"... neither businesspeople nor economists are usually very good poets, but so what? Yet many people (not least successful business executives themselves) believe that someone who has made a personal fortune will know how to make an entire nation more prosperous. In fact, his or her advice is often disastrously misguided."
#PaulKrugman, 1996
Having linked this article, I ought to clarify that despite making a few good points (like the opening one above), it's showing its age. Marbled as it is with neoclassical assumptions that have been thoroughly debunked over the subsequent two decades. An example is the peculiar idea that employment is the primary (or even the only) driver of inflation.
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First, let me ironman the argument. It does seem logical that in a country with a shortage of the basics of life (housing, food etc), or where everyone already has as much of them as they need, prices will increase along with employment. Because under these conditions, increasing the total buying power of wage earners is likely to throw them into bidding wars over goods and services that are scarce.
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But the root problem here isn't increasing employment, but a shortage of things to buy with the resulting income. These scenarios can avoided using non-market mechanisms, like democratic governance.
Take the problem of the money supply growing faster than the goods and services available to buy. Governments can reduce growth of the money supply by increasing taxes. Which spreads the reduction fairly across the economy, instead of making a minority of people carry it by being unemployed.
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The problem of the basics of life being scarce can be solved by making sure they aren't. *Especially* things like housing and transport, which are hard to scale up quickly in response to increasing demand (the capacity to express needs in a willingness to pay). Then the only thing stopping people obtaining them is a shortage of money, which can be addressed by finding ways to pay them for more of their work (all economies are underpinned by huge amounts of unpaid voluntary labour).
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So even full employment is not inherently inflationary. It depends on the other political choices.
If government budgets and taxation levels respond to economic conditions, instead of relying on interest rates to do it indirectly, creating pain for working homeowners. If new jobs are created at a living wage, unlike a lot of the jobs created by neoliberal states, which pay huge salaries and fees to a handful of (usually undertaxed) consultants. Then it need not be inflationary at all.
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The idea that inflation control relies utterly on central banks keeping a minimum number of people unemployed - and thus in avoidable poverty - is as factually wrongheaded as it is monstrous in its consequences.
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"Our second example, the relationship between foreign investment and trade balances, is equally troubling to businesspeople. Suppose that hundreds of multinational companies decide that a country is an ideal manufacturing site and start pouring billions of dollars a year into the country to build new plants. What happens to the country’s trade balance?"
#PaulKrugman, 1996
https://hbr.org/1996/01/a-country-is-not-a-company
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"Business executives, almost without exception, believe that the country will start to run trade surpluses. They are generally unconvinced by the economist’s answer that such a country will necessarily run large trade deficits."
#PaulKrugman, 1996
https://hbr.org/1996/01/a-country-is-not-a-company
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Another dated neoclassical truism that still had currency in the 1990s is that government's shouldn't prioritise particular productive activities;
"But should a government decide on a list of key industries and then actively promote them? Quite aside from economists’ theoretical arguments against industrial targeting, the simple fact is that governments have a terrible track record at judging which industries are likely to be important."
#PaulKrugman, 1996
https://hbr.org/1996/01/a-country-is-not-a-company
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Now again, there is a grain of truth to this. Krugman is right that nobody wants governments engaging in corporate welfare (except the shareholders in those corporations of course). That is, we don't want governments giving particular companies or industries money, purely in the hopes that doing so will increase the country's "economic growth" in the abstract. Offering foreign movie studios tax breaks in exchange for staging productions here is a good local example.
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But the argument against corporate welfare is often misused to target policies that have nothing to do with trying to boost overall economic growth. When governments subsidise particular outcomes, usually for reasons of social or environmental policy, they are not "picking winners". They are modifying the rules of the race.
A sprinting race that doesn't ban foot-tripping other participants is at risk of a much higher rate of sprinting-related injuries than a race that does.
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A local example is the previous government's targeted subsidy of NZ Steel's electric arc furnace. The government's goal wasn't to make more money out of steel exports. But rather to reduce the country's overall carbon emissions, by allowing the arc furnace to replace NZ Steel's coal-fired furnaces.
