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Robert J. Samuelson: These are hard times for economists

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  • marxist Salt Lake City, UT
    Feb. 18, 2014 12:45 a.m.

    I continue to contend that economics will remain static and ineffective until Marxian analysis is let into contemporary economics. Marxian analysis makes pretty quick work analyzing our current problems. First, profits come from incomplete compensation to labor. Second, the need of capital to grow profits without limit leads to stagnant wages and off shoring of jobs. Third, the stagnation of wages leads to increasingly top heavy distributions of wealth and income (this is happening, it's not just theory), and the falling from the middle class of many families. Fourth, as capitalism matures banking capitalism becomes more prominent (financial services have climbed to 20% of GDP) and for that reason their recklessness lends increasing instability (Wall Street banking created the collapse of 2007-2008). And finally fifth, government steps in to save the system from collapse by borrowing heavily and flooding the system with money to save the banks which in turn loan to the government to finance the bailout of themselves. Marx predicted all of this.

    Isn't this just great? We Marxists understand this stuff. Galbraith and the rest can't because they don't have the right tools.

  • Mainly Me Werribee, 00
    Feb. 18, 2014 3:28 a.m.

    Economists educated using the Obama method are unable to predict anything accurately because they use unrealistic socialist/liberal (same thing) models. They don't live in the real world or look at real world figures. Their accounting methods are "creative" and designed to give the illusion of prosperity when the sky is really falling. And, even when the sky begins to fall around them, they close their eyes and deny the truth.

  • SEY Sandy, UT
    Feb. 18, 2014 7:13 a.m.

    Meanwhile, the accurate predictions of Austrian economists are predictably ignored.

  • LDS Liberal Farmington, UT
    Feb. 18, 2014 7:42 a.m.

    Oh,

    The "economy" recovered alrighty...

    It's just that it only went to the top 1%,

    so, the 99% of the rest of us are left scratching our heads wondering what just happend,
    While the uber-wealthy are laughing all the way to the Government bailed-out banks!

  • Nate Pleasant Grove, UT
    Feb. 18, 2014 7:56 a.m.

    Keynes has been discredited time and again by the real world. Yet there are still people who will tell you that a dollar spent by the government has some kind of magical multiplying effect in the economy. They ignore this fact: before that dollar can be spent by the government, it must first be taken out of the economy through taxation. Surely the absence of this dollar has a ripple effect of its own.

    Keynesianism attempts to make the shallow end of the pool deeper by dipping from the deep end.

  • 10CC Bountiful, UT
    Feb. 18, 2014 8:09 a.m.

    SEY:

    The Austrians advocate "expansionary austerity", and they've had a very large stage to audition their ideas - Europe, and the UK. The UK has had a double-dip recession, not exactly the robust growth envisioned and advocated by Austrian economists and David Cameron, the Prime Minister who decided the Austrians must be right.

    Keynesians like Paul Krugman assert the only reason the recovery hasn't been bigger is because we needed a much bigger stimulus.

    Monetarists like Greenspan have found their theories and policies lacking, a sobering dose of reality as unregulated financial markets nearly seized up.

    This answer may be anathema to most, but "Marxist" comes the closest to being able to explain what is going on. Karl Marx never prescribed specific fixes for the problems of Capitalism, but his followers certainly had their chances, in Soviet Russia, Cuba and earlier China.

    Clearly, we need a "reset" of ideas, and the example of Teddy Roosevelt stands out as offering a good blend of the American Dream, with regulated capitalism, with the notion of a "square deal" paving the way for a resurgence in the optimism that has defined America and our prosperity.

  • JoeBlow Far East USA, SC
    Feb. 18, 2014 8:24 a.m.

    Can someone explain this.

    The concept of "trickle down economics" basically says that when business and high income earners are doing well, everyone does well.

    You know, the "rising tide lifts all boats" theory.

    So, in the last 4+ years, Corporate America has done pretty darn well. The richest Americans have also done quite well.

    Their tide is certainly rising, and quite nicely.

    So, why is it that middle America and the poor and floundering, comparably?

  • SEY Sandy, UT
    Feb. 18, 2014 8:33 a.m.

    10CC: apparently you're getting your talking points from reading Paul Krugman who, by the way, has a knack for misreading and misinterpreting the Austrian school. I suggest you read the real thing on the Mises website before you engage in such wild mischaracterizations.

