The Great Stagnation and the Possibilities of Redistribution

Tyler Cowen’s new e-pamphlet (The Great Stagnation) takes on the slowing gains to be had from social and technological progress and offers an interesting explanation of some of the trends that many people see as troubling: the flat arc of median incomes since 1973 and the apparently universal surprise that the last decade offered no real growth for the United States even as the developing world boomed. Cowen claims that we have misrecognized increased spending in the areas of medicine, education, government, and financial services as growth. While those areas have seen the most increases in spending in this period, this spending has not garnered as many benefits as the metric of GDP suggests. Thus, we are “not as rich as we thought we were,” and we’ll need to adjust to this stagnation for a long time to come. We’ll still grow, but more slowly: call it the Great Decrease in Acceleration.

One important element in Cowen’s argument is that many of our current woes are due to the misdiagnosis of our problems. Republicans thought they could solve the stagnation by lowering taxes and raising military and Medicare spending. When this didn’t work, they were surprised. Democrats have thought that the internet and sustainable energy initiatives would spur new growth, but this has largely been growth in private consumption of status updates and Youtube videos, not jobs or public goods measurable in GDP. Electric cars are still toys, not engines of growth: this could change, but it hasn’t yet, and importantly, it didn’t over the last decade, when we were nonetheless living as if it had!

So conservative tax cuts won’t work, and progressive technological hope won’t work. In addition, Cowen also suggests that a redistributive agenda will fail. Yet here he is uncharacteristically short on argument or evidence, so I wonder if this is true. Generally, we say the problem with redistribution is that it slows growth, and it’s better to have a larger pie tomorrow than to have a equally-divided pie today. But if there is little growth forthcoming, then redistribution seems like it’s a much better deal, doesn’t it? Continue reading The Great Stagnation and the Possibilities of Redistribution

When Money Itself Comes to Represent Nothing: Baudrillard or Austrian Economist?

(This post is especially for my friends who are reading William Gaddis’s The Recognitions right now.)

Post-structuralist trickster or stuffy monetarist? You guess:

If modernity is characterized by loss of the sense of the real, this fact is connected to what has happened to money in the twentieth century. Everything threatens to become unreal once money ceases to be real. […] That fact is ultimately to be traced to the biggest counterfeiter of them all–the government and its printing presses. Hyperinflation occurs when a government starts printing all the money it wants…. Inflation is that moment when as a result of government action the distinction between real money and fake money begins to dissolve. […] Money is one of the primary measures of value in any society, perhaps the primary one… As such, money is the central source of stability, continuity, and coherence in any community.

Source below the fold: Continue reading When Money Itself Comes to Represent Nothing: Baudrillard or Austrian Economist?

Today’s Reading

The Quiet Coup:

In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.

Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity. When inflation is high, who can say what a piece of property is really worth? When the credit system is supported by byzantine government arrangements and backroom deals, how do you know that you aren’t being fleeced?

Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.

The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

What’s the Ideal Number of Friends:

“You can have friends because of what you do together or enjoy something together like football or shopping, but they’re not as profound friends as those who you love for themselves because of something in their character. And it doesn’t matter what you’re doing with them, even sitting alone in a room.”

There’s a limit to how many close friends like this you can have and it’s probably between six and 12, he says.

Cathy Caruth on Hannah Arendt on Lying, War, and Testimony:

Arendt draws on a number of examples, remarking, for instance, on the disappearance of Trotsky from the history books of the Soviet Union, and the German and French representations of their actions during World War II. Unlike the ancient world in which the notion of politics first appeared, she suggests, the public realm in the modern world is not only the place of political action that creates history but also, and centrally, the place of the political lie that denies it. Focusing on the ubiquity of the lie in the modern world, then, Arendt ultimately, in my interpretation, asks the following question: what kind of politics is possible in a world in which history is regularly and systematically denied?