Reviewed in the United States on February 20, 2021
The book itself is a highly readable compilation of newspaper articles, blog posts and magazine pieces from 1992 through 2019 explaining important macroeconomic issues and policy debates for a general audience. Following are my abbreviated chapter reviews. My full set of chapter reviews was too large to post on Amazon which only allows for 20,000 characters, including spaces.
1. Social Security
This chapter recaps the cynical and disingenuous attempt by the administration of George W. Bush to abolish the Social Security system by privatizing it as well as the work of Nancy Pelosi to stop the charade. The essays show how the crass manipulation of facts can be used create a false narrative. The zombie idea was to replace a publicly managed and highly successful social insurance program with a multitude of private mutual funds.
2. Obamacare aka the ACA
We learn that essential or even adequate healthcare for every citizen is a too radical an idea for the U.S. The real crisis is in healthcare, not Social Security yet reform (ingenuous) efforts were directed at Social Security. The ideological Regan era paradigm to be overcome is that government is always the problem. This was the presumption behind the misguided or even dishonest attempt to privatize Social Security and it stands in the way of universal integrated healthcare reform. In lieu of real arguments against healthcare reform and improvements, fear mongering over costs and scare tactics over choice are the preferred strategy of opponents. The great fear of course is that once successful, it would as impossible to overturn as Social Security. The fear is that the American people will experience the benefits of universal healthcare and not allow it to be overturned. Thus, the fear of failure in all places and the dread of disaster on all levels has to be instilled to prevent success. This debate became one of the early steps toward the post-truth politics of the current time where imaginary conspiracies overshadow reality.
3. Attacks on Obamacare
The chapter document the insidious attempt to undermine the Affordable Care Act by attacking it at the margins or trying to sabotage it outright with changes to intentionally drive insurance premiums higher. Shockingly, or perhaps not so shockingly in an ugly world of mendacity and cruelty, almost every state governed by Republicans declined the offer of the federal government to provide health insurance to many of its citizens at little to no cost to the state thus bringing in federal dollars that could aid the state economy. This was the brave stand against the evils of Obamacare. The conservative opponents of Obamacare predicted its failure because they were afraid of its success and the implication that the government might not be the problem.
4. Bubble and Bust
Lurching from one economic shock or crisis to another is an indication of being trapped in a neoliberal bubble driven economy. When one bubble bursts another is created but it referred to as a recovery. For example, the internet stock or dot-com bubble that burst in 2001 was replaced by housing bubble that burst in 2008 which was replaced by the current monetary policy driven stock market bubble which will burst in ???? Federal monetary policy is really about its ability to create booms and busts. The petty larceny of the bust becomes the grand larceny of the boom. Not discussed in the book, and for what it is worth, I think we are in an unprecedented double bubble. That is, the double trouble of a monetary driven stock market bubble and a debt bubble (individual, corporate, student and public). After all, a great deal of the corporate debt (first bubble) is being incurred to buy back stock to keep stock prices artificially high (second bubble) and disconnected from the health of the underlying economy. Standby for a simultaneous bursting of simultaneous bubbles, party on.
5. Crisis Management
Five essays dealing with the unresponsive response to a devastating 2008 economic decline and a finical crisis which was outside the experience of those condemned to experience it. This was the crisis of inversions. For example, reckless private risk taking created the crisis but caution in the government response became a reckless risk in the aftermath. Likewise, normally responsible policy measures such as fiscal prudence in government spending became wildly irresponsible. The zombie idea that just will not die is that austerity is beneficial, perhaps this is based on some sort of confused idea or prejudicial belief that is austerity is virtuous and suffering builds character. Could it be the toxin of religious belief infecting economic thinking? After all, belief in God is the ultimate zombie idea, the idea killed by evidence, but refuses to die and goes on to cause great harm. If one can engage in the magical thinking that makes belief in a supernatural being possible, one can likely believe almost anything.
6. The Crisis in Economics
Crisis occurs when hacks posing as thinkers get romantically involved with their theories and seduced by the beauty of their models, yes, double entendre intended. When the theory does not explain the facts, the facts are reinterpreted (twisted and contorted) to fit the beloved theory. For example, there is the simple and lovely little myth that fully free markets are omniscient, are in long-term stable equilibrium producing growing prosperity. This myth has become a destructive fundamentalist belief. Economists engaged in a certain amount of hubris in thinking that the big debates are over, the big problems solved and catastrophic economic failures a relic of an unsophisticated past, at least until 2008. The economics profession entertained idealized myths such as self-correcting market mechanisms, perfect information, efficient market, rational actors and perfect competition - all dressed up in fancy want-to-be physicist mathematics. This is the neoclassical fallacy, i.e., orthodoxy, where people are rational and markets are perfect and efficient. The practitioners of this sophistry forget that economics is not physics. In an impressive over precision fallacy, economic models do not account for the vicissitudes, vagaries and irrational messiness (the most common) of human behavior. In reality, free markets are as imperfect and idiosyncratic as human beings. The economic profession became ahistorical and conveniently forgot about an inconvenient history of market failures, bank runs and financial panics, too many to list here as well as those endemic human virtues of, greed, panic, irrationality and herd-like behavior.