  • Mountanman Hayden, ID
    Feb. 18, 2014 9:04 a.m.

    JoeBlow. The answer to you question is very easy. The US has THE highest corporate taxes in the world, more government regulations on business than nearly any other county and now Obamacare mandates! What business in their right mind would risk their capitol to open a business in America and hire people? Made in China sound familiar to you at all? What little is "trickling" in the economy right now is going up to Washington DC., Jobs are very scarce but food stamps, unemployment checks and free healthcare are not scarce. The tricking is going the wrong way and the proof is the $17.3 trillion (didn't congress just increase the debt ceiling?) national debt! If we could get the government out of the way, our economy would explode!

  • Invisible Hand Provo, UT
    Feb. 18, 2014 9:17 a.m.

    @JoeBlow: The tide isn't rising. The "trickle down" theory that government is using now is that the government and Fed will print money, it will go to government programs and to bail out financial institutions and favored industries, and from there it will trickle down to the rest of us. The result is precious little trickling because it gets stuck on bank balance sheets and in the hands of those closest to the source. The "rising tide" you're looking for can't happen until animal spirits are unleashed through more economic freedom, lower regulation and taxation.

    @10CC: Austerity is not a policy, it is an unavoidable consequence of bad policy.

  • JoeBlow Far East USA, SC
    Feb. 18, 2014 9:26 a.m.

    "The US has THE highest corporate taxes in the world,"

    I assume that you know the difference between published tax rate and effective tax rate. Corporations have paid off our politicians to give so many writeoffs that our effective corporate tax rate is nowhere near the highest in the world.

    According to the GAO, in 2010,

    "Large, profitable U.S. corporations paid an average effective federal tax rate of 12.6% in 2010, the Government Accountability Office said Monday."

    Yes, we have lots of "entitlement" spending. As do other developed nations.

    We also spend a huge chunk in defense that those other countries dont have to pay for with tax dollars. Did you factor that in? Wouldnt that have to add at least a few points to the tax rate if you want to spend $700 BILLION + dollars per year.

    The US DOD is the largest employer in the world. All paid for by our tax dollars. (remember yesterday? They get FREE healthcare.

  • LDS Liberal Farmington, UT
    Feb. 18, 2014 9:36 a.m.

    JoeBlow
    Far East USA, SC
    Can someone explain this.

    The concept of "trickle down economics" basically says that when business and high income earners are doing well, everyone does well.

    You know, the "rising tide lifts all boats" theory.

    So, in the last 4+ years, Corporate America has done pretty darn well. The richest Americans have also done quite well.

    Their tide is certainly rising, and quite nicely.

    So, why is it that middle America and the poor and floundering, comparably?

    8:24 a.m. Feb. 18, 2014

    =========

    Mountanman
    Hayden, ID

    Invisible Hand
    Provo, UT

    You are both wrong.
    The fact of the matter is --
    The Re-distribution of Wealth doesn't happen by the goodness or compassion of the wealthy elite,
    the only way it can only happen is via Unions, or the Government.

    In the 1920's - American had Unions, and the USSR had the Government.

    Today - Conservatives had destroyed both...
    leaving the Gadianton's of Corporations to "manage" the Government and controlour Country.

    Imagine -- being able to finance your own bail-outs,
    using "the people's" money.

    I'd like to see Joe the Plumber pull that one off...

  • Invisible Hand Provo, UT
    Feb. 18, 2014 9:50 a.m.

    @LDS Lib: Can you clarify your last post? Do you think governments and unions should redistribute wealth? How does that work? Do you think the soviet system of government confiscating and managing all productive assets is a good idea? I don't think we disagree that corporations in bed with government to finance their bailouts is bad.

    It appears that where we disagree is that I think wealth should be distributed according to principles of freedom, as in free markets, with minimal interference from central authority. You think we should trust some central authority to do it. Is that a fair assessment?

  • LDS Liberal Farmington, UT
    Feb. 18, 2014 10:16 a.m.

    Invisible Hand
    Provo, UT
    @LDS Lib: Can you clarify your last post? Do you think governments and unions should redistribute wealth? How does that work?

