Thursday, February 19, 2009

Shocking the Shockers OR Disaster Keynesianism

A comment to my last post triggered a thought about how I could be more succinct in my critique of the government response to the current economic situation, both at the Federal and State levels. In particular, I was reminded of this quote:
Only a crisis—actual or perceived––produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. . . . Our basic function [is] to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.
This was free-market economist and Nobel Laureate Milton Friedman's insight. But the version of the quote I remembered wasn't Friedman's, it was from Naomi Klein's book The Shock Doctrine: The Rise of Disaster Capitalism.

In the book, Klein delivers a whirlwind tour of the late 20th century economic response to certain crises arising from natural disasters and political upheavals. If you want to read a recent history with an axe (a really big axe) to grind, I can't recommend The Shock Doctrine enough (here's a link to the google books version).

Klein spends the entire book trying to show that Friedman's prescriptions for a return to economic health were, well, disastrous. But she never refutes his assertion that only times of crisis produce change. I can't remember if she even tries.

Oh yeah, the succinct part:

Working from Friedman's insight, recent events can be seen in a whole new light. Democrats took Friedman's words to heart and have continued to keep alive those ideas that are dear to them, that have been dear to them at least since the New Deal. The collapse of the housing market, with the rest of the world economy in tow, did the rest.

If they are simply using the current crisis to enact the same old agenda, what chance does it have of succeeding? Some? Any?

If the current program succeeds, great, we will all be better off. But if it fails, I hope that thirty years from now we have recovered sufficiently for some hip right-winger to write a snappy critique of the early 21st century response to economic crisis and title it: The Stimulus Doctrine: The Rise of Disaster Keynesianism.


johnny said...

I think that there are a few glaring problems with the current stimulus. First, its not nearly big enough to have the desired effect. Perhaps 1.2 to 1.5 trillion would have been better with more focus on infrastructure and especially health care. President Obama tried to lure Republicans in with a tax cut element and he got a grand total of three of them to vote for it. The party of no wanted yet another of what they see as a cure all: a tax cut. While President Bush's much vaunted rounds of tax cutting did a bang up job at growing the deficit, the positive effect on the economy is debatable. Same with last years stimulus checks. Real change is needed and this crisis is just the thing for it. Pouring huge amounts of dough into roads and bridges and tunnels and railroads(not vegas to disneyland,though; which btw is not in the stimulus package no matter what the fox "news" channel says) is the way to go. These industries generate large amounts of jobs that pay well and have skills that transfer when projects end. AS for healthcare, think of the waste that can be prevented if all health records are computerized properly and securely. The rather paltry sums dedicated to these two issues shows that much bigger thinking is needed. I think that President Obama was too timid in this first round and that things are going to get worse. Besides whats another 2 trillion or so tacked onto the debt.It keeps the Chinese and the Saudis and the Japanese and the crafty Norwegians and all those sovereign wealth funds occupied buying debt so they are not plotting ways in which to gouge us more. It will also keep the Congress busy too. Isnt that what they are there for anyway, naming post offices and raising the debt ceiling?

Anonymous said...

Which is has been more discredited: the fantasy of Keynesian economics or the delusions of Marxist conspiracy theorist Naomi Klein? Hard to say really.

Steve said...

Concerning "Shocking the Shocker", I fully agree with Johnny. The stimulus package should be much bigger. He is trying the bi-partisan approach to a too great degree. The right-wingers can only think "little", relying on their old mantras of "the small business, the individual, free enterprise, and other historical concepts that cannot apply to today. In the world financial situation it is the "end of history". Bank nationalization is the next logical step, along with national health insurance, instead of the tribal mish-mash we now have. Of course we could finance both of these, along with other stimulus jobs and money ms by replacing the "shock and awe" of Bush's military reactionary mentality which was partially responsible for getting us into this mess in the first place. We simply cannot afford to be all things to all people in the world. I believe we have the right leader for the right time but he is likely to be nailed to the cross by critics who still think in the old historical ways, but sometimes it is necessary for someone to be nailed to the cross in times of crisis. Thought for the day: Don't
buy gold, it, also, is historical.