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
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