    ========

    Unions went on strike when they saw the wealthy getting wealthy from THEIR labor.
    The U.S. Goverment also taxed Corporations when they withheld that wealth from the laborer.
    Conservatives have destroyed that working model over the last 30 years.

    Governments [like the former USSR] simple own the Corporations and then redistribute the wealth produced by the laborers.

    So --
    It really comes down to this,

    Either go back the strong Larbor Unions and higher taxes on the Uber-Wealthy whcih made America the envy of the last 100 years,
    or
    let the Government do it.

    I know which way I would rather have it go,
    but you Conservatives seem to hate Unions and higher taxes on the wealthy more than you do Communism....
    [also manifested with the Conservative's Corpoation LOVE-feast with Communist China.]

  • Invisible Hand Provo, UT
    Feb. 18, 2014 10:32 a.m.

    @LDS Lib: You have set up a false dichotomy. "Either go back to strong labor unions" (not sure how you would do this without forcing people into unions) or "Let the government do it". There is another way that doesn't involve coercion. Let people be free. Let them keep more of their own earnings. You may not fix inequality (which is only a problem if you suffer from envy), but you will get the "rising tide" that lifts everyone.

  • marxist Salt Lake City, UT
    Feb. 18, 2014 10:35 a.m.

    @SEY "Meanwhile, the accurate predictions of Austrian economists are predictably ignored." What to the Austrians say about distributions of wealth and income?

  • Gildas LOGAN, UT
    Feb. 18, 2014 10:36 a.m.

    Economists are a waste of space. Obviously none of the popular doctrines work and the world's "enlightened" spenders are all in bondage to lenders. I learned more from a financially wise mother who spent less than she had and paid bills on time. I learned more from an honest father whose earnings came from his own honest toil, who didn't desire to divert percentages of other men's incomes, whose charity began at home, and for whom additional charity was his own decision not that of others of questionable sense or character.

  • marxist Salt Lake City, UT
    Feb. 18, 2014 10:48 a.m.

    In a rare moment of insight prominent economist Lawrence Summers had this to say:

    "The current tax code is so badly designed that it is very likely to be having the effect of reducing economic growth. It also allows the rich to shield a far greater proportion of their income from taxation than the poor."

    Summers says we are approaching a "Downton Abbey" economy.

    In other words our top heavy distribution of wealth and income is dragging the whole system down. If you want to save American capitalism (I'm not sure I do - maybe we ought to get the whole thing over with - but the pain of the process!), restore the progressive tax code of the 1950's.

  • SEY Sandy, UT
    Feb. 18, 2014 12:16 p.m.

    marxist: the Austrians have a lot to say about distribution of wealth and income. David Stockman said a great deal about it in his monumental book The Great Deformation. It's an impossible task to cover the subject here, but in brief, the entire economic system has become deformed by the "politburo" of monetary planning, aka the Federal Reserve system. Distortions of financial markets as a result of interest rate manipulation and massive infusions of fiat money into the system create huge pockets of malinvestment. Cronies of the Federal Reserve and Treasury have benefited most from these policies at the expense of the rest of us (aka the 99%).

    As Invisible Hand noted, austerity is not an Austrian economic policy, it's a consequence of malinvestments as a result of inappropriate market prices, most significantly the interest rate which impacts all other prices. There is only one way out of this mess, and that is to allow markets to clear by appropriate pricing set by market forces and not by the above-mentioned politburo or by wage and price controls.

  • CLM Draper, UT
    Feb. 18, 2014 6:02 p.m.

    Kudos to SEY and Invisible Hand. I wish I could have said it half so well myself. Thanks for your solid additions to this board.

    Now a few words about Larry Summers. "prominent" economist Larry Summers? I'd say rather, ignominious. Summers tops the list of those responsible for sabotaging the world economy as one of the key players in creating the mortgage derivative bubble that ended up costing tens of millions of Americans their homes and life savings. As Clinton’s Treasury secretary, Summers supported the banking lobby’s successful effort to make the sale of unregulated bundles of mortgage securities and the phony insurance swaps that backed them perfectly legal and totally unmonitored. Those are the toxic bundles that the Federal Reserve is still unloading from the banks at a cost of trillions of dollars. I don't think he's a reliable source to quote on any economic issue.

  • pragmatistferlife salt lake city, utah
    Feb. 18, 2014 6:07 p.m.