The opposition attacked this as corporate welfare, and cancelled the funding as soon as they became the government. Potentially costing the country even more;
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Now NZ Steel is a profitable, investor-owned corporation. It's not a publicly-owned infrastructure company, nor a social enterprise. Nor is it struggling financially.
So there's an argument to be made that the government should not have offered them funding for their arc furnace as a subsidy. But rather as an investment, giving the public an ownership share in the company (which was once 100% publicly-owned).
But either way, withdrawing it will increase the country's carbon emissions.
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@strypey Yet this same group supports corporate welfare for the banking industry, the real estate industry, the tobacco industry, the dairy industry, some parts of the horticulture industry (mainly trees and vines; not so much vegetables), the airline industry, the racing industry. And soon the private healthcare industry and anyone who wants to fast-track, say, a goldmine.
@libroraptor
> Yet this same group supports corporate welfare for [long list of corporate welfare recipients]
Funny that. It's almost as if they only support subsidies etc that give public money to their mates' businesses, rather than subsidising public interest outcomes ; )
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One of the goals of the research I've kicked off on the legacy of Rogernomics is to identify undeclared conflicts of interest. Where politicians or people close to them benefited financially from neoliberal specific neoliberal actions taken by governments they were part of.
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"[tax cuts have] slowly become fundamental to conservative politicians since the 1960s ... This is because tax cuts moved wealth towards those with a shareholding in the corporatist project but also because they grew the national debt and therefore curbed future government spending, which in turn starved public services and utilities of funding and opened them up to privatisation."
#DrNealCurtis, 2024
https://newsroom.co.nz/2024/06/07/govt-thinking-inside-corporate-box/
One reason is that the nature of businesses is to try to provide more goods and services all the time especially if you can provide them for a lower cost. They only tend to cut if signals are telling them that product or service can't make a profit.
The result is typically that a business conservative will take a look at proposal from the left, and we'll just try to underbid them like a good businessman. It makes sense for a business standpoint, and so you end up with the left offering one set of proposals, and the business right proposing a more efficient version of the same proposals. In reality, the only way to stop the ever encroaching state socialism is to be willing to entirely stop paying for superfluous stuff (if you wonder if there's superfluous things we're paying for, when half the economy is government the answer is just yes)
Of course, the superfluous stuff also usually represents a bloc of voters, and so one of the weaknesses of democracy is revealed, that it's extremely hard to stop spending government money, as Ronald Reagan likes to say but never really did anything about (he quadrupled the national debt), there's nothing so permanent as a temporary government program.
What really needs to happen to improve Liberty is a completely new culture of government with on government is not the answer to every problem. If government was actually able to solve a problem then it would have already, and instead we just get more and more government, eventually more and more taxes, and contrary to the expected outcome more and more problems.
The right answer to most questions of "how can the government fix this?" Is government should not be the center of our worlds and should not be trying to solve every problem. In that sense, the anti-gun control folks are on the right path, but they're failing to properly Express a worldview, perhaps because they intuitively understand it but they can't express it because the force of government for the past century has been a great job of explaining why it needs to take over everything.
When you consider it, one of the purposes of the first amendment of the Constitution was that the government didn't have ultimate control over everything and everyone's lives in 1776 in the US. Instead, the church was a social institution which helped regulate people's morality. Now you might disagree with the specific morality of the church, but it's important to see that one of the reasons that all layers of government could be a lot lighter a century ago as they were is that other cultural institutions took care of some of the functions that we now rely on an omnipresent government to supply.
So in the past, there was capitalism, government, the church, and besides the church just community. And as we've seen all of these forces up besides one the massively eroded, all that's left is state socialism, and it's therefore no surprise that we are a miserable civilization.
One criticism of individuals is that it is often said that people can never have enough and so there can never be enough. Personally, I don't really think that this is the case. From an economic standpoint, the personal cost to you of another hour at time ends up becoming worth less than the benefit of another hours pay.
