Krrrrrrugmanomics!

13 01 2010

I’ve probably complained enough about Paul Krugman for several lifetimes.  It’s true that he’s brilliant; a Nobel in economics seems a bit harder to get than one for peace, at least these days.  I can’t even begin to argue with his objective economic analysis at this point in my intellectual development, so I won’t.

His opinion pieces, however, are another story.  In fact, I’m not even sure how a hardcore liberal can agree with many of them.  Like when he said not to worry about potential inflation caused by the Fed’s recent and staggering monetary expansion.

Cue the Jaws theme

Now, he’s right that this isn’t a problem right now because banks simply don’t have an incentive to lend that money; it exists, but isn’t in circulation.  So no massive inflation for now.  But he flippantly dismisses the risks associated with this problem, not realizing that runaway inflation would destroy the hard-earned savings of “Main Street” or “the little guy” or whoever needs defending from greedy rich folk who can easily find safe havens for their ill-gotten assets.

He was so out there that he was panned by everyone from hard-core capitalists to…Huffington Post contributors.

Now he’s urging us to be more like Europe, because they’ve got such dynamic economies and nice progressive sensibilities and they’re really well dressed.

For example, he points out that

Since 1980, per capita real G.D.P. — which is what matters for living standards — has risen at about the same rate in America and in the E.U. 15: 1.95 percent a year here; 1.83 percent there.

Okay, numbers don’t lie.  Krugman’s not making that up.

But wait—what was that?  Looks like a bitch-slap from Greg Mankiw to me.  Turns out that even if the rate of real GDP per capita growth is only slightly slower in Europe than it is here, the GDP per capita is more than $10,000 higher in the US than it is in the UK, our closest competitor.  So there’s a massive gap that isn’t getting any smaller.

And what about unemployment rates?  We’re here freaking out about 10% unemployment caused by an economic tsunami the likes of which we haven’t seen in generations.  In France, 10% is pretty much par for the course.  The structural unemployment in numerous “progressive” European countries is positively frightening (though to be fair, it’s not bad in others, like the Netherlands)—it would spark a regime change if it became the norm here (I hope).

But why is unemployment permanently at recession levels in Europe?  It’s not just because Europeans really like coffee breaks and holidays more than Americans.

The 35-hour work week is actually a plot by French café owners to boost revenues.

No, it’s because there’s a perfect storm of high taxes, staggering amounts of regulation (good luck firing that underperforming worker or starting a new business), and idiotic initiatives that actually destroy jobs.  Like the bizarre green jobs adventure in Spain, where each green job “created or saved” an estimated -2.2 jobs.  The Spanish unemployment rate is around 17%, by the way.

We should be running as far from the European model as possible, the exact opposite of what Krugman advocates.  Just like in America, much of the European welfare state is funded by unsustainable levels of debt (excepting countries like Norway, which finance  their spending with natural resources like oil).

Unfortunately, Obama seems to have unconsciously heeded Krugman’s advice.  The President recently announced a “green jobs” stimulus.  The cost: $135,000 per temporary job.  Since a permanently high unemployment rate gives those in power a perfect excuse to pursue their agendas with taxpayer dollars in the name of “putting Americans back to work,” perhaps it’s a feature, not a bug.

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