    I'm sorry Sey but I don't think the Austrians have much to say about wealth distribution except to poo poo the concept itself as a fantasy, and I don't think your comments about financial market distortions have anything to do with Marxists question.

    The Austrians respond to the fact that 1% own over 40% of all wealth by some gibberish about separating capital wealth from consumer wealth, and then muddling on about how you can't re-distribute consumer goods, nor can you divide up capital wealth except through ownership.

    Non of this addresses a growth consumer economy that is rapidly changing to a financial growth economy that is leaving behind all the consumers because nearly 80% of the wealth needed for consumer growth rests in the hands of a very few.

  • CLM Draper, UT
    Feb. 18, 2014 8:04 p.m.

    Kudos to SEY and Invisible Hand. I wish I could have said it half so well myself. Thanks for your solid additions to this board.

    Now a few words about Larry Summers. "prominent" economist Larry Summers? I'd say rather, ignominious. Summers tops the list of those responsible for sabotaging the world economy as one of the key players in creating the mortgage derivative bubble that ended up costing tens of millions of Americans their homes and life savings. As Clinton's Treasury secretary, Summers supported the banking lobby's successful effort to make the sale of unregulated bundles of mortgage securities and the phony insurance swaps that backed them perfectly legal and totally unmonitored. Those are the toxic bundles that the Federal Reserve is still unloading from the banks at a cost of trillions of dollars. Summers is a highly dubious choice for quoting.

  • SEY Sandy, UT
    Feb. 18, 2014 9:58 p.m.

    pragmatistferlife: do you mean wealth distribution or wealth RE-distribution? I addressed the concept of wealth distribution under a regime of non-interventionism. Once you eliminate the Federal Reserve, which is the top 1%'s best friend, along with the destructive practice of fractional reserve banking, you will find that wealth will be much more equitably distributed through market forces alone.

    As for redistribution, it's a totally failed concept. As long as nothing else changes (insanely low interest rates, fractional banking, fiat currency, special rules for bankers and financial cronies), money will continue to flow from those with less to those with the most. Taxation has failed and will continue to fail as a method of wealth redistribution. Marxist's suggestions are not reality-based.

    I don't know where you're getting your information about Austrian economics, but I'm guessing it's from 2nd or 3rd hand sources. Your portrayal of it is convoluted and nonsensical. Please state your source and I'll be happy to give it a look.

  • Nate Pleasant Grove, UT
    Feb. 18, 2014 10:57 p.m.

    "Summers is a highly dubious choice for quoting."

    You can say that again.

  • Tyler D Meridian, ID
    Feb. 19, 2014 10:06 a.m.

    @10CC – “This answer may be anathema to most, but "Marxist" comes the closest to being able to explain what is going on.”

    Perhaps… unfortunately after Marx makes his diagnosis of the patient his remedy is to first castrate the patient (i.e., destroy any motivation to work) and then cut off his head (destroy the entrepreneurial class).

    Not sure this is the doctor we want to go to for the cure…

    @SEY – “I suggest you read the real thing on the Mises website before you engage in such wild mischaracterizations.”

    I am rarely impressed when someone’s counter argument essentially takes the form of “you would understand me if only you had read Ludwig Van Brainiac’s seminal paper on capital formation, industrial production, and monetary constraints.”

    If you have a point to make, just make it…

    @Nate – “Yet there are still people who will tell you that a dollar spent by the government has some kind of magical multiplying effect in the economy.”

    And rightly so, but it depends on the spending. Long term capital projects do have a multiplier effect… transfer payments generally do not.

  • airnaut Everett, 00
    Feb. 19, 2014 10:54 a.m.

    SEY
    Sandy, UT

    As for redistribution, it's a totally failed concept.

    ========

    THE EXPERIENCE OF MANKIND has shown that the people of communities and nations among whom wealth is the most equally distributed, enjoy the largest degree of liberty, are the least exposed to tyranny and oppression and suffer the least…

    ONE OF THE GREAT EVILS with which our own nation is menaced at the present time is the wonderful growth of wealth in the hands of a comparatively few individuals. ...

    If this evil should not be checked, and measures not taken to prevent the continued enormous growth of riches among the class already rich, and the painful increase of destitution and want among the poor, the nation is likely to be overtaken by disaster; for, according to history, such a tendency among nations once powerful was the sure precursor of ruin.