In my view, while I certainly don't oppose anyone working if they want to, I don't think that nearly as many people need to be working as do, and in the past they didn't have to. Not to an extent it can definitely appear that I'm shaping the data to fit my hypothesis here, but I think one of the reasons that everyone needs to work so damn much is the overwhelming level of taxation from the state. Not only direct taxation such as income taxes and then on top of that property taxes if you own a home, and then sales taxes when you buy something, import taxes and tariffs, and then indirect taxes at you only end up seeing in an increased cost of living such as taxes which directly affect the cost of electricity or fuel, taxes are directly affects the cost of food or things like alcohol. With the overwhelming amount of taxes that we end up paying to support the massive government, we need to be working basically all the time and everyone in a family to make ends meet, and in the meantime capitalism (shrinking as it is) becomes the scapegoat, and Community suffers whether directly or through religion because people who make community are busy being conventionally economically productive.
(You might want to fight me on the prevalence of the state, but consider this: we aren't having this discussion on AOL, CompuServe, GEnie, or some BBS network, we're having it on the Internet, originally developed as darpanet, a government program)
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I disagree with most of the assumptions underlying this @sj_zero. To understand why, you could try skimming some of the threads I've been posting with the tag #neoliberalism.
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The most fundamental disagreement lies in the obsession with;
@sj_zero
> the government making up as much of the economy as the market
I'm much more concerned about the huge chunk of our common infrastructure ("the economy") controlled by anti-democratic corporations. The last 40 years has proved pretty conclusively that this is a bigger threat than democratically accountable governments, however imperfect. Not only to our liberty, but to our material wellbeing and long term survival.
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This becomes crystal clear if you look at software and the internet specifically. It's pretty clear that 'leave it to The Market' is exactly how most people's private information and social relationships, and many of our public squares, have ended up owned and controlled by a handful of billionaires. Using proprietary software, predatory EULAs, and increasingly blocking any attempt at interop.
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Meanwhile, governments are passing regulations like GDPR and DMA, and enforcing antitrust, and providing public funding for Free Code (eg all the fediverse software funded by the EU). Supporting our rebel alliance against the DataFarmers. In the process, creating huge new market opportunities for a wide range of non-predatory businesses (eg fediverse hosting).
Government vs. Market is a false dichotomy. Both need constant (re-)democratisation to protect human rights and freedoms.
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@sj_zero
> What did Plato and Aristotle say about the fate of Democracy?
Don't really care and I'm immediately suspicious of anyone who references them in a discussion about contemporary politics;
https://genius.com/Pop-will-eat-itself-the-incredible-pwei-vs-the-moral-majority-lyrics
Plato's Republic describes the forms of government. The initial aristocracy (defined as rule by the best people) is dominated by the most wise and just in a society. Eventually, the children of those wise men inherit power, but they are not necessarily wise and instead work to cultivate wealth rather than virtue, leading to a focus on values such as warfare and courage as those are perceived to be the virtues that lead to wealth. Eventually, the government is replaced with oligarchy, as the wealthy are the rulers. Eventually, the socioeconomic divide grows and those tensions result in demands that the majority get a stake in government, creating a democracy.
The time of democracy is a time of populism, and so the lower class looks at the upper class and a democrat will say "You have so much, we have less, surely you can share what you have?" and so the democrats will vote to take from some and give to others. Through this, the upper class will shrink, and the lower class will grow. Eventually, many of the wealthy will have hidden their wealth such that nobody can vote to take it from them, and there won't be any wealth left to take.
At that time, a demagogue will step in and promise the world, and the government will slip into tyranny.
Aristotle's "Politics" speaks of democracy, as well as oligarchy, monarchy, aristocracy, tyranny, and polity. He argues that in a democracy, the poor, who are the majority, will pursue their own interests rather than the common good, leading to instability and injustice. This is in contrast to oligarchy, where he suggests the rich, who make up the powerful under such a system, will pursue *their* own interests rather than the common good, again leading to instability and injustice. He suggests that a form of democracy that helps curb the excesses of the rich and the poor by having a strong middle class. The fundamental problem to Aristotle is people voting in their own self-interest rather than in the common good.
Both Plato and Aristotle prefer the concept of aristocracy as defined as wisest and most just by the best of people for the common good, not the concept of hereditary nobility as we've seen through the ages.
Both writers saw the democracy to be dangerous and lead to tyranny.
