Wednesday, December 21, 2011

Nine (well, eight) Reasons that Progressive Policies Deliver Prosperity and Freedom

Steve Roth is a rare oddity - a conservative who actually looks at the evidence and changes his thinking accordingly. These days, that is an accomplishment worthy of note. DailyKos's Hunter had an excellent article on Sunday about the overwhelming evidence that austerity economics has failed and is failing, but the wrong-wing ideologues and political hacks who believe in it remain steadfast in their obdurate stupidity:

This speaks to the very core of conservative distrust of science. A fundamental of science is that once something has been conclusively disproved, you ought to stop believing in it, and certainly ought to think twice about using it as the foundation for building your own supposedly "scientific" notions. You can believe that if you feed a horse a penny, it will poop out a dime, but once the experiment has been tried and has failed you probably should cancel your plans for a horse-based retirement fund. 
This is roughly what has happened in Europe, as every nation that has attempted contractionary polices has found itself faced with, glory be, contraction. Austerity has resulted in austerity and has not magically morphed into expansion via the power of Told You So. We should probably stop expecting the horse to crap out dimes, at this point. We should also probably reflect on what this means for our own "austerity" policies here in this country, but that would require several hundred politicians, thousands of lobbyists, and a hundred thousand ideologues to cop to being proved wrong on something, which will never, ever happen. The mere suggestion is always met with fury. The point is not what reality proves or disproves, the point is the ideology, and if the reality conflicts with the ideology then it is reality that can go to hell.
That is a populist diatribe against orthodox economic thinking, so for you folks who are more into the nerdy, brainy sort of hard-core economics theorizing, Naked Capitalism has been serializing a paper by economist Philip Mirowski that is both ruthless and funny (for example, after describing how leading economists had enjoyed a decade of self-congratulatory boasting of how they had finally defeated the boom and bust business cycle during the, as they called it, "Great Moderation" of the 1990s and 20-aughts, Mirowski starts his next paragraph, discussing how the financial crash embarrassed these orthodox economists, with the title "The Great Mortification."

Mirowski is also a rare oddity - an economist familiar with not only actual economic history, but also philosophy. This gives him wonderful insight into the myopia of most economists today, who are thus far very unwilling to abandon their pet nostrums despite the complete hash they made of the economy by failing to foresee and warn of the financial collapse.
The father of ‘cognitive dissonance theory’ was the social psychologist Leon Festinger. In his premier work on the subject, he addressed the canonical problem situation which captures the predicament of the contemporary economics profession:

Suppose an individual believes something with his whole heart…suppose that he is then presented with unequivocal and undeniable evidence that his belief is wrong: what will happen? The individual will frequently emerge, not only unshaken, but even more convinced of the truth of his beliefs than ever before. Indeed, he may even show a new fervour about convincing and converting people. (Festinger et al., 1956, p. 3)
Part 1 of Mirowski is here, Part 2 is here, and Part 3 is here.

So, finally, getting back to Steve Roth. Last week, he began posting on the Angry Bear economics blog, and his first post was Nine Reasons that Progressive Policies Deliver Prosperity and Freedom. Though I strongly disagree with his seventh point, which is based on the usual conservative "neo-liberal" Shock Doctrine economics idea that labor unions are always bad because they labor markets "less efficient," Roth presents some hearty food for thought. All I would add in the way of evidence is that every grand experiment in the conservative "neo-liberal" idea of cutting top marginal income tax rates - in the 1920s, the 1990s, and 20-aughts - has been followed by a financial crash. Though he is not directly addressing the issue of taxation, Roth provides a few more very plausible macro-economic reasons for why wrong-wing tax cutting sets up the financial system and the economy for a fall. Best of all, Roth's is a point-by-point refutation of the economic thinking that dominates policy making today, which is rather obviously incapable of addressing our worsening economic and ecological woes.
For my inaugural post, I'm going to break with my tradition and rather than inflicting data on you, I'm instead going to frame much of what I write in some big-picture ideology and theory.

I think this thinking does much to explain what Mike Kimel in particular has made so clear here over many years (with occasional help from moi): that based on the long-term historical record, by pretty much any economic measure it's progressive policies that deliver superior growth, prosperity, fiscal responsibility, opportunity, individual liberty, and a vibrant, robust economy and society.

How can that be? Aren't Republicans "the party of growth"?

That question cuts straight to the reason I started blogging back in 2004. Back then I generally and rather unthinkingly accepted (at least provisionally) the dominant meme of Reaganomics -- that larger government hurts economic growth. But I've always been a curious fellow (yes, in both senses...), so I started pulling data and crunching it to see for myself. (I am from Missouri, after all.)

I was pretty astounded at the time to find that the dominant meme just wasn't true. Run the numbers various ways yourself, or do a review of the professional literature, and you get the same results: in prosperous countries, government size has basically no correlation with long-term economic growth (even though government sizes vary hugely -- from well under 30% of GDP up to 50%+). Go figger.

And that means that all the rhetoric, ideology, and theory supporting that meme has a problem. The more I thought about it, the more I realized that it was in fact wrong by a 180 degrees.

That's how I came to what I'm giving you here -- a reprise, revision, and reworking of thinking I wrote up a couple of years ago:

Alternate Title:
The Nine Habits of Highly Efficient Economies

Republican economic policies are widely perceived (especially by Republicans) as being pro-growth and pro-prosperity, even though All. The. Evidence. Demonstrates. The. Opposite. Even the rich get richer under Democrats (except for the very rich) -- though not at the expense of the poor and the middle class.

Progressives deliver more prosperity. They deliver it to more people. And they do it without busting the budget.

How do they achieve all that? Through the miracles of economic efficiency -- policies that make the markets actually work -- and work better -- for the greater prosperity of all.

Wisdom of the Crowds. Democrats' dispersed government spending -- education, health care, infrastructure, and social support -- puts money (hence power) in the hands of individuals, instead of delivering concentrated streams to big entities like finance, defense, and business. Those individuals' free choices on where to spend the money allocate resources where they're needed -- to truly productive industries that deliver goods people actually want.
Read more.

1 comment:

  1. The posting above, under the section titled "The Nine Habits of Highly Efficient Economies" has a link to your blog that does not work, you might see if you can get this fixed--

    Best regards, Mike