Martin Wolf on Replacing American Consumer

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The New America Foundation is organizing a major forum in March, and yours truly is deeply involved.
Financial Times chief economics editor Martin Wolf will be appearing at the meeting which will be titled “What will Replace the American Consumer?”
Wolf replied to the conference title immediately:

Of course the answer to your question is “nothing”. We are in for a big slump.

— Steve Clemons

Comments

15 comments on “Martin Wolf on Replacing American Consumer

  1. Harry Gillis says:

    Hello – I am in the middle of a long adventurous life –
    I have become aware that I have achieved some wisdom which I would like to share and enlarge –
    Number one on my list is a review of the worldwide crisis which we have developed with the monetary system –
    IT CANNOT BE FIXED! – IT MUST BE REPLACED!
    .
    Functional advances in our social system are set in motion by THINKERS – EXPERTS assist but it is THINKERS that set progress in motion.
    I have written a three page introductive review of 50 years of observation –
    I want to send this review to all THINKERS worldwide with the intent of developing and implementing a new social system designed for the equitable distribution of the abundance which we are learning to create.
    I am not very computer literate and I need help in finding the most effective way to expand and share our ideas.
    Our theme will be “A WORLD WITHOUT MONEY” and I see that your site already has some on this road.
    Please help me with lines and methods of communication.
    Thank you – Harry Gillis – hgillis2@gmail.com – 260-567-2570.

    Reply

  2. Cee says:

    It turns out that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists
    I would agree.
    “There’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots!” said Brzezinski, President Jimmy Carter’s national security advisor, in a recent interview with NBC.
    http://www.presstv.com/detail.aspx?id=86350&sectionid=3510203

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  3. pauline says:

