Paul Krugman, "When Zombies Win"

Neoclassical economics, or neoliberalism, has been failing for 30 years now. It blew up the US economy, and nearly took the world economy with it. It’s been 30 years of straight fail. Neoclassical economists have been wrong about everything in the past 30 years, yet their theories continue to control the commanding heights of society.
The neoliberals have tried to blame the economy they blew up on Obama. What’s the cause of the economic crisis. The failure of Big Government. Yet there was no Big Government under Obama. Government employment and spending actually fell from the levels of the Bush Administration you call that a stimulus?
The stimulus, although it kept us out of a Depression, was too weak to do much more. Further, 40% of the stimulus was tax cuts. Obama threw those in as pre-emptive surrender before negotiations even began in order to get Republican support, yet he still got only 3 Republican votes for stimulus.
Nevertheless, excellent economic analysis shows that the stimulus, weak though it was, did what it was supposed to do. It added nothing at all to the deficit. In fact, it actually decreased the deficit through increased government revenues, which again follows from time-tested and time-proven Keynesian economics.
The neoclassical frauds on the Right have been screaming since Obama came in.
His Big Government economics was going to lead to inflation! Inflation’s always been just around the corner. In fact, the main problem still is deflation. Even core inflation is at its lowest level in 50 years.
His Big Government economics was also going to lead to rising interest rates! Wrong again. The Fed rate is at near zero. It can’t go any lower. Bond rates move up or down depending on how investors feel about the likelihood of a recovery – Obama’s economics has had nothing to do with it.
Nevertheless, one of the two things that infuriated the corporate media the most about Obama was his stimulus. The other was his insurance industry friendly health care plan. According to media liars, these represented moves “too far to the Left.” The 2010 midterm results were voters punishing Obama being too liberal for enacting health care reform and a stimulus program. Truth is that voters were mad about the economy and nothing else.
Why was the stimulus hated? Possibly because as Keynesian economics, it represents a threat to the neoclassical lies that have governed the past 30 years. Similarly, the health care plan was a suggestion that Big Government could actually do something that the private sector had miserably failed at, provide health care for the American people. These two things were threats to ruling neoliberal discourse. That’s why they had to be demonized and killed.
Neoliberal frauds like the UK’s George Osborne were praising Ireland in 2006, while signs of serious economic issues were yet looming in the financial sector. Now Ireland is a gigantic example of neoliberal FAIL in the worst possible way. But Osborne was rewarded for being wrong. He is now the head of UK economic policy.
And he’s trying to implement Ireland’s horrible austerity policies in the UK. Rightwingers, including the execrable Osborne, spent the past year cheering Ireland’s horrific austerity. There’s nothing to cheer about. The Irish people will be ruined for the next 10 years due to this debt peonage, possibly for decades. The bankers’ losses will be balanced on the backs of the groaning workers far into 21st Century. The Irish people may not recover in my lifetime.
Economist John Quiggin has a new book out called Zombie Economics in which he talks about how 30 years of FAIL should have killed off neoclassical crap, but didn’t. Neoclassical economics is like the zombies in Night of the Living Dead who simply won’t die no matter how many times they killed.
Barack Obama praised the catastrophic Ronald Reagan for “restoring American dynamism.”
He has spent most of his first two years repeating neoliberal lies and catch phrases about economics. Worst economic downturn since the Depression? Obama said the solution is for the government to tighten its belt, and he froze federal spending and wages. Obama is hailing his tax cut plan as a stimulus that saved the economy, at the same time that he is already signing on to spending cuts which will negate any meager stimulus in the plan. By using  language of neoliberals, Obama is empowering their failed ideas.

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0 thoughts on “Paul Krugman, "When Zombies Win"”

  1. This is my analysis of what’s happening: US multinational corporations are now generating 50% of their revenues from overseas. At the same time, 70% of their domestic sales are made to the top 30% of the US population. I would hypothesize that the bulk of this 30%, say 20%, draw a large percentage of their income from the international sales of US firms. That means that around 70+% of the revenue of the big corporations are obtained either overseas or from 20% of US citizens who derive their income primarily from overseas sales. As China, India, Brazil, etc. continue to develop rapidly and as the US stagnates the percentage of US corporate revenues generated abroad will grow even further in the next few years.
    A drastic divergence has thus evolved between the interests of the top 20% or so of the US population that directly benefit from globalization and the rest of the US population. The economic collapse of the bottom 80% is of no consequence to the elite. They can thrive even if the bottom 80% becomes completely destitute. Observe how US corporations have recently been making record breaking profits despite the US’s 20%+ (in reality) unemployment rate.
    Since a thriving domestic market seems to be of no importance to the health of the big corporations, the elite will among other things push for further outsourcing (to increase profits drawn from foreign revenues), cuts in welfare benefits, lower taxes, and other measures detrimental to the bottom 80% but favorable to their own material interest (and their globalization efforts).
    So long as people at the bottom do not rebel, I believe that some form of economic equilibrium can be attained even with such a scenario. As pundits have been saying, the US has evolved into a banana republic with extreme economic inequality, fabulous wealth amidst widespread poverty, and a weak domestic manufacturing sector.
    Robert, how do you think Americans can escape from this trap?

  2. even Adam Smith said capitalists need to be regulated.
    economics is barely a science. i do like some of the experimental economics which reveal the way human psychology affects economic decisions. they often point out how few of us are the “rational man” that lots of economics take as a starting point. these experiments also show how we compare ourselves to others and show a strong human tendancy towards egalitarian values.
    but it just takes the 5% of psychos who don’t have egalitarian feelings to game the larger part of humanity into bad situations. march that 5% out into the street Mao-style and gun them down.

  3. and GDP is a terrible measure of real humanist values, and the unemployment rate as well as the rate of inflation/prices are fake as hell.

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