Andy Rosenthal (@andyrNYT), editor of the editorial page of The New York Times, subjected subscribers to yet another screed from the Neoliberal Thought Collective, the term used by Philip Mirowski in his excellent book Never Let a Serious Crisis Go To Waste. This one is by Stephen King, who is the Chief Economist at HSBC. There is no mention of HSBC’s corrupt history, for example its willingness to launder money for drug dealers, arms traffickers, and other scum of the earth. Mr. King learned absolutely nothing from the Great Crash or his employer’s nasty doings that led to it.
King says that rosy projections of growth in the economy have not come true. He doesn’t ask who made those projections, how they were made, what changes in the models might be necessary to account for the impact of the Great Crash, or any other technical issues. There is no discussion of the inaccuracy of almost all economic projections. And King certainly doesn’t ask whether any of this might have been ameliorated by better government and central bank policies. He simply announces that there will be no more growth, and that the poor need to get over it.
King claims that there were five crucial trends that led to rapid economic growth in the 20th century: global trade, financial innovations like consumer borrowing, widespread social safety nets, employment of women, and improvements in education. “These five factors induced, if not complacency, an assumption that economies could expand forever.” He says that everyone assumed this could continue forever, which is utterly untrue.
Thoughtful people knew that global trade is a mixed blessing, good for some but harmful in the middle term for the working class. No one thought consumer borrowing was an acceptable substitute for well-paying jobs. Social safety nets never replaced the need for savings, but his larger point, that savings are the engine of investment, is wrong, as Modern Money Theory shows. Obviously there is a finite number of women who can work. Education is available, but the number of people who can benefit is always about the same, and once you reach that number, you won’t get more out of it. In short, no reasonable person ever believed that growth could go on forever based on any one or more of these factors.
Looking at his arguments more closely, we see that he doesn’t mention all of the financial innovations: unstable credit default swaps, fraudulent real estate mortgage backed securities, and cash boxes for drug dealers built to fit under teller windows. He doesn’t say that the social safety nets are fraying because of the huge numbers of people who need help, and the tax avoiding skills HSBC and many other banks practice and sell to the hyper-rich and their corporations, and creepy right-wing billionaires blaming the victims and demanding that they be beaten to encourage them to work for slave wages. He doesn’t say that part of the social safety net was public support of education, and that the labor share of income is historically low, or that banks aren’t in the lending business any more. In other words, this argument only works because King ignores the crowd of thugs engineering the economy.
It’s sad when growth stops, says King, but there is nothing to be done except “…to recognize that promises made during good times can no longer be easily kept.” His prescriptions follow, straight from the unrepentant Chicago School of Loathing for the Middle Class:
That means a higher retirement age, more immigration to increase the working-age population, less borrowing from abroad, less reliance on monetary policy that creates unsustainable financial bubbles, a new social compact that doesn’t cannibalize the young to feed the boomers, a tougher stance toward banks, a further opening of world trade and, over the medium term, a commitment to sustained deficit reduction.
No, nothing has changed. Business can save us, and government needs to get out of the way.
In the aftermath of the Great Crash, normal people saw that the assertions of economists about dangers of regulation of the financial sector and of business in general, the efficiency of markets, the horrors of high taxes and the inability of government to do anything about anything had failed. King and the rest of his economist colleagues didn’t learn anything. They continue to offer the same destructive ideas, but now with a dose of “ we won, get used to it”.
Look at the first comment in the NYT picks for good comments. Apparently @andyrNYT, hasn’t learned anything from the Great Crash either.