There is an interesting casino scene in Thunderball where Connery’s Bond stares down the bad guy Largo and tells him that he sees the spectre of defeat behind the shoulder of his opponent. While egging his enemy on, the reference is also to the man’s organization: It is a cabal which stands for “Special Executive for Counter-intelligence, Terrorism, Revenge and Extortion”. These words could even apply as an apt description of what that conglomerate — that includes most governments, banks, mega corporations and economists — has been in relation to the rest of humanity. However, with the unsolvable Eurozone crisis, and America’s ever spiraling debt, some economists are making shrill complaints that they are not being listened to enough when austerity is proposed as a solution to this mess that they, the high priests of modern human suffering, have helped create.
So we have not just the spectre of debt hanging over many economies, but probably the only other one that has haunted us for some time: It is the spectre of capitalism which is finally helping bring about the death of its unholy doctrine – economics, as we know it. And that is something that cannot be too soon. One of the acolytes of neoclassical mumbo-jumbo is good old Paul Krugman who thinks that those who oppose his mantra that perpetual debt (and it can never be too great) is the answer to the world’s problems are VSPs (Very Serious People).
But Krugman has also allowed us to open up to the possibility of VVSPs (Very, Very, Silly People) as he suggests recently in posts and at least one interview that unless national debt and inflation are engineered for states and peoples, we are in real trouble. In fact, the answer to the problem and curse of debt is to have more debt: These are the ideas for which they give out Nobel prizes. Ye olde Krugman believes that we only need to look at what depressions bring about to actively steer away from austerity and the develeraging it entails, for horror of horrors – we could have another replay of “Brownshirts” 1930s style. It is interesting that when more and more in the US think that their own country has been potentially on the brink of some sort of fascism since the Bushite regime, that the apparent bugbear for either too much spending and indebtedness (that can bring about hyperinflation) or too little of it (that may result in depression) — is a resurgence of Hitlerism. (The fellow is a little behind the curve on this.)
In other words, we have an aporia plain but never simple: Damned, either way . So with this debacle, that in actuality cannot be resolved, and since it seems to some experts that we are at a point of economic collapse — not forgetting a rebirth of some form of Nazism — the likes of Krugman suggest that:
- the public sector run a debt at its own pace such that it can be accommodated by monetary policy (whatever that means)
- by avoiding unconventional monetary policy we may seem virtuous but create a depression
- due to deleveraging shock we are at zero lower bound interest rates and how low can you go anyway
- there is too much desired saving over needed investment
- this implies inadequate demand and so depression
- this means bring in fiscal shenanigans and allow governments to run large deficits to try and get full employment (allowing breathing space for the private sector)
- but debt is a great thing when we understand that in essence it means that one person’s liability is another’s asset
- since all debt is not created equal, “borrowing by some actors now can help cure problems created by excess borrowing by other actors in the past” (sic)
- depressions and deflation make it harder to service debts
- that inflation will finally erode debt but it will thereby reward the past excess of some
And here comes the clinker, sage Krugman then thunders out the neoclassical secret: “economics is not a morality play.” At long last, we finally understand what all the problems we encounter are about: We have confused economics as having a sense of morality, and we are now deservedly paying the price. Sieg Heil, Krugman.
But then brilliance turns into genius with the suggestion that: We must get the government to then come in and build rail tunnels and other “useful things” to apparently lead to a situation where further deficit spending will not be required to have full employment. Then this other insight which is the icing that tops things off – public debt replaces private debt: But the good news is that the economy’s problems will have been reduced even as overall debt has not fallen. Q.E.D.
Two questions for Krugman need to be put. First, there must have been people who listened even to him in the past, and there is (in truth) nothing he is suggesting that sounds as if it has not been tried out before many times; second, since we are still in a situation of great debt and possible depression etc, is it not clear that whatever solution is proposed inevitably leads to the ineluctable situation of socio-economic travail with the constant threat of hyperinflation and/or depression: Precisely the kind of instability that has led to many of the major problems of the past century.
But Krugman need not feel lonely, for he is joined with equally outrageous suggestions and a twisted narrative coming from Nouriel Roubini who recently repeated what we already know: That the global economic forecast is not good. The economic sluggishness of the US, China and the Eurozone implies a drag on growth for emerging markets (this is worsened by their lack of structural reforms among other things). However, Roubini at least allows for war and other conflicts – as in the never ending fiasco in the Middle East — to have some impact on economies, unlike dude Krugman.