    I may have seen this article earlier on TWN, but imo it is worth a serious second look.
    ****************
    “U.S. Intel Chief’s Shocking Warning: Wall Street’s Disaster Has Spawned Our Greatest Terrorist Threat”
    By Chris Hedges, Truthdig. Posted February 17, 2009.
    The Director of National Intelligence argued that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists.
    We have a remarkable ability to create our own monsters. A few decades of meddling in the Middle East with our Israeli doppelganger and we get Hezbollah, Hamas, al-Qaida, the Iraqi resistance movement and a resurgent Taliban. Now we trash the world economy and destroy the ecosystem and sit back to watch our handiwork. Hints of our brave new world seeped out Thursday when Washington’s new director of national intelligence, retired Adm. Dennis Blair, testified before the Senate Intelligence Committee. He warned that the deepening economic crisis posed perhaps our gravest threat to stability and national security. It could trigger, he said, a return to the “violent extremism” of the 1920s and 1930s.
    It turns out that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists. We will see accelerated plant and retail closures, inflation, an epidemic of bankruptcies, new rounds of foreclosures, bread lines, unemployment surpassing the levels of the Great Depression and, as Blair fears, social upheaval.
    The United Nations’ International Labor Organization estimates that some 50 million workers will lose their jobs worldwide this year. The collapse has already seen 3.6 million lost jobs in the United States. The International Monetary Fund’s prediction for global economic growth in 2009 is 0.5 percent–the worst since World War II. There are 2.3 million properties in the United States that received a default notice or were repossessed last year. And this number is set to rise in 2009, especially as vacant commercial real estate begins to be foreclosed. About 20,000 major global banks collapsed, were sold or were nationalized in 2008. There are an estimated 62,000 U.S. companies expected to shut down this year. Unemployment, when you add people no longer looking for jobs and part-time workers who cannot find full-time employment, is close to 14 percent.
    And we have few tools left to dig our way out. The manufacturing sector in the United States has been destroyed by globalization. Consumers, thanks to credit card companies and easy lines of credit, are $14 trillion in debt. The government has pledged trillions toward the crisis, most of it borrowed or printed in the form of new money. It is borrowing trillions more to fund our wars in Afghanistan and Iraq. And no one states the obvious: We will never be able to pay these loans back. We are supposed to somehow spend our way out of the crisis and maintain our imperial project on credit. Let our kids worry about it. There is no coherent and realistic plan, one built around our severe limitations, to stanch the bleeding or ameliorate the mounting deprivations we will suffer as citizens. Contrast this with the national security state’s strategies to crush potential civil unrest and you get a glimpse of the future. It doesn’t look good.
    “The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications,” Blair told the Senate. “The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.”
    The specter of social unrest was raised at the U.S. Army War College in November in a monograph [click on Policypointers’ pdf link to see the report] titled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development.” The military must be prepared, the document warned, for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” The “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.”
    “An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,” it went on.
    “Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,” the document read.
    In plain English, something bureaucrats and the military seem incapable of employing, this translates into the imposition of martial law and a de facto government being run out of the Department of Defense. They are considering it. So should you.
    Adm. Blair warned the Senate that “roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown.” He noted that the “bulk of anti-state demonstrations” internationally have been seen in Europe and the former Soviet Union, but this did not mean they could not spread to the United States. He told the senators that the collapse of the global financial system is “likely to produce a wave of economic crises in emerging market nations over the next year.” He added that “much of Latin America, former Soviet Union states and sub-Saharan Africa lack sufficient cash reserves, access to international aid or credit, or other coping mechanism.”
    “When those growth rates go down, my gut tells me that there are going to be problems coming out of that, and we’re looking for that,” he said. He referred to “statistical modeling” showing that “economic crises increase the risk of regime-threatening instability if they persist over a one to two year period.”
    Blair articulated the newest narrative of fear. As the economic unraveling accelerates we will be told it is not the bearded Islamic extremists, although those in power will drag them out of the Halloween closet when they need to give us an exotic shock, but instead the domestic riffraff, environmentalists, anarchists, unions and
    enraged members of our dispossessed working class who threaten us. Crime, as it always does in times of turmoil, will grow. Those who oppose the iron fist of the state security apparatus will be lumped together in slick, corporate news reports with the growing criminal underclass.
    The committee’s Republican vice chairman, Sen. Christopher Bond of Missouri, not quite knowing what to make of Blair’s testimony, said he was concerned that Blair was making the “conditions in the country” and the global economic crisis “the primary focus of the intelligence community.”
    The economic collapse has exposed the stupidity of our collective faith in a free market and the absurdity of an economy based on the goals of endless growth, consumption, borrowing and expansion. The ideology of unlimited growth failed to take into account the massive depletion of the world’s resources, from fossil fuels to clean water to fish stocks to erosion, as well as overpopulation, global warming and climate change. The huge international flows of unregulated capital have wrecked the global financial system.. An overvalued dollar (which will soon deflate), wild tech, stock and housing financial bubbles, unchecked greed, the decimation of our manufacturing sector, the empowerment of an oligarchic class, the corruption of our political elite, the impoverishment of workers, a bloated military and defense budget and unrestrained credit binges have conspired to bring us down. The financial crisis will soon become a currency crisis. This second shock will threaten our financial viability. We let the market rule. Now we are paying for it.
    The corporate thieves, those who insisted they be paid tens of millions of dollars because they were the best and the brightest, have been exposed as con artists. Our elected officials, along with the press, have been exposed as corrupt and spineless corporate lackeys. Our business schools and intellectual elite have been exposed as frauds. The age of the West has ended. Look to China. Laissez-faire capitalism has destroyed itself. It is time to dust off your copies of Marx.
    Chris Hedges, a Pulitzer prize-winning reporter, is a Senior Fellow at the Nation Institute. His latest book is Collateral Damage: America’s War Against Iraqi Civilians.

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  4. ... says:

    johnh quote ‘Housing construction and defense were the only American industries that could grow significantly in the face of free trade.’ financial instruments have been an important area of growth internationally.. remember back to the asian financial crisis of 1998?? countries were accused of practicing crony capitalism.. the imfs actions in argentina, russia and etc. round the globe were a financial rape and pillage but according to the experts were necessary for these countries to move towards ‘healthier’ markets…. falsehoods abound sometimes..
    financial dynamics favouring the usa have been an important economic driver for the usa ever since bretton woods.. that the us$ is treated as the world currency creates a false sense… it will be shocking/destabilizing when the world monetary system is replaced with something other then the us$…. at present there is a lot of paper out their holding less confidence then previously…

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  5. JohnH says:

    I forgot to mention my key point, which ties directly to the above.
    One of the things that makes this economic downturn so challenging is that the standard recovery engine is missing. That recovery engine is housing. Housing has led the way out of every recession since WWII. It won’t this time because of the housing glut.
    I believe that Greenspan knew back in 2002 that the American economy had been hollowed out. As a result, he used the Fed to artifically stimulate the housing market. Housing construction and defense were the only American industries that could grow significantly in the face of free trade. So the Fed kept the accelerator on at full throttle, because they knew that any pull-back in housing meant recession, because there wasn’t much else left to prop up the economy. It was great while it lasted, but then there was not alternative to doomsday.
    The only way to get housing to play its vital role again is to basically write off all those extravagant ex-urban estates and start actively promoting economical, low-sprawl alternatives along rapid transit corridors. Of course, this will require that retailing and business complexes also be built along those same corridors.
    This is the kind of reapportioned consumption that needs to be a part of the discussion. No more business as usual.

