Now Playing at Reason.tv: Obama's New New Deal—as bad as the old New Deal?
December 16, 2008, 12:00pm
Nobel laureate economist and New York Times columnist Paul Krugman says he wants President-elect Barack Obama to enact "something like a new New Deal." Historian Douglas Brinkley has said that Obama could come to office with a "sweeping legislative agenda which will be Johnson-like or New Deal-like." An aide close to Obama told New York magazine that "A lot of people around Barack are reading books about FDR's first hundred days."
On the cusp of a deep economic recession, and with a staggering amount of bailout money being offered to struggling industries, pundits and political advisers are advocating that the incoming Obama administration construct a new New Deal.
But is the popular narrative about the old New Deal—that Keynesian economics and top-down planning rescued America from the Great Depression—accurate? Reason.tv's Michael C. Moynihan talks to UCLA economist Lee Ohanian, who argues in work written with colleague Harold Cole, that the New Deal's massive intervention into the economy actually prolonged the economic crisis by seven years.
"Obama's New New Deal" is written and produced by Michael C. Moynihan. Director of Photography is Dan Hayes.
Lefiti | December 16, 2008, 1:50pm | #
http://blogcritics.org/archives/2008/09/04/1628412.php
Book Review: The Conscience Of A Liberal by Paul Krugman
Written by Dan Schneider
Published September 04, 2008
In short, Krugman discourses on how the aftermath of the Stock Market Crash of 1929- which ended what he calls the Long Gilded Age, of the 1870s thru 1920s, impacted Americans via the Great Depression, which saw the rise of Liberalism, through what he calls the Great Compression, after the Second World War, when higher tax rates and governmental policies squeezed incomes from top and bottom, creating a more egalitarian and stronger economy- and one that has yet to be equaled. Krugman posits that the post-war economic boom, and the rise of the suburban middle class (using the example of Levittown), was not a result of the free market, which he rightly acknowledges ended, for all intents and purposes, with the Great Depression, but with direct government intervention.
He then charts the rise of Movement Conservatism’s early and naked biases, how it learnt its lessons, and emerged to wage a stealth politics of class division (which they often accuse their counterparts on the Left of doing) to seize power, and begin a decades long assault on social gains instituted by the New Deal of President Franklin Delano Roosevelt. Krugman also details how they overplayed their hand, and why he feels the 2006 election was a turning point back to more Liberal control of national politics, or, at the very least, a return to 1950s and 1960s moderation of the two major political parties, when, Krugman quotes President Eisenhower, on the radical Right Wing, who wanted to dismantle the New Deal, abolish social security, unemployment insurance, and eliminate labor laws and farm subsidies, as their ‘number is negligible and they are stupid.’ The President was wrong on their size, and he shows how and why they let the accordion expand again, economically, undoing the Great Compression, and bringing on the income stagnation of recent decades. Krugman cleverly shows that in no other period of American history was there even an argument over whether a younger generation would do better than an older one. The very fact that there is debate is proof of the poor policies of Right Wing agenda-driven governance.
Lefiti | December 16, 2008, 1:58pm | #
http://www.fpif.org/papers/2004keynesianism_body.html
FPIF Special Report
May 2004
From Keynesianism to Neoliberalism: Shifting Paradigms in Economics
By Thomas I. Palley
Excerpt:
The concept of market failure has proved extremely powerful, but it has in turn generated a neoliberal counterargument framed in terms of government failure. The claim is that, though markets may fail, having government remedy market failures may be even worse, owing to bureaucratic inefficiencies and lack of market-styled incentives.
The government failure argument has had great resonance in the United States, given the culture of radical individualism. However, the role of government in a market economy runs far deeper, and its contribution is inadequately understood. Government not only plays a critical role in remedying market failure, it also provides essential services related to education and health. In addition, government is pivotal in stabilizing the business cycle through fiscal and monetary policy. Deeper yet, government is integral to the workings of private markets through its provision of a legal system that supports the use of contracts. Absent the ability to contract, the benefits of a market economy would be enormously diminished.
Particularly poorly understood is the role of government in preventing destructive competition, in which market incentives lure agents to engage in actions that generate a socially suboptimal equilibrium. This type of situation is illustrated by the bribery problem. Bribery is economically destructive, because it allocates business on the basis of bribe-paying rather than economic efficiency. For this reason, societies should aim to avoid bribery. However, unregulated markets tend to produce bribery. If one agent bribes while others do not, that agent thrives while others suffer. As a result, all agents have an incentive to bribe. Left to itself, the market therefore generates a “bad” equilibrium in which all agents pay bribes. The “good” equilibrium in which none pay bribes can only be induced and maintained by laws imposing penalties that deter bribery. This illustrates how government action may be needed to support optimally efficient outcomes. The real world is afflicted by situations generating destructive competition—examples include bribery, excessive advertising expenditures, tax competition between jurisdictions to attract business investment, and the global race to the bottom, in which countries ratchet down labor standards to attract business. Remedies for all of these situations require government intervention.
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