Friday, May 4, 2012

Paul Krugman on our broken political system...

New York Times
May 3, 2012
Plutocracy, Paralysis, Perplexity

Before the Great Recession, I would sometimes 
give public lectures in which I would talk about 
rising inequality, making the point that the 
concentration of income at the top had reached 
levels not seen since 1929. Often, someone in the 
audience would ask whether this meant that another depression was imminent.

Well, whaddya know?

Did the rise of the 1 percent (or, better yet, 
the 0.01 percent) cause the Lesser Depression 
we’re now living through? It probably 
contributed. But the more important point is that 
inequality is a major reason the economy is still 
so depressed and unemployment so high. For we 
have responded to crisis with a mix of paralysis 
and confusion — both of which have a lot to do 
with the distorting effects of great wealth on our society.

Put it this way: If something like the financial 
crisis of 2008 had occurred in, say, 1971 — the 
year Richard Nixon declared that “I am now a 
Keynesian in economic policy” — Washington would 
probably have responded fairly effectively. There 
would have been a broad bipartisan consensus in 
favor of strong action, and there would also have 
been wide agreement about what kind of action was needed.

But that was then. Today, Washington is marked by 
a combination of bitter partisanship and 
intellectual confusion — and both are, I would 
argue, largely the result of extreme income inequality.

On partisanship: The Congressional scholars 
Thomas Mann and Norman Ornstein have been making 
waves with a new book acknowledging a truth that, 
until now, was unmentionable in polite circles. 
They say our political dysfunction is largely 
because of the transformation of the Republican 
Party into an extremist force that is “dismissive 
of the legitimacy of its political opposition.” 
You can’t get cooperation to serve the national 
interest when one side of the divide sees no 
distinction between the national interest and its own partisan triumph.

So how did that happen? For the past century, 
political polarization has closely tracked income 
inequality, and there’s every reason to believe 
that the relationship is causal. Specifically, 
money buys power, and the increasing wealth of a 
tiny minority has effectively bought the 
allegiance of one of our two major political 
parties, in the process destroying any prospect for cooperation.

And the takeover of half our political spectrum 
by the 0.01 percent is, I’d argue, also 
responsible for the degradation of our economic 
discourse, which has made any sensible discussion 
of what we should be doing impossible.

Disputes in economics used to be bounded by a 
shared understanding of the evidence, creating a 
broad range of agreement about economic policy. 
To take the most prominent example, Milton 
Friedman may have opposed fiscal activism, but he 
very much supported monetary activism to fight 
deep economic slumps, to an extent that would 
have put him well to the left of center in many current debates.

Now, however, the Republican Party is dominated 
by doctrines formerly on the political fringe. 
Friedman called for monetary flexibility; today, 
much of the G.O.P. is fanatically devoted to the 
gold standard. N. Gregory Mankiw of Harvard 
University, a Romney economic adviser, once 
dismissed those claiming that tax cuts pay for 
themselves as “charlatans and cranks”; today, 
that notion is very close to being official Republican doctrine.

As it happens, these doctrines have 
overwhelmingly failed in practice. For example, 
conservative goldbugs have been predicting vast 
inflation and soaring interest rates for three 
years, and have been wrong every step of the way. 
But this failure has done nothing to dent their 
influence on a party that, as Mr. Mann and Mr. 
Ornstein note, is “unpersuaded by conventional 
understanding of facts, evidence, and science.”

And why is the G.O.P. so devoted to these 
doctrines regardless of facts and evidence? It 
surely has a lot to do with the fact that 
billionaires have always loved the doctrines in 
question, which offer a rationale for policies 
that serve their interests. Indeed, support from 
billionaires has always been the main thing 
keeping those charlatans and cranks in business. 
And now the same people effectively own a whole political party.

Which brings us to the question of what it will 
take to end this depression we’re in.

Many pundits assert that the U.S. economy has big 
structural problems that will prevent any quick 
recovery. All the evidence, however, points to a 
simple lack of demand, which could and should be 
cured very quickly through a combination of fiscal and monetary stimulus.

No, the real structural problem is in our 
political system, which has been warped and 
paralyzed by the power of a small, wealthy 
minority. And the key to economic recovery lies 
in finding a way to get past that minority’s malign influence.

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