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  6. JohnH says:

    As erichwwh says, it’s really worthwhile to start discussing NOW what we want consumer demand to look like and how demand in general should be apportioned. Usually, the rich and powerful make that decision to their best advantage. They are taken care of, end of conversation. Of course, it sometimes backfires, and you get an incident like the Caracazo in Venezuela as a reaction to IMF intervention and the ensuing ecnomic collapse. That situation eventually led to Chavez’ being elected and to a major redistribution of wealth, which the rich and formerly powerful are still seething about.
    Unfortunately, the American consumption problem faces severe structural impediments. It’s amazing that efficiency of manufacturing and distribution processes have been honed to the point where products can be delivered anywhere in the world at extremely low cost, just in time to stock store shelves. Meanwhile workers getting to work and shoppers going to shop have become extravagantly expensive, highly inefficient activities. It’s because the country was built on sprawl which by definition is highly wasteful and requires a high consumption lifestyle. I tell my daughter that if she wants to live economically, she should live near a high frequency bus route close to shopping. Hopefully that message gets to policy makeers, and they make it possible for most Americans to have that option.
    I would add one additional factor to consider in the mix for optimum apportionment besides just private, public and common goods–that is time. It’s ridiculous that in the “wealthiest” country in history, most people can’t afford to take even two weeks vaction. People in their working years get worked to the bone, and retired people and teenagers are largely shut out. It’s either 60 hours per week or zero. France had the right idea when they capped the work week at 35 hours, except that it should have been 30.

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  7. questions says:

    erichwwk,
    Couple more thoughts…. The property rights side of econ 101 is straight from Locke. We invest labor into things and they become OURS in a really deep, fundamental way. It’s as if one’s soul is transferred to the apple you pick. If the apple is violated, say, by being grabbed from you, you are violated as well. Money is introduced because much of the stuff we put labor into (food) spoils over time and money doesn’t. But somehow, that money ends up taking on the same soulful feeling. Locke extends the soulfulness to the fruits of the labor of our work animals and our servants. (So maybe the fruits of labor aren’t quite so sacred??) And he constructs an entire political system whose main purpose is the protection of property from grabby monarchs and other taxing bodies. We love our stuff and we want to keep it.
    Decoupling the emotional bond between a guy and his dollar bills or his collateralized debt obligations is not going to be easy.
    There’s a philosopher/economist David Schweikert who has done some work on breaking up the economy and suggesting that financials be socialized even while keeping markets for labor and consumption. (I hope I’m characterizing his work properly.) This would be to take away the Lockean soulful quality of part of our money stream. Given the howls of the bankers at the thought that a 20 million dollar bonus was maybe over the top, I’m not sure that any amount of capital can be separated from the soul. And given Harvard’s inability to spend reasonable percentages of its outsized endowment, I don’t see any puddles of money actually being put to good use under different terms.
    What we do have is a potent public sector that seems to be able occasionally to do things with money, and maybe rhetoric needs to go that direction. Government spending doesn’t compete with private spending, it enhances it. (Nice bumper sticker slogan!) In fact, government spending corrects for a lot of game theoretic dilemmas (the commons, lack of communication among competitors and the like). And the government can take risks that the private sector is unwilling or unable to. What’s rational for Wall Streeters is precisely what we’ve just been through. They compete, they can’t coordinate. They take, they can’t give or share. It’s definitional.
    So it would seem that if Obama goes wrong anywhere with the stimulus stuff, it’s in allowing too much private sector involvement. Maybe we just need a very very strong public sector to compensate for the insanity of rational behavior on Wall Street. (Eric Patashnik and Donald Kettl have a couple of nice recent books dealing with some relevant policy issues related to the government and to public/private co-enterprises.)
    Again, comments/criticisms/outright hostility(politely stated) are welcome as I am stretching here!

