Nobel laureate economist Paul Krugman reflects (“Plutocracy, Paralysis, Perplexity,” New York Times, May 3) on the correlation between “rising inequality” and “the Lesser Depression we’re now living through.” To Krugman and his ilk, present conditions demand “strong action” from the state.
“[P]olitical polarization,” he argues, has bred an environment in which “facts, evidence, and science” are disregarded by (at least half of) the Washington political establishment. Market anarchists are of the same mind of Krugman in locating “the real structural problem … in our political system.”
We too lay the blame for America’s ongoing economic crisis at the door of a small and rich minority of the population. But the problem with Krugman’s narrative is its failure to note the link between the economic interventions of the state and the inequalities he so rightly confronts.
Given his diagnosis, Krugman’s prescriptions become especially odd, ill-suited to addressing the problems as he identifies them. The policies he recommends are of just the kind that benefit and draw power to the small faction of elite plutocrats he pinpoints as the source of the country’s current economic infirmities.
Assuming they mean well (and I usually assume exactly that), statists like Krugman want to have it both ways, at once blaming a tiny ruling class and proposing that we grant that class still more control over the millions of activities we call “the economy.” Krugman readily concedes that “money buys power,” yet has no misgivings about another dosage “of fiscal and monetary stimulus,” which — according to the evidence he so reveres — have overwhelmingly benefitted the very “0.01 percent” he inculpates.
The monetary policies that Krugman endorses have and will continue to reverberate through the entire social and economic system in the United States. The Federal Reserve’s “open market” policy, which allows the Fed to purchase (among other assets) the debt of the federal government, enables the kinds of unhinged government spending that we’re witnessing right now.
And most of that spending, quite contrary to the impressions of establishment liberals like Krugman, does not go to aiding the poor or less advantaged in society. Rather the government’s dollars go in the billions to “defense” and “national security” contractors, war profiteers whose bread and butter consists of imperialist escapades without end.
Monetary expansion is no different, with the Fed’s counterfeit greenbacks funneled to a banking elite completely free of competition and able to charge interest on moneys lent at zero cost. The result is a debt-based and -addicted economy with enormous overheads, where incumbent players, entrenched with policymakers, make up an oligopoly.
The idea of another fiscal stimulus is at least as ridiculous as a monetary one. The American Recovery and Reinvestment Act of 2009, the President’s almost $1 trillion stimulus package, has consistently proven itself little more than a dressed-up payola scheme for the well-connected.
As Timothy P. Carney noted, “Obama’s biggest gift to K Street was the stimulus, which enriched lobbyists from nearly every industry.” The plutocracy complained of is nothing even remotely close to a legitimately free market, but the Krugmans of the world can never seem to sort that fact out.
So they keep right on trumpeting for the exact kind of legal, regulatory and policy bundle that creates the paradigm of the failed corporate capitalism we have now. Ending the structural problem of inequality means ending the state and allowing a true free market to take root and develop. The alternative is continuing to grant a small group of colluding political and economic elites the power to dictate the rules that we all have to live by.