Senate Richard Wolff and Mark Blyth

Question for Ender: if you don't believe Keynesian spending is the appropriate response to an economic downturn, what do you say to the economists who say the resulting collapse of the economic system would have bee catastrophic, and in the case of 2009, would have been worse than the Great Depression? Is there no way, besides having good regulations to prevent the severity of them, to let the harshness of the business cycle occur?

I'm hoping to get a genuine response on this.

 

Let it happen.

The inevitable response, almost inaudibly underpinned by the sound of pearls rattling together in a clenched fist is, "but the human cost! The people!"

That response ignores that boom/busts themselves are necessary and inevitable and so as a result you are left with a question of when, not if, it will occur.

One the absurdities around "too big to fail" is that failure is an excellent tool for ridding an economy of businesses that do not deserve to be in business. By delaying a collapse - which is all Obama et al did - you do not preserve human wellbeing. You ensure it's hit with a tidal wave that's more powerful than the one you "successfully" avoided.

This is the point. The simple point. The bust is as necessary as the boom to maintain consistency of price and resource distribution.

And the underinformed critics of capitalism - not so much likewater, who is basically unthinkingly copy/pasting first year socialist 'argument' without amendment, but Wocky - will point to the concentration of wealth and sad bad! Bad capital! whilst praising someone like Obama who left it that way.

It's been long established you are a shoddy philosopher, so I won't say "but even you would have heard of Schumpeter". I'll instead suggest you go Google him for the first time, and see what it is some economists like about him.

 

Thanks for the informative response.

Disappointed in the last paragraph though - I don't know why you can't control yourself. I've heard of him in passing, but I've heard more from Keynes (naturally), Stiglitz and Ferguson. I think if we were to eliminate the Keynesian response to the boom bust cycle (which I can agree with your assessment of), we must make better efforts to buffet against what causes the normal boom-bust cycle to become catastrophic. It's the deregulation within some market economies which creates a situation where a naturally corrective recession becomes social destructive, and all the while that is allowed to reoccur every 60 years or so the system as a whole is unsustainable, not because the system isn't able to correct itself, but because the social cost will be unacceptable. Unfortunately people seem unable to accept the destructive nature deregulation and it will continue to create crisis where the only political response can be Keynesian spending.

 

I'm not sure the socially destructive is avoidable. It's a pipe dream based around a notion that comfort is perpetual.

 

Of course, in any economic downturn, there is going to be some social destruction. However in an average recession this can be alleviated by social welfare programs which can cushion the society in the year or two that the economy takes to correct itself (which is a form of Keynesian spending I suppose, but one I assume you support). I was under the impression what causes an average recession (8 months or so) to become a sever recession or catastrophic depression were typically factors of deregulation which makes the naturally corrective cycle more severe. While societies are normally able to weather average recessions, severe recessions or depressions normally foster severe distrust in the system, and are often induced by avoidable deregulation.

 

No, not always.

What stops an economy dead in its tracks is the cessation of capital flows. Like an engine without oil, it seizes up and can't move. When people stop spending, then you're in trouble.

But tellingly the Great Depression got worse in the US after the Smoot-Tawley Tarriffs Act was passed.

I don't mind state spending to trigger the upturn, or on welfare, but it's irresponsible over the long term to pre-emptively spend your way out of a recession.

 

Fair enough.

Generally speaking I think bail-outs and saving companies from collapsing is a bad thing, putting off an inevitable collapse and potentially inadvertently encouraging behaviour which caused the crisis in the first place.

Infrastructure spending to boost your way out of a recession is beneficial, especially if the infrastructure is in the right place to encourage economic growth. The same can be said of welfare spending increases. But of course long term spending is counter productive.

Sounds like you're Keynesian lite

 

I am all for creative destruction. In the end, it cleans the system of inefficient and failed businesses and allows people to start over. That's the great thing about if things go bust: the law gives you a way to start anew and fresh. And the economy, consumers and business owners all, are better for it.

The main thing I am for is social insurance for individuals and families to bridge the inequality that can grow and widen with rapid economic growth and downturns.

One of the issues with Kenynesian economics is timing the stimulus. Sometimes the stimulus arrives when the economy is already on the upswing. That can diminish its effectiveness. That lag period between recognition of a problem, legislative action,implementation, will always be an issue.