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End This Depression Now! Hardcover – 11 May 2012
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"Starred review. Krugman (Fuzzy Math), winner of the 2008 Nobel Prize in Economics, takes an edifying and often humorous journalistic approach to the current economic crisis in this accessible and timely study. Rather than provide a mere postmortem on the 2008 collapse (though relevant history lessons are provided), Krugman aims to plot a path out of this depression. Krugman has consistently called for more liberal economic policies, but his wit and bipartisanship ensure that this book will appeal to a broad swath of readers from the Left to the Right, from the 99% to the 1%." --Publishers Weekly
"Krugman has picked a good time to unleash a thoroughly persuasive polemic against premature fiscal austerity in the wake of a deep recession. He does so in a remarkably easy style [...] it's lively and readable." --Financial Times
"Krugman...most hated and most admired columnist in the US..." --Martin Wolf, Financial Times
"...Krugman divides opinion like no other. To his followers, he's a saint; to his detractors, he's a false prophet with satanic intent." --Jeremy Warner, Daily Telegraph
"[...]since reading Paul Krugman's new book, I fear I'm in danger instead of becoming a bore. It's the sort of book you wish were compulsory reading, and want to quote to anyone who'll listen, because End This Depression Now! provides a comprehensive narrative of how we have ended up doing the opposite of what logic and history tell us we must do to get out of this crisis." --Decca Aitkenhead, Guardian G2
"Although it is not without flaws, I hope without much confidence that the book s wide readership includes the UK prime minister and chancellor." --Samuel Brittan, Financial Times
"Loathe him or love him and Krugman's take-no-prisoners writing style has as many enemies as admirers it is impossible to ignore him." --Ben Chu, The Independent
"Furious but funny, Krugman's seductive style renders recondite theory readable for even the most economically illiterate." --Word
"Krugman is "feisty" and "sharp-elbowed": you might disagree with his thesis, but you'll keep on reading." ----The Week
"In this lively polemic, he [Krugman] makes a powerful case against austerity." --<The Evening Standard
Krugman is "feisty" and "sharp-elbowed": you might disagree with his thesis, but you'll keep on reading. --The Week
From the Inside Flap
A New York Times best-selling call to arms from Nobel Prize-winning economist Paul Krugman.
The Great Recession is more than four years old-and counting. Yet, as Paul Krugman points out in this powerful volley, "Nations rich in resources, talent, and knowledge-all the ingredients for prosperity and a decent standard of living for all-remain in a state of intense pain."
How bad have things gotten? How did we get stuck in what now can only be called a depression? And above all, how do we free ourselves? Krugman pursues these questions with his characteristic lucidity and insight. He has a powerful message for anyone who has suffered over these past four years-a quick, strong recovery is just one step away, if our leaders can find the "intellectual clarity and political will" to end this depression now. --This text refers to the Paperback edition.
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Krugman states that he started to see problems developing in the American economy in 2003. I noticed that September twelfth 2001 was considered by some major American firms to be a good day to bury bad news. Even more of them buried their bad news on September thirteenth 2001. At that point I knew the American economy was sliding to a crash, which had nothing to do with the events of September eleventh. Since major companies in Ireland, from Waterford Glass to Philips, were already sending manufacturing to Eastern Europe or China and computer work to India, where labour, rent and electricity were cheaper, I knew the boom was essentially over. I made arrangements to repay part of my mortgage early, clear credit cards and take on no debts. From then on, I was telling pollsters that the economy had already crashed, but was being held up by house prices. This meant that householders were no better off, because what they gained in higher wages they spent on higher mortgages. The Irish government was raking in money from every house built. Polls continued to radiate confidence. Then the banks crashed.
Krugman makes many visits to the 1930s and sees how the Depression was lifted by war spending. He wants the American government to do this again, saying that it has increased spending on social supports, food and medical aid for out of work people, but not on schemes that will give them jobs or improve transport. He wants a return to a profitable spending consumer driven economy, saying that when people have money they borrow and spend. Without money they practise thrift.
The economist doesn't seem to understand that manufacturing has shifted to Asia, mainly China, where clothes are put on hangers before shipping to America because this means Wal-Mart doesn't have to pay Americans to do it. In China, coal mines and power plants are next door to manufacturing and nobody in charge cares about workers' lungs or polluted rivers. In China, health and safety standards as we know them do not exist or are ignored. This is why Rare Earth Elements which make the components of smartphones, jet engines and any other appliance that has been getting lighter and smarter, are almost all mined and refined - filthily - in China.
Consumption has screeched to a halt. Most consumers now understand the disastrous consequences of industrial and domestic pollution and waste. Even those who don't want to know about the already-present climate change can see contaminated water tables, mountains of tide-borne garbage and plumes of escaping methane. And if your house is in danger of foreclosure, haven't you learnt a lesson about how many handbags you need?
Krugman barely glances at small businesses, except to say that they should take out loans to boost the economy. Small businesses are the first to suffer from a crash and the first to boost the economy out of it. A staff member at a local newspaper told me shortly after the crash that he could no longer sell advertising. This staff person had already taken