As Paul Krugman put it in The Story of Our Time, his Monday New York Times column, that "may be the most crucial thing to understand" in what he offers in his "refresher" necessary to understand our current economic problems.
It is clearly written, very much to the point. It is yet another example of why I wonder when Krugman will get the Pulitzer for commentary he deserves every bit as much as his Nobel Memorial Prize for Economics.
He explains that crucial point thusly: And of course that is what we have experienced. It doesn't matter, as he points out, whether we did so voluntarily or were forced to by our creditors, whether it was unwillingness or inability to spend, the result is the same"
The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.
Wait a minute? Are we going to have to revoke his economist license? Did he just use the dreaded D word? Yes, he said "depression." Forget whether or not the US economy meets the technical definition, it is clear looking at countries like Greece and Spain that attempting to address the economic woes by austerity can easily overcome any technical definitions.
But there is, as is always the case with Krugman, so much more.
I am not going to go through all of his analysis of how we got here. His words are clear enough. They do not require explanation.
I am going to illustrate the power of the column another way.
After asserting that this is no time for austerity, Krugman raises the question for us: why should we believe him rather than the austerians?
The next paragraph could be simply rephrased - because I was right and they were wrong. Read these words:
Well, I could go on at length on this topic, but just look at the predictions the two sides in this debate have made. People like me predicted right from the start that large budget deficits would have little effect on interest rates, that large-scale “money printing” by the Fed (not a good description of actual Fed policy, but never mind) wouldn’t be inflationary, that austerity policies would lead to terrible economic downturns. The other side jeered, insisting that interest rates would skyrocket and that austerity would actually lead to economic expansion. Ask bond traders, or the suffering populations of Spain, Portugal and so on, how it actually turned out.
And so we will be perfectly clear, he adds a detailed warning about the austerians, which concludes:
Some of them see the crisis as an opportunity to dismantle the social safety net. And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain.
that isn’t actually feeling much pain - like billionaire Pete Peterson pushing Fix The Debt, like Simpson and Bowles, like Mitt Romney. . . .
Krugman ends this powerful column - which you absolutely must read, and save for use in rhetorical exchanges - with a certain amount of optimism:
What has happened now, however, is that the drive for austerity has lost its intellectual fig leaf, and stands exposed as the expression of prejudice, opportunism and class interest it always was. And maybe, just maybe, that sudden exposure will give us a chance to start doing something about the depression we’re in.
the expression of prejudice, opportunism and class interest it always was -
Yep, this column is a keeper.