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  8. erichwwk says:

    Just a few thoughts. Longer response later.
    Being trained in economics can be a liability, as well as an asset. I think a property right approach, ala the University of Chicago/UCLA/RAND
    seems to have wide usage, and that we start anew, from the point of sociologists when we select the characteristics of both behavior units and the characteristics of the goods we agree are most meaningful in aggregating the rich tapestry of things and activities into composite and compressed direct observations. In simple terms this means starting with a very simple and clear map of ownership, by people units over goods.
    To me, the great depression ( and I think to Ben Bernanke and many others) was a breakdown in property rights- by making property rights to complicated, perhaps being intentionally obscure to capture more exclusivity that the social contract entitled. To Ben, once banks folded, detail as to the nature of the transaction were lost as well, and the transfer of rights was contested, resulting in uncertainty, rather than risk. What we have today is NOT a risk problem per se, but is better described as an uncertainty problem. WE must decouple, unbundle, treat as separate issues, money as required to account for current consumption, from what facilitates its credit function or even out of pocket future consumption. Two totally DIFFERENT functions. and one can Since no one is forecasting positive growth, we can declare a 60 day moratorium on asset rights as of (I would go back to at least Sept. 1, 2008), and first letting backs balance sheets under an open market determine whether the bank has net value. What is important is how the asset transfer is handled, in terms of bring continuity to current transactions. But I digress.
    I hope others, Tony, WigWag, POA, etc etc who ofter contribute whose views i find meaningful, especially when delivered in a format that saves editing and could be shared as a “cut and paste” to the crowd invited to participate in March.
    http://tinyurl.com/create.php

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  9. ... says:

    questions quote “I think it’s time to tear down housing and recreate nature.” unfortunately the narrow belief that one must procreate is killing us collectively… and it fits right in with the main religion of consumerism, which means more houses, more walmarts, more cars and etc. etc instead of a respect for the limits and madness of being led around by our insecure egos… some are able to see the madness we are involved in and know it can’t last.. those who believe that they must have offspring, are not seeing the bigger picture – we’re all related, and we are killing ourselves in our self-centeredness…

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  10. questions says:

    Random thoughts from a non-economist…. Apologies in advance.
    I don’t think we’re in a crisis in one limited sense only — we were never actually in a boom. What moved goods and services was a mass delusion of wealth unrelated to wages or actually ability to service the debt. The consumer acted almost like a Keynesian government for a while there, injecting huge sums of non-existent deficit-derived money into the flow of the system. Simultaneously, financial firms dumped huge sums of unreal money into the system by trading bets on whether or not debts would be repaid. We “created” trillions of dollars in stuimulus and we were stimulated. And of course, the government’s debt was a third stool leg in the mass creation of “wealth” that was the bubble.
    Now the closets are full, the garages can’t hold all the cars, the cupboard is bare (see today’s NYT online story about food pantries in wealthier areas).
    I think it’s time to tear down housing and recreate nature. There’s apparently a 9-month supply of housing on the market, it’s all overinflated in price compared to actual wages, much of it sits on land that could be better used to grow food or wild trees. We had an orgy of overbuilding, maybe we could try an orgy of creative destruction. When we have enough wild preserves around, we can tear them up and build new houses. The project is Sisyphean, but so is every project we engage in.
    There are a few other non-consuming ways to consume that might work better than widget-production. We could encourage massive self-improvement through student loans, theater and film making, local rec departments and the like. If we all try to “Brush up on Shakespeare” or the like, then we are doing things without using up the earth’s supply of metals and land. And maybe we get used to entertaining one another in ways that don’t require toxic production. Community orchestras and bar bands instead of ear plugs and iPods.
    The point, in a way, is to move away from the commodification of EVERY act of creation and move towards the production of what we currently consume.
    If we can entertain ourselves, think how much less money we need to earn. If we can live in something closer to dormitories, think how much less crap we’ll need and how much less space we’ll take up.
    Maybe instead of focusing on what bubble replaces the bubble of consumer debt, we should think about what a good use of a human life is. Can’t see how sustainable it is even psychically to be chasing after millionaire status just so that you can replace your iPod every three months or whatever. Much better to learn to play an instrument and make your own music. We’ve lost much by commodifying our lives. Learn to cook, to eat, to create.
    What happens if we allow what I’m guessing is a major deflationary cycle to take hold? Can we stave off starvation while shifing to less of everything? And if not, are we really stuck with walking on bubbles and praying they don’t burst?
    Comments are welcome, as I am thinking outloud and outside my field.

