We often look to academic experts for advice. Many assume that these experts are outside the influence of class interests, bringing their expertise to solve problems in an even handed way. Not so, though. Class interests, world views, and ideologies seep into the most "neutral" experts.
Sometimes it is unconscious, but often not at all. Experts need to live and there is a market for their work. They sell their labor. And guess who buys it more often than not?
This brings me to Paul Krugman's column today, a column that in my view is one of his best: Who Wants a Depression?
You should read the entire column. It's short. I'll paraphrase and quote some of the main points.
One unhappy lesson we’ve learned in recent years is that economics is a far more political subject than we liked to imagine.Krugman goes on to say that, perhaps, people should not have thought so, but he certainly did believe that "there was a fairly broad professional consensus on some important issues" in economics, at least until the Great Recession happened. Then Krugman learned that class interests infect the views of many economists and other experts. He points to the statement by Bush's administration regarding the 2001-2002 downturn that “aggressive monetary policy can make a recession shorter and milder." Surely there was a consensus between left and right economists on this basic point regarding monetary policy. And there was, until it affected class interests.
I’ve written a number of times about the phenomenon of “sadomonetarism,” the constant demand that the Federal Reserve and other central banks stop trying to boost employment and raise interest rates instead, regardless of circumstances. I’ve suggested that the persistence of this phenomenon has a lot to do with ideology, which, in turn, has a lot to do with class interests. And I still think that’s true. But I now think that class interests also operate through a cruder, more direct channel.
Quite simply, easy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent.Krugman points to conservative economists, pundits, and financial interests who have warned for five years that the Fed's low interests rates are debasing the currency and will lead to runaway inflation. Yet it has not happened. Normally facts cause false opinions to change, but not here. The opinion, the warning, the opposition to easy money remains, but the rationale changes.
[Like the Bush tax cuts. Krugman does not point to this, but remember in 2000-2001? Bush wanted tax cuts because there would be too big of a surplus when the economy was doing well. Then there was a recession and Bush wanted the same cuts to boost the economy because it was not doing well.
The facts changed, so the rationale changed and the policy remained the same. It did not matter what the facts were: Bush wanted tax cuts. Same with Iraq. He wanted an invasion and, in the famous words of the Downing Street Memo, "the intelligence and facts were being fixed around the policy."
That is what is happening here.]
So why does this view persist when it is rebutted by facts? Some is ideological: Krugman points out the conservative aversion to government. If activist government can ameliorate the pain from the Great Recession, then maybe it can do health care, etc. But that's not all:
And conservatives don’t want to legitimize the notion that government action can ever have positive effects, because once you start down that path you might end up endorsing things like government-guaranteed health insurance. But there’s also a much more direct reason for those defending the interests of the wealthy to complain about easy money: The wealthy derive an important part of their income from interest on bonds, and low-rate policies have greatly reduced this income.It's the .01 of 1% that derives large amounts of income from interest on bonds.
Back in 2007, before the slump, the average member of the 0.01 percent received $3 million (in 2012 dollars) in interest. By 2011, that had fallen to $1.3 million — a loss equivalent to almost 9 percent of the group’s 2007 income.To Paul Krugman's main point, and one that I think is very important:
It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority. And, as a result, monetary policy is as bound up in class and ideological conflict as tax policy. The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.His eyes are opening. Krugman started as a mainstream liberal. So did Joe Stiglitz. And they are seeing the limits of liberalism. Both are moving toward becoming class warriors for working people. The battle of intellectuals is not enough, but it helps. Just as Piketty's book does.
The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.
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