There is very little in this world as useless as the endless hair-pulling between two factions of the neoclassical economics world, The Keynesians and The “Austerians.” For those of you who correctly sense this to be too boring to follow, allow me to get you quickly and painfully up to date so that we can get beyond this whole moronic intellectual framework and on to something much more useful for actual people.
Ever since the Great Financial Crisis of 2008, the Same Old Authority Figures have separated themselves into two groups in their attempts to “fix” the world economy by doing nothing new or interesting. First, you have the Keynesians and their spiritual leader Paul Krugman. Their philosophy is simple: if the economy is producing privation, ecological ruin, anxiety, institutional collapse, grotesque inequality and bankrupt governments, have central banks print a bunch of money and give it to governments and megabanks. See? All better! Note: If this does not work, you did not print enough money! If you point out that, for example, the United States was already printing tons of money when its economy went in the toilet, Paul Krugman will scoff at you and mention his Nobel prize.
Grimacing toward the Keynesians in a hip-hop pose à la You Got Served is a group we can call the Austerians, economists that believe that we can fix the economy through “austerity.” This is accomplished by doing almost all of the same things as prior to the crisis, while making up any shortfalls by cutting government programs for the poor, sick and old. Cutting wages wouldn’t be a bad idea either, according to Austerians. (Why look at those nice Bangladeshis! Reasonable wages and a much lower Debt-to GDP Ratio than that horrible Europe!) If we follow the austerity path in a monastically devout way, we can reduce government debt, which is the Worst Thing In the World, despite that fact that most industrialized countries have been accumulating debt at a steady clip since the end of the gold standard, through times good and bad. According to Austerians, Government debt in 2013 is still the mostest awfulest thing ever which is precisely we everybody keeps producing lots of it and trading it on complex, state-sanctioned markets. Because it’s terrible and all the poor people need to help make it stop!
Rules of Austerity Wrestling
If you go on television to talk about The Global Economy, chances are either the hosts or the guests will attempt to suck you into this wrestling match. You are not allowed to stay on the sidelines, insisting on a broader and more nuanced understanding of our current economic predicament – you must immediately pump up on steroids, don Spandex pants and get in the ring.
Here are the only legal moves in Austerity Wrestling:
- Arguing for or against the use of quantitative easing of debt from central banks and bond markets as a way to “get through” the “crisis”
- Bonus points: quoting Keynes, Hayek, or von Mieses directly as if their thinking applies directly to a 21st century economy where the financial sector is ten times larger than in their day, and where global trade is hyperconnected through nearly the entire planet
Illegal moves in Austerity Wrestling are as follows:
- Mentioning the role of energy markets, especially Peak Oil, as a potential driver of economic shift
- Refusing to accept the high Dow Jones average as a sign of recovery
- Mentioning the long-term effect of youth unemployment
- Referring to people earning low wages (The Poors) as some form of equal citizen deserving of consideration
- Wondering aloud if moving manufacturing to countries where buildings fall on top of you has something to do with our trouble
- Indicating the structural problem that comes from an consumer economy facing the reality that Generation X is half the size of the Boomers
- Admitting that today’s bureaucratic management techniques are entirely overwhelmed by the level of complexity we have wrought
- Presenting any thought other than those specifically mentioned above
Like so much in today’s media, this is the game – we take a fascinating event in world history – a historic economic shift driven by demographics, management techniques, energy transition, technology and more – and we reduce it to a framework that is clean, well-defined and useless. Coke or Pepsi? Mac or PC? “Quantitative Easing” or “austerity?”
I got to play this game briefly on RT’s CrossTalk with Peter Clavell. The host, Clavell, actually avoids this construct, but the moment I am asked a question about austerity, the wrestling match is on. I say that obviously you can’t spend money indefinitely without consequences, no matter who you are. One of the other guests immediately straps on his Spandex and goes all ‘roid rage, accusing me of (GOP communications guru) Frank Luntz-style distortions so that I can support “my” plans for austerity. Huh? Since when is it a controversial thing to say that spending like a drunk sailor has consequences? How does that equal wanting to squash the poor while I laugh over at Karl Rove’s house? Well, in the Austerity Wrestling ring, it makes sense.
Eventually, I got to make my real point, which is that neither Keynesian nor Austerian politicians have articulated what’s going to happen after their miracle cure “fixes” the economy. Where are we going? If we suffer through “austerity,” what’s next, and how is it better? If printing money is the way to success, how long until we actually see some reductions in unemployment and the revitalization of some downtowns? I think that austerity has worked well for the Estonians and is actually causing an epidemic of suicide in Greece and Italy, so obviously there isn’t one right answer. I’m merely interested in the quality of economic leadership – people who can articulate a vision of a better future. The cognitive onanism of a bunch of theory-masticating college professors and central bankers is one step below useless for me and everybody else.
In the meantime, I’m treated to opening the newspaper and attending conferences where theoretical economists whose work did nothing to predict or prevent out current predicament trumpet the success/failure of printing a lot of money (Look! The Dow is awesome! Also, our kids are doomed!) or point out the success/failure of the other guy (Look Latvia is doing great after austerity! And Portugal is doing terrible! Boo!) But just like professional wrestling, neither side ever wins, and the whole spectacle is a distraction from anything substantive going on in our lives.
And note that nobody will ever mention the real reason behind all that debt – it is a new way of executing great power politics through currency manipulation and financial engineering, all while telling Regular People that government debt works the same way as your checking account. If we’re going to discuss sovereign debt structures and bond markets, well let’s get into it – but this will preclude us from simultaneously guilting the guy in the street into believing that there is something bad he did yesterday that now requires his retirement to be delayed by a decade. Thus, we avoid having a real discussion entirely.
Time to discuss things that might actually help people
Bottom line – our economic woes lie in our failure to understand the future, not in our inability to declare a winner among the neoclassical economists from the 1940s. Huge questions remain, with answers that will impact real people’s lives. How can we transition away from our fragile, plutocratic financial institutions toward something that allocates capital in a flexible and useful way? How disruptive will the current energy transition become, and how fast will in change national fortunes? How much will climate change disrupt the world economy? What is a “nation-state” in a hyperconnected global economic system where both national and supranational policy makers seem unequal to the task of managing complexity? What about the unprecedented surge of aging populations? What are the rights and obligations we have to society as the economy becomes more abstract and global?
These are all questions we need to discuss, and their answers will be useful to real people, actual business leaders. But as far as the angels-on-the-head-of-a-pin discussions about austerity go, I have had my fill. Every moment spent wondering about that construct is a moment that could be spent helping somebody, revitalizing a downtown, finding a job for a young person. I’m throwing out my Spandex trunks.