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  11. erichwwk says:

    Great comments. Thanks for sharing.
    Thanks for responding, John H. To the extent that consumers used credit cards to extend their demand, whether that is a demand worth resurrecting is an interesting topic. Ditto for the consumer demand generated by phantom wealth, ie the permanent income of M. Friedman that was based on illusion, leveraged money that merely bid up asset prices, in particular the price of one’s own home, turning that into a private bank or ATM machine. This bears directly on the issue as to whether the solution is to “prop up” those prices, or let a non-leveraged money supply establish a market equilibrium at much lower asset prices for housing and stocks So I see this as more than an issue of aggregate demand. I see three components to this: 1) how to make the transition to a more realistic current US consumer demand 2) how to achieve a more optimum apportionment of private, public and common goods, and 3) how to shift from production of future goods (investment)- how to have a mechanism that assures the optimum allocation between future private goods, public goods, and common goods. One criticism I have always had of the Chicago School is their reluctance to take a treat income distribution as worthy of study ala Amartya Sen or Thorstein Veblem (more on him later).
    This leads into anonymous’s reply, which gets us away from framing the problem as an international currency/ financial institutional problem, and into looking at “consumerism” from a broader, more root cause, perspective. In my opinion, the last great depression had the benefit of making consumerism a major issue, and resulted in four decades of equal sharing of what we produced. From the perspective of “producing for the rich”, or “conspicuous consumption”, we are back (or worse) to where we were in 1929. To me this is a major international issue generally taboo in MSM, and we again need to continue this thread.
    Veblen was a major figure in this alternative way of looking at economies, from the viewpoint of leaving money completely outside of the discussion, ir focusing on the REAL as opposed to the MONETARY economy as the root of the problem.
    This issue is at the core of what I Gar Alperovitz and Lew Daly call “A more Encompassing Theory”, the final chapter in their book “Unjust Deserts: How the Rich are Taking our Common Inheritance and Why We Should Take it Back”. From this perspective, solving global financial institutions does nothing to address root the root problem. What is needed is to address the property right structure directly. That final chapter suggests “there are reasons to believe we may be moving slowly but steadily toward a full confrontation” to this issue. I read the trend in modern economics the same way, and see the thwarting of that issue during the great depression as where we should begin with a discussion, and especially the view that WWII can be seen as a means to stop the attempt to “confront” that issue, and NOT as eg Krugman and even Leijonhvud maintain, as what got us out of the great depression.
    In response to Linda, you nailed it. Velben is a good place to start. After a brief historical discussion of this issue, from Locker, to Hobson, et al, the next section begins with:
    One of the most striking early contributions is that of iconoclastic American economist Thorstein Veblen. With a body of work spanning the late nineteenth and early twentieth centuries, Veblen also provides a useful bridge to consideration of modern thinkers who have begun to reach toward the fully developed argument.” Skipping forward several pages devoted exclusively to Veblen, they write “Veblen wrote scathingly of the “captains of industry” and the “great man” theory of accumulation”. “ Veblen did not take the next step:”. “What is striking, however, is how prescient Veblen’s writings now appear, both because they so clearly anticipate the work of Slow, Denison, Moykr, and others on the central economic importance of inherited knowledge, and because his analytical understanding resonates so powerfully with contemporary efforts to clarify a theory of entitlement that explicitly recognizes the full implications of knowledge.”
    http://www.garalperovitz.com/UnjustDeserts.html

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  12. Linda says:

    Could not agree more with the above.
    But I think we also have to give some credit to “conspicuous consumption” and good old Veblen.
    http://en.wikipedia.org/wiki/Thorstein_Veblen
    Almost everybody in US ended up using home equity and credit to consume more than they could afford.
    The following is the best part of all of Wiki on Veblen:
    “In 1927 Veblen returned to the property that he still owned in Palo Alto and died there in 1929. His death came less than three months before the momentous crash of the U.S. stock market, which heralded the Great Depression.”

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  13. ... says:

    great idea for a meeting in march and i especially like martin wolf’s answer to the question.. hopefully the right questions will be asked as erichwwk notes.. i like erichwwk and johnh’s input on this… i frame the question more generally – “what will replace consumerism?” a less materialistic viewpoint would really help.. it would require or coincide with a major shift in priorities.. this might happen if the financial turmoil was significant enough for long enough.. does it really make sense to fund military excesses while people starve? does it appeal to anyone to be known in this context internationally?? a change in priorities is necessary and those in power need to be replaced with people who can see this and work towards it..

