2014: Same as 2013?

Well, it looks that way. We seem to be stuck in something akin to the mud that engulfed my neighbors car a week or so ago. There’s lots of huffing and puffing, by those with a job at least, and not much coming out the other end. The experts call it stagnation. The rest of us call it something less polite.

Most of the non-economists I chat with, those that whose eyes don’t glaze over at the word ‘economics’, are now entering a kind of stoic acceptance of our economic mediocrity. It is, as they say, the way it is. We are powerless to overcome the slowing of growth to a crawl. After all don’t the experts all seem to agree that our technologies nowadays are incapable of igniting much of anything. And those technologies that are most eye-catching don’t seem to generate many jobs – Google, Apple, and so on are actually smallish employers given their outsized presence in our day to day loves. Indeed, given the efficiency enhancing, by which mean labor saving, nature of many modern technologies, the adoption of a digital way of life is probably job destroying on a net basis.

Or so it seems.

Let’s put this bluntly: it didn’t have to be this way. Not at all. That it was, and remains so, is testimony to the intense politicization of everyday life, of business, of the workplace, and of academia. Of everything. It was not so long ago that a Republican administration could position its economic policy along Keynesian lines. The Bush economic team crowed about the ‘stimulus’ of the federal deficit they created by slashing taxes. It would, we were assured, boost the economy. It didn’t. Is that an indictment of Keynes?

Presumably in the eyes of those involved it must be because those same people are now regularly found decrying any sort of deficit, arguing that stimulus is vaporous.  Besides, they preach, any policy that involves creating a deficit is precisely offset by the counter measures taken by households and businesses who recognize that it a deficit has to be paid off via a future surplus which means higher taxes. So people save in order to pay those future higher taxes and thus neutralize the stimulus. Hey presto! A ready made right wing argument for debasing the role of government in the economy.

Politicization of economics is nothing new of course. It’s just that in the good old days people were a little more up front about it. Marx, after all, didn’t exactly hide his thinking about capitalists. And Adam Smith’s famous work is mostly a peon to the greatness of the various ‘freedoms’ that enable those capitalists. Although we must toss Smith a line: at least he spoke darkly of the nature of businessmen who will collude, cheat, or connive at the slightest hint of potential profit.

Nowadays economics has shed its older and more accurate title of political economy, and has become an adjunct to the mathematics departments of our universities. This was a consequence of the effort made to expunge politics in the wake of the Marxist critique, because, well, he had a point and made economists look like the shills for capitalists that they were. The result of this cleansing was the introduction of a lot of math to dress older ideas up and make them look scientific; the search for newer ideas that suited a more scientific outlook; and the elimination of any vestiges of social, political, or psychological friction that may prevent the newer ideas from being tractable to that math.

So what we have today, part from outlying remnants of opposition, is a sanitized, dehumanized, and mechanistic relic of the late 1800’s, updated with a few nutty add-ons designed to double down on sanitization, dehumanization, and mechanization. Thus we end up with a view of people as being a kind of omniscient, coldly calculating, infinitely rational, and hyper aware machine capable of undertaking the counter measures postulated by those who deny that government has a role to play in the economy. Or at least a positive role.

I don’t know about you, but I feel that whenever anyone has to string together a long series of highly interdependent arguments each of which itself depends on very particular and delicate assumptions in order to arrive at a very precise and easily unbalanced end point, I get queasy. There has to be a simpler argument. One that is more robust, albeit less precise or elegant in mist explication.

So. No people don’t offset a deficit creating policy exactly. They just aren’t that smart, rational, farsighted, and informed enough. And, no, the math doesn’t ‘prove’ a thing. So deficits can help. Demand matters.

It’s a matter of being pragmatic.

Business managers won’t expand their businesses if they cannot sell the extra stuff they produce. Period. In order to induce business expansion the most effective policy, therefore, is to create extra demand for that extra stuff. The government can do this. Especially when no one has much of a need for investment capital precisely because there’s insufficient demand to justify expansion. Duh. So there’s no danger of the government somehow gobbling up all the capital and thus blocking business. Stimulus is a stimulus. It works. Keynes was right. Move on.

But we haven’t done that.

Not by a long shot. Instead we have been cutting the deficit furiously – it is down radically from its crisis-driven high point. We are cutting government jobs – teachers, fire and police personnel mainly. We are hunkering down. We are self-inducing stagnation.

And that seems to be the acceptable mainstream policy adopted by both our political parties, advocated in the media, and defended by orthodox economists everywhere. It’s called austerity to give it a kind of puritanical moral tone. It sounds better than calling it what it is: stupid, cruel, and shameful.

Think about this: stagnation is a way to ossify or freeze in place our current economic relationships. Without growth to provide wiggle room we cannot easily redistribute or bolster our social policies. People feel too put upon to go along with extending the safety net – it feels as if each dollar spent on such things is coming directly out of our particular pocket. So people oppose government policies, even if they happen to help them. Stagnation works to the advantage of those at the top. Austerity becomes a cover for their continued domination.

Aided and abetted, naturally, by right wing economists who claim to be scientific but are actually simply shills for a certain world view. Just like in the old days.

This is where we were in 2010, in 2011, 2012, and 2013. The austerity view has failed every single test it has taken in the real world. We are not wallowing in hyperinflation. Deficits have not ballooned to the size that the bond market has cut and run. Our workforce has not suddenly become the world’s dumbest. We have not debased our currency. And we are not stuck with circumstances beyond our control.

This stagnation is what we did to ourselves. Happily if you’re a rentier living off an income generated by bonds, property, or dividends. Sullenly if you’re one of the majority. And since the rentiers run the show we can safely predict that 2014 will be more of the same. Stagnation for us. A gold mine for them.

Come to think of it we have debased something. We debased our democracy.

Let’s work on righting that wrong this year. It surely can’t hurt. Well only the plutocrats. And we don’t care about them. Do we?