But Roubini too laments that austerity may be part of the problem in that he seems to think that just as developed states’ monetary policies are running on empty with near zero interest rates and repeated quantitative easing (printing more money), the issue is not so much liquidity but sheer insolvency: Debt. This debt of course limits further stimulus. This in turn limits the ability of states to bail out more failing financial institutions and the like. So states (sovereigns) are now off-loading the public debt onto the banks who they were supposed to bail out in the first place.
So Roubini’s solution is that taking on austerity should be gradual and that there should be a new EU compact and debt salving/mutualization via Eurobonds. There is a need for greater banking union and political integration. Again this amounts to chucking out more IOUs that still have to be serviced as debt in the end. All these scenarios lead to debt and more debt, and there is no way out from this mess. Roubini provides the obverse of Krugman who thinks greater sovereign debt is the answer, when the former’s economic tale shows that some form of austerity is needed — as who do sovereigns borrow from when they cannot even save banks anymore (since they need to borrow from someone, and quantitative easing is not quite the solution. One obvious answer, however, is to squeeze more money from the already impoverished tax payer yet again, but this will lead to only more problems — to put it lightly.
Meanwhile, VVSPs believe the state should create more debt to save the indebtedness of the private sector and, as far as possible, with inflation.
But what all this shows is that whatever economic narrative and theorizing one prefers it brings us back to the fact that debt is here to stay, and that current economic thinking is completely bankrupt and unable to effectively account for, much less deal with, the situation. All attempts by governments to stave off the crisis that is about to break loose are failing because we are just unable to cut our way out from this economic and political Gordian Knot created from trusting politicians and, worst of all: Bankers, mega corporations and those over-hyped rascals – economists. In fact, at the heart of this impending implosion is the attitude and idea of VVSPs who believe: Economics is not a morality play.
It is precisely this notion that has led us to where we are. The ungodly assumption that economic theorizing is devoid of moral form and content begs the issue as to what good does it serve then? Are the people who are unemployed, sinking daily into poverty, protesting, demonstrating, occupying public spaces and seeking desperate ways to survive as the state and economic edifice takes a pummeling from indebtedness – mere apparitions that form an insubstantial test-bed for economic theories? Human beings, shocking as it may seem, deserve some attention. If you prick us do we not bleed? If you tickle us do we not laugh? If you poison us do we not die? (But this time, we can do without the revenge of old.)
Economic theory which is devoid of morality is nothing but a shadow play in the dark where the only light you have comes from klieg lamps such that every day is Walpurgis night, and there is an eternal situation — as economists keep showing us — of everlasting indebtedness and inflation that is needed to apparently keep things moving. But this danse macabre has reached its end, and the game is up. We have been largely haunted by ghosts, hobgoblins and evil sprites that have run amuck and ruined the economy and the world. What good has any of this occultist economic theorizing done? Look at where we are today. We now need the natural death of this crumbling corrupt edifice of Babel; we need economics together with its diabolical incantations to give up the ghost and we must then exorcise the planet of future Gog and Magogs.
So what is the response then to this economic and political cul-de-sac we seem to be trapped in? It is that we should not live in fear at all but welcome what is coming our way: We should with open arms embrace the collapse of the old economic paradigm; the end of the falsehoods that have kept this world in the thralldom of lies, greed, and manipulation; and look forward to the end of economies, governments and states as we know them. The much needed end to these old and dying structures will bring about the birth of a new world, and we will have to create the new forms that will help us live in peace and harmony with workable solutions for a new socio-political economy. We are indeed in the last throes of the Kali Yuga. But before speculating on what exactly this new world will be like, we have to put our shoulders to the wheel and try creating suitable alternatives for the present. And just as we start to create these alternatives, we need the old ways and all the power-profit mongers to leave the scene: And that can only come about with the collapse of the hollowed out economic-political plasterwork of our world today.
In the new world, there will be no more ghosts and spectres haunting anyone. At long last, we will be free to listen and create according to the better angels of our nature.
Philosophers for Change