In my mind, austerity is the warmed-over secular version of Calvinism, itself a vile Protestant cult-like sect-based belief that makes a virtue of suffering, fear and sacrifice. Though human suffering is inevitable, there is nothing redeeming in it.
There are many fallacies in thinking that government spending must be cut during an economic downturn. One is that government spending crowds out private sector investment and spending. However, during a recession, there is little to no private sector investment and spending to crowd out, this is why there is a recession. It is government spending the fills this private sector gap. The dispositive historical antecedent is the Great Depression. In a conversation with a very serious person (not in the book), I was told that the New Deal and government spending to spur demand and create jobs was a failure, the truth was that WWII ended the Great Depression. I asked this very serious person, “did you hear what you just said?” I replied further, “WWII looks to me like the greatest government spending and jobs program in history, this demonstrated that government fiscal stimulus spending can work if implemented on a large enough scale to move the economy.” Stunned silence from my interlocutor. I mean, war, unfortunately, is still a form of government spending.
8. The Euro
Paul Krugman explores the trade-offs that come with monetary union combined with political disunion. The Euro is a powerful sign of European unity and makes cross border business much easier and more efficient. The European euphoria over the Euro created a debt bubble. The debt bubble burst. In such cases, without a currency union, a national monetary authority can allow its currency to fall (devaluation) thus reducing the cost of exports giving its domestic industry an advantage in becoming more competitive in international markets. With a currency union, this is no longer possible. In this case, the devaluation as such most occur internally in the form of higher unemployment, lower wages and falling prices with increasing private debt, i.e., an ugly deflation aka draconian austerity. The internal adjustment process is much slower and brings with it the political risk of national upheaval. The nation becomes the prisoner of the currency union. Or, is the monetary union the first step to the politically unified or least federalized Europe? It is either full union or bust.
9. Fiscal Phonies
We find that bringing down government budget deficits, even with the hocus pocus of flimflam projections of known charlatans, is more important than bringing down high levels of unemployment for real people. The charlatan in chief is Paul Ryan, onetime Speaker of the House. He proposed a serious of tax cuts to slash tax rates on the highest incomes accompanied by the sham of flimflam spending cuts, the real purpose of which was to reduce benefits and services for the lower and middle classes, e.g., Medicare and the remaining remnants of a social safety net while increasing military spending. The higher military speeding became a permeant reality but fortunately, further real cuts to programs such as Medicare remained an unreality, but this amounted to a reduction in government revenue due to an unnecessary tax cut and no offsetting spending cuts, hence the title of fiscal phonies. Cutting taxes for the wealthy, not deficit reduction, was the true fiscal priority of the fiscal phonies. The real trade-off is between having a social safety net or lower taxes for corporations and the wealthiest individuals. There is always great concern when debt is incurred for public investment in infrastructure and research or for the funding of social services in aid of something as trivial as public health, but there is never a concern over budget deficits and accumulated debt when cutting taxes for the corporations and the wealthiest. When tax cuts cause deficits and increases in debt, the true fiscal phonies come forward and dutifully demand cuts in public spending for such unnecessary programs such as Social Security, Medicare and Medicaid. Who needs a silly old social safety net in home of the brave and land of the free anyway?
10. Tax Cuts
At stake is the hypothesis that tax cuts for the wealthy result in benefits for the everyone. Trickledown economics was an untested hypothesis when it was first implemented in 1981 by Ronald Regan, not a valid theory of economics. I think we now have enough empirical test data. The finding is that lower taxes mean that less is paid in taxes – period, full stop, no surprise. There is no magic trickledown formula. Most of the wealth created by these means accumulates and remains at the top with wealth and income disparities in the U.S. growing ever more severe. What is most remarkable is that, with or without tax cuts, the aggregate economy has continued to grow by almost any measure while income levels of working people have continued to fall by almost any measure. Belief in tax cuts and trickledown economics has proven to be a remarkably tenacious belief in the face of considerable evidence to the contrary, similar to a religious belief. This is an example what Paul Krugman calls a zombie idea, one that is defeated by evidence and reason but lives on in the minds of true believers. Corporations use both debt and the proceeds from tax cuts to buy back their own stock to pump up its market value, this is illusory value that can be dissipated within a few seconds. But this is preferred to creating real value through investment in expanded capacity, resources, technology or people. This is the gilding of a new gilded age.
11. Trade Wars
This chapter focuses on Trump trade policy which is based on the anti-intellectual premise that his gut knows more about trade than any so-called expert. It seems that for Trump, in his natural state of belligerent ignorance, trade is a way of lashing out based on xenophobia and racism. In reality, the winners and losers from trade are mostly between interest groups within a county rather than between the countries engaged in the trade war. A trade war works to the advantage and disadvantage of differing groups within each country but makes the national participants in the trade war overall worse-off. Trade agreements are a sign of international cooperation so Trump’s capricious ambition for a trade war to undo eighty years of progress built on rules largely created by the U.S. is quite understandable.
No serious person advocates for pure or absolute material equality but the most pernicious effect of radical inequality is the loss of a sense of shared reality or the notion that we all have something in common by living in a shared society. Radical inequity attenuates social bonds and replaces them with economic transactions.
When it comes to understanding inequality, a logical error is often made, that of reversing cause and effect. The fallacious argument is that material inequality is caused by declining values and scoial pathologies. Rather, the declining values and scoial pathologies are caused by material depravation and increasingly wide asymmetries in material wellbeing. That is, philosophies, perspectives and attitudes flow from material realities, not the reverse.
The conservativism of Edmund Burke (not in the book) is extinct and has been replaced by the oxymoronic beast known as movement conservativism. No self-respecting conservative would be a part of a movement. The movement conservatives have moved the entire political spectrum far to the right. Movement conservatism works by stoking cultural anxiety, racial animosities and xenophilic nativism for the purpose of pushing an elitist economic agenda. The strategy is to motivate and mobilize voters with faux social issues to get elected but once elected turn toward fulfilling very real but narrow financial and economic interests.
14. Eek! Socialism!
Conservatives are fond of saying to non-conservatives, ‘not everyone who disagrees with you is a fascist’. Fair enough, ‘not everyone who disagrees with conservatives is a socialist’. The trouble with these labels is that fascism and socialism mean different things to different people with few people still understanding the meaning of these labels. Socialism, the government ownership of all enterprise, is not the same as a social democracy which is based on a market economy and free enterprise with a robust public SafetyNet and strong government regulation as to what can be done for profit accompanied by vigorous government action to preserve society when markets go array. Contempt for the reality of market forces will produce economic catastrophe, but Neoliberal ideologs intentionally conflate socialism with social democracy to discredit the latter.
Bursting bubbles, income equality, financial market regulation, the conduct of business etc., do not mean anything if we manage to destroy the climate with an economic system that requires constant growth within a reality of limited resources. The profits from pollution and the ideology of the free market combine to block any necessary government action to address the scientific and objective reality of climate change. But of course, climate change is a mass conspiracy, a hoax perpetrated by climate scientists on a global scale to enhance their reputations and gain funding. It is actually the climate change deniers that are in the captivity of powerful special interests who profit from pollution. Climate change denial is just a special case of a general hostility to science that challenges ideology or belief, it is an example of willful ignorance.
Much of the content is devoted to cataloguing the list of deplorable crimes of Donald Trump. There is also the ease with which the Republican Party supported Trump. This is the sign of a party that is willing and ready to follow its pie-eyed thuggish leader into the promised land of permanent one-party rule. Party loyalty prevails over governance. The Republican Party will abandon democracy before it abandons its agenda. As emphasized by Paul Krugman, white nativist nationalism ‘trumps’ (ha ha) economic interest. People voted for Trump based on good old racism and white resentment of people of color, any color other than white, i.e., white nationalism. This is certainly true, I do not think there is any doubt that Trump, his success and his supporters are driven by racial resentment. The riots of 01/06/2021 were driven primarily by angry middle-aged white men and some naïve white women, I know a few, which is a few too many for me.
17. On the Media
This is the Alice in Wonderland world where that which is labeled as fake news is real news and the real news is slandered as fake news. Donald Trump reaps a double benefit. First, any news that reflects poorly on Trump, no matter how accurate or factual, is discredited as fake news. Second, he benefits from throwing the fake news epithet at real news. The volatile admixture of fake new and real news creates the toxin of confusion from which Trump benefits. Additionally, there is the old false equivalency fallacy where all sides of an issue are accorded equal treatment by the media when one or more is patently absurd and demonstrably false or even a blatant lie in a frantic attempt to seem unbiased. Ugh, a bias in favor of the facts and the truth is not a vice.
18. Economic Thoughts
These essays are a bit more esoteric and philosophical relative to the rest of the book. Here Krugman talks about the purpose of economics, what it exactly is, what it means to do economics and what it means to be an economist. Economics presents itself as the most rigorous of the scoial sciences, what I call physics lite. I agree with Krugman that economics is better understood as a conceptual field. Physics is about objective natural phenomena that follow known laws which lends itself quite well to mathematical representation. Economics is about subjective human behavior which follows no known natural laws or principles of reason. So-called rigorous mathematical economic models only work when over simplifying assumptions are made about the inputs that represent that state of human existence and interaction such as perfect competition, the long-term equilibrium, rational actors, rapidly clearing efficient markets, utility maximization. The very attempt to be overly rigorous creates blind spots. Krugman points out hoe models are still useful metaphors for reality but do not provide the exact truth of reality. I believe that when economics gets bogged down in the minutia of mathematical model building it starts to look like the logic chopping of Medieval Scholasticism with same resulting increase in human knowledge. The greatest value in any model of complex reality is in its ability to help us think more clearly about this complex reality, not in modeling it with any precision.