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  14. JohnH says:

    Martin Wolf is asking exactly the right question: how to replace the American consumer. Erichwwk has nicely summarized the problem: aggregate demand collapse.
    The conundrum is how to run an economy with no demand for its products. The less affluent used their credit cards to prop up demand for purchases from abroad. The more affluent used a combination of credit cards and housing cum ATM to buy foreign products. Meanwhile, foreigners found little of value to buy here except securities that turned out to be junk.
    So we’re left with 2 sources of demand–the federal government and the wealthy, who have no reason to live more extravagantly than they already do. The less affluent are tapped out, as is foreign demand. The federal government can carry the load only so far.
    Most countries in the US’ situation would do a massive devaluation of their currency to jump start foreign demand. However, in the current situation a massive devaluation would simply lead to a round of competitive devaluations.
    One thing for certain, the American market is NOT what it used to be. And to the extent that American power depended a foreigners’ currying favor with Washington in return for access to that market, America’s standing has fallen a few notches. That will be exacerbated by a massive devaluation of the dollar, which has to happen at some point to rebalance the world economy.

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  15. erichwwk says:

    This is fantastic! It is amazing how many top notch economists either blog, or writes a regular column. Martin Wolf’s column is on my “A” list of blogs I read regularly. I hope some of my other “A” list economists are invited and accept, and we do get to hear from a true “Team of (Economic Policy) Rivals”, something many of us are concerned that Obama does not. There is starting to be some good discussion of why that is so, a topic I hope makes in on the agenda, or at least some variant thereof, such as “How to influence Obama Economic Policy”, which I believe was a “pre-inauguration” focus of the NAF.
    In any case, I hope my interest in having Steve sketch out more detail as to the objective and focus of this forum is shared by readers, and I would be interested in their comments as well as Steve’s. I am also delighted to hear that the forum will be major. One such major NAF form will always stand out in my mind, the one on Terrorism”, that was truly a meeting of Rivals, and in my opinion did much to, in Deng Xiaoping’s words- “Find truth from facts”, and offer a fact based alternative to “terrorists as religious fanatics.”
    The question to Wolf, and his response, lead me to believe that this forum might be limited to viewing the world through the “real” Keynes’ eyes, i.e. see the problem as one of merely aggregate demand failure, as brought about by either excessive leveraged debt (Richard Koo’s “balance sheet recession”, or one of falling investment and wealth working its way through to a decline in consumer and government demand. I hope that such a focus does not exclude some topics I feel are also vital to understanding issues beyond declining aggregate demand that are more of a systemic nature, such as :
    • The issue of private, public, and common goods, as well as the issue which this greatly affects, the issue of income distribution and wealth distribution. Sub-topics here might also include a discussion of intellectual property rights and how this impacts both free markets and economic growth. Focusing on just one side of transactions, the “numeraire” or money, can greatly mislead as to the nature of the problem, leading one to view folks as “working to live” rather than “living to work”
    • The issue of national income accounting, and the metrics we use to quantify economic activity. A precursor to this might be an agenda item on aggregation, or what constitutes an economic behavior unit, or an economic good unit. Eg, politics always plays a role in defining unemployment rates (eg some see the New Deal as ineffective by using employment rates that define those working on New Deal projects as Unemployed), the CPI, and whether the SS trust fund even exists. This might also be the place to discuss military expenditures, and whether these are inputs or outputs to be included in GDP. The accounting (or rather lack of) natural capital might also be discussed here
    • The issue of the basis of economic growth, with at the history of thought in terms of economic growth sketched out. Especially important here would be the issue that public and common goods play in determining growth. Here I would hope to see an agenda item on just the multiplier concept.
    To me, probably the greatest impediment to resolving this current crisis is the extent to which discussions are often framed in ideological terms, rather that on seeking “truth from facts”, the very thing which ultimately sinks economies. So I hope we can discuss “ the extent to which black cats and white cats catch mice”, rather than merely focus on white cats. So much of what I hear dismisses alternative viewpoints by, “as we all know”, or the labels of “socialist”, “free market”, “liberal”, “conservative”,
    While I hope I am not so presumptuous (these days I regrettably realize that may not be the case- apologies to all I offend along the way) to suggest that topic may be to narrow, I would like to think that Steve finds some value in these comments, and whatever value he finds he is able to use from the niche he has carved out in being heard.
    In any case I hope to hear from TWN readers who are interested in “How to influence TWN to influence the NAF agenda”. Kudos to Steve for this effort. The advance notification is highly appreciated, but not as much as the fact that Steve is willing to lead such a major effort as a public NAF forum. Just my $0.02 worth.

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