As for what happened to Athenian Democracy, first they lost in the Peloponnesian war to Sparta leading to the installation of "the thirty tyrants" who ended the democracy. Later there was a short-lived democratic revival before Athens was taken over by the Macedonian monarchy, before eventually being conquered by Rome.
Interestingly, plays recovered from the time suggest that at least some wise Greeks knew full well that they were democratically marching off a cliff, but under democracy, a mob always has a greater weight than a few wise people.
Rome itself is also a cautionary tale -- while it was much different than liberal democracy, it was a republic with democratic elements that fell because after a bunch of different classes acting in self-interested ways to accumulate wealth and power, eventually the Rubicon was passed and Rome became an Empire under a tyrant for the rest of its existence.
Another example of tyranny arising out of democracy is Nazi Germany arising directly out of the Weimar republic, which was by far the most progressive democracy on the planet at the time, which is arguably one of the things that led to its downfall.
Having evolved from governments making up 10% of the economy to the current form of 50% of the economy, and a rising alienation between different groups of people, a declining standard of living, a shrinking middle class that's having its blood sucked out of it by both the poor and the rich, I think the warnings of both writers are prescient. Western democracy may in fact be in its late stages -- we may even already be past the breaking point, in a cryptotyranny that pretends it's still a democracy while happily eliminating the concept of liberty using near total control of the media to sell it as something else.
According to the Greeks including Plato, Aristotle, and Herodotus, one of the signs of a tyrant is a reliance on foreigners rather than the local population. It represents the increasing disconnect between the tyrant and the population they are supposed to rule. This isn't definitive, but it certainly is a sign that perhaps western society has transitioned into tyranny considering the most important issues are not really about the common person's problems but the problems of foreign countries and people who are specifically not representative of the typical people.
When discussing "Democracy", it's important to question whether the line we're walking is actually towards a better future, or if we're just digging deeper into our developing tyranny. I personally think that given the massive increase in the size of government and massive declines in the middle class and the grinding decline in quality of life that's led to a demographic cliff in front of us, and governments around the world slowly closing its hands around the throats of people including increasing attacks on fundamental human rights such as freedom of speech including Canada's intervention into the Internet with constantly increasing censorship such as bills C-11, C-18, and new bills incoming this year, there's a very real risk that we're living in tyranny already.
My country's leadership tripled the federal debt in 8 years. Increased taxes. Higher inflation than the US. Many scandals costing taxpayers billions of dollars in a country where a billion dollars actually matters, but all memory holed by a press that's been paid off (and our tyrant laughs about it). All that money spent, but rising homelessness has led to homeless encampments in every city, despite being a place where the weather here will kill you dead half the year. Have you ever felt -40C? I have, you can feel your body freezing to death, you can feel the fact you're going to die, but there's encampments of people living outside because they had nowhere else to go, despite a trillion dollars in new debt. Meanwhile the leadership focuses on things totally disconnected from the realities faced by those ruled, spending time and money on wars on the other side of the world. Feels like tyranny to me.
Arguably, one of the key things that matter a lot to having a democracy or a democratic republic that thrives is having a populace that is interested in the good of society as a whole and is willing to disregard their own interests, but has a good understanding of what constitutes the common good. How many people will ever have a conversation like ours, compared to the people regurgitating word for word what establishment media tells them? How many people vote but don't really think about it because they've got some simplistic heuristic to follow?
I recently went back to some of the establishment media I used to watch, and the way they uncritically presented government data in the way the government wants it presented. The big news story that day was that the jobs numbers were a huge hit, but the fact is that 11 of the past 12 numbers were revised way down afterwards wasn't mentioned. I used to rely on that media, until I realized my predictions were all wrong. After I dropped those sources and found more accurate ones, suddenly I found my predictions improving significantly.
Besides establishment media, we now have overwhelming proof that big tech social media was directly receiving marching orders from the government. Directly. One allegation is that there was a specific gateway so government agents could come in and silence dissenting posts. It isn't often in history the state has been able to interject in conversations between people like it can today. Unprecedented tyranny. Justified by democracy, even though it's totally undemocratic.