them all. Now they have run out of rabbits.

Then, after telling us that governments have no options left for staving off the growing crisis in both the financial and real economy (and demonstrating this claim with figures and examples), he offers us a solution.

The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts.
Uh, wait a second Nouriel - didn't you just go to great lengths to demonstrate that precisely these kinds of measures, other than make taxation more progressive, were no longer possible given the financial state of many western governments. Europe is on the edge of a meltdown precipice. America's debt has been downgraded. Which is it?

Is Capitalism Doomed? - Nouriel Roubini - Project Syndicate

1 comment :

AMiserableEconomist said...

Really? Capitalist policy makers and their armies of decorated economists are running out of tricks to keep economic resources from recycling faster and that somehow substantiates an argument that a wholly controlled command economic structure - devoid of innovation and potentially beholden to intellectual pygmies - was correct?
Roubini is outlining the avenues at the disposal of policy makers to prevent a 'hard landing' in this market correction.
Once exhausted, these policy makers will be impotent to prevent the market from re-arrange prices and re-allocate capital and resources to thier most efficient uses (with a little jiggery pokery from incumbent subsidies) much in the same way shock therapy did to address the structural inefficiencies of the Russian economy on January 2 1992.
Worst case scenario will be the immediate loss of many inefficient jobs (like supurfluous bond traders) and a generation of very unpopular politicians - not breadlines, starvation and meltdown - lets not get silly.
The US is a very wealthy nation with relatively low personal income taxes (and ironically relatively high corporate taxes - far higher than Canada or many European social democratic economies), and is in no real danger of not being ABLE to pay off its debt. Whether it will choose to do so in a predictable manner is another matter - hence the downgrade by Standard and Poor's.
Possibly Mr. Roubini was suggesting today's flawed incarnation of Capitalisim is doomed to survive in the long run, much the same way Stalinist command resorce allocation was.
Economists concern themselves with attaining growth in a number of key metrics and spend their lifetimes building models to prescribe monetary and fiscal policies to achieve such ends - Marx was no exception to this though his model relied on monopolistic control in the resource allocation process.
They are not concerned with what is right or wrong (Engles did most of the normative stuff) - simply what is correct or incorrect in achieving the highest rate of growth.
Possibly those of us in the 'wealthy west' should focus our efforts on being happier, and more of a community than achieving growth in our personal net worths'.
Stiglitz convinced Sarkozy back in 2008 that the list of 'key metrics' economists should concern themselves with are far broader than those that can be achieved using fiscal and monetary policy..... Canada and the US..... not so convinced it would seem as things are very much business as usual.

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