    Signed,
    LDS 1st Presidency,
    and all members of the Quorum of 12 Apostles.

  • Nate Pleasant Grove, UT
    Feb. 19, 2014 1:30 p.m.

    @LDS airnaut

    Thank you for posting selected portions of "A Proclamation on the Economy from the First Presidency and Twelve," published in 1875. Here's a further look at the same text:

    "When the proposition to organize Zion's Co-operative Mercantile Institution was broached, it was hoped that the community at large would become its stockholders; for if a few individuals only were to own its stock, the advantages to the community would be limited. The people, therefore, were urged to take shares, and large numbers responded to the appeal. As we have shown, the business proved to be as successful as its most sanguine friends anticipated...."

    "...Every one who can should take stock in it. By sustaining the Co-operative Institution, and taking stock in it, profits that would otherwise go to a few individuals will be distributed among many hundreds...."

    "...The Institution has opened a retail store within a few weeks, one of the old fashioned kind, in which everything required by the public is sold. This should receive the patronage of all the well-wishers of co-operation. In the settlements, also the local co-operative stores should have the cordial support of the Latterday Saints."

  • Nate Pleasant Grove, UT
    Feb. 19, 2014 1:32 p.m.

    ...continued...

    As a solution to the stated problem of concentrated wealth, the Brethren propose the widespread purchase of stock in a co-operative business venture. The more investors there were, the wider the rewards would be dispersed.

    They didn't propose external wage controls. They didn't propose involuntary redistribution of wealth. They proposed that everyone freely become an investor and together enjoy the profits of industry. They proposed that everyone support the venture by freely purchasing goods there.

    Co-operative capitalism.

    Not socialism.

  • Tyler D Meridian, ID
    Feb. 19, 2014 2:33 p.m.

    @Nate – “Co-operative capitalism… Not socialism.”

    That actually sounds pretty good… curious why the model (within the LDS community) did not continue.

    And putting the sections you quoted together with those quoted by airnaut, it does show a remarkable contrast to our current society where a large percentage of citizens own nothing and a relatively small percentage owns more all the time (often through the simple magic of compounding and/or economies of scale).

    I’d say 401k’s and similar vehicles of individual stock ownership have offset some negative effects, however it is likely negligible in terms of influence given the size of corporations and institutional investors.

    Do you see an inherent problem with wealth concentration? If so, are you proposing a re-chartering of corporations into co-ops on a large scale?

  • Alter Nate Pleasant Grove, UT
    Feb. 19, 2014 8:24 p.m.

    @Tyler D

    The LDS community maintains many cooperative practices in its welfare program. Where it makes sense to pursue an independent economy, we still do. If you were to look at a Church website called providentliving dot org, you would find that the principles which drove cooperative efforts in the 1870's are still being taught today.

    Do I see an inherent problem with wealth concentration? Yes and no. Human nature doesn't easily resist the temptation to convert wealth to power, and power to wealth. I hate cronyism with all my heart, and cronyism goes hand in hand with large concentrations of wealth. Human nature is also susceptible to greed and envy, both of which are sins. That said, I don't believe that the accumulation of wealth makes a person evil. I have seen wealth used to bring about much good.

    Am I proposing the re-chartering of corporations into co-ops? Yes, if that's what they choose for themselves. Liberty trumps equality in my book. I generally prefer voluntary solutions to economic problems.

  • Tyler D Meridian, ID
    Feb. 20, 2014 10:15 a.m.

    @Alter Nate – “The LDS community maintains many cooperative practices in its welfare program.”

    Interesting… it still raises the question of why this isn’t practiced in the Utah business community at large if the church believes that co-op’s are more beneficial for society. Would it be unfair to say that most LDS people are (voluntarily) going against church wishes in pursuit of more “worldly treasures?”

    I generally agree with the rest of your points and am reminded of an interview I once heard that included a Tea Party leader and an Occupy Wall Street leader (if they have such a thing). The interviewer asked a long series of questions and turns out the two leaders agreed on about 80% of the issues – and their disdain of crony capitalism was definitely one they agreed on.

    Sad that our media today likes to focus on the 20% of disagreement vs. the 80% of agreement.