This is Why Paul Krugman Is Never To Be Taken Seriously
Ξ September 6th, 2010 | → Comments Off | ∇ Intellectual, Politics |
Paul Krugman is an economics columnist at the New York Times, and received the Nobel Prize in economics for work he did in the late 80′s. Those two things give him a certain cachet in the realm of economics policy. However, ever since George W. Bush was elected in 2000, he has turned nearly totally partisan, using his clout to attack conservatives and defend liberalism, at the expense of intellectual integrity. His latest column is an example of how wrapped up in partisan rhetoric he is.
Krugman is a Keynesian. Keynesians believe that in economic downturns massive government spending must take place to turn the economy around. This was the prevalent school of thought in the FDR administration, and the economic policies of the 1930′s reflect that. However, Krugman goes too far with his attempts to interpret Keynesian success from the 1940′s:
From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.
Had anyone proposed spending even a fraction that much before the war, people would have said the same things they’re saying today. They would have warned about crushing debt and runaway inflation. They would also have said, rightly, that the Depression was in large part caused by excess debt — and then have declared that it was impossible to fix this problem by issuing even more debt.
But guess what? Deficit spending created an economic boom — and the boom laid the foundation for long-run prosperity. Overall debt in the economy — public plus private — actually fell as a percentage of G.D.P., thanks to economic growth and, yes, some inflation, which reduced the real value of outstanding debts. And after the war, thanks to the improved financial position of the private sector, the economy was able to thrive without continuing deficits.
I’m no economist, nor even an economic historian, but it strikes me fairly obvious that America’s economic prosperity following WWII might have had something to do with the fact that it was the only industrialized nation that hadn’t been devastated by war. Germany, Russia, Britain, France – all had their industrial centers ravaged, their male populations decimated. BMW and Mitsubishi weren’t exactly in a position to challenge GM, Ford or Chrysler in 1946. Britain didn’t end food rationing until 1954 – nine years after the war ended.
I’m sure America’s economy would see an uptick if the rest of the world’s industrial infrastructure crumbled overnight. I don’t think we’d even need to go into public debt if it did happen to trigger the boom. I’m just not sure how Krugman is proposing for it happen.
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