Bow down to the Bubble: Larry Summerian Endorses Bubbleonian Madness and Paul Krugman Embraces the Hansenian Stagnation Thesis


... while the neoconservative ideology might be appropriate to some stage of the development of capitalism, it is clearly out of place in the modern economy, where the capacity effects of investment are huge. Further, the neocons would violate Wagner's Law by reducing the relative size of government as the economy develops. This ignores the social desire and need for increased provision of social services as the economy grows. The argument that J.K. Galbraith made in the early 1960s concerning the relative dearth of public services is only very much stronger today—with unmet needs for universal health care, for universal access to higher education to prepare youth for the "knowledge" economy, and for greater public involvement in finally eliminating the remaining inequalities that result from intransigent racism, sexism, and cultural biases. All of these are difficult issues and there is no plausible argument or evidence that they can be resolved through "private initiative." In fact, the neocon ideology has played an important role in reversing progress made since WWII on these and other fronts. Neocon policies reward the privileged and punish the have-nots. The rich get vouchers for well-funded private schools; the poor see funding of their public schools reduced. The rich get tax relief on capital gains and inheritances; the poor get higher local sales taxes and federal payroll taxes. The Katrina victims are evicted from Femaville trailers while the Haliburtons get no-bid contracts to rebuild New Orleans as a playland for well-heeled business conventioneers. Obviously, this reduction of the role played by government moves the U.S. economy in the wrong direction.

As Hyman Minsky used to argue, capitalism was a failed system in 1930. The growth of "Big Government" was singled out by Minsky and by Vatter and Walker as the necessary medicine to build a viable and robust version of capitalism. Minsky always insisted that there are "57 varieties" of capitalism, with different systems appropriate to different historical epochs. Unfortunately, the modern Hooverites are attempting to return to 1929, that is, to a system that was not even appropriate to the pre-war period. — L. Randall Wray

EconoMonitor : Great Leap Forward » Bow down to the Bubble: Larry Summerian Endorses Bubbleonian Madness and Paul Krugman Embraces the Hansenian Stagnation Thesis*

The logical conclusion of laissez-faire capitalism is monopoly. However, is Randy Wray right that some form of the mixed economy is the best solution for what ails humanity and the planet? Ultimately, I don't think so.

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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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