They’ve Got Nuthin’

by digby

I am no economist and rarely write about the technical aspects of the economic crisis, particularly when there are such good bloggers around who actually are economists. So, I tend to concentrate on the politics of the economic crisis instead. And it’s quite clear to me that the conservatives are pulling their old John Birch Society tracts off the shelf, dusting them off and regurgitating every anti-FDR, anti-New Deal trope they can find, like they are newly minted slogans. And for most people, they are. Unless you are a scholar of the period, you have to be pretty long in tooth to have ever heard some of the stuff we are hearing these days about Keynes and The New Deal.

Paul Krugman is losing patience with this crap and I don’t blame him. Having to relive the Great Depression because wingnut ideologues refuse to acknowledge they were and are wrong is frustrating. Having to waste your breath fighting ghosts is almost as bad:

The greatness of Keynes …

… is illustrated by the trouble people who consider themselves well informed have, to this day, in understanding the basic principles of how a depressed economy works. The key to Keynes’s contribution was his realization that liquidity preference — the desire of individuals to hold liquid monetary assets — can lead to situations in which effective demand isn’t enough to employ all the economy’s resources. When you don’t understand that principle, you end up writing stuff like this:

Obama’s “rescue plan for the middle class” includes a tax credit for businesses “for each new employee they hire” in America over the next two years. The assumption is that businesses will create jobs that would not have been created without the subsidy. If so, the subsidy will suffuse the economy with inefficiencies — labor costs not justified by value added.

That is, if the private sector wouldn’t have created a job on its own, that job shouldn’t have been created — whereas the real choice is between having workers doing something and being uselessly, destructively unemployed. From the same article, we have this:

In a forthcoming paper, Ohanian argues that “much of the depth of the Depression” is explained by Hoover’s policy — a precursor of the New Deal mentality — of pressuring businesses to keep nominal wages fixed.

I’ve already pointed out how Keynes disposed of the money-wage argument, way back in 1936. Why do people still fail to get Keynes, after all these years? Keynes might have said that it’s the inherent difficulty of the concepts:

For—though no one will believe it—economics is a technical and difficult subject.

But there’s also the Upton Sinclair theorem: It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

I suspect it’s both.

We’ve just been through something like this with the post 9/11 lunacy that threw out everything the civilized world had agreed upon in terms of wars of aggression and preventive/pre-emptive wars since World War II. They told us that all the rules had changed, there was nothing to learn from the past that they were now “history’s actors” and the rest of us were along for the ride. We know how well that turned out.

So, get ready for some really stupid commentary from the right on the economy now that they’ve left the country in this terrible mess. Their ideology is so bankrupt that they have nothing left to offer but nonsense from people like the Laurie Mylroie of economics, Amity Schlaes, and revisionist pop economics from George Will. The only thing we have to be thankful for is that they don’t have the government entirely at their disposal to experiment with at the moment.

Update: Krugman’s going to be over at FDL at 2EST to discuss his book The Return of Depression Economics and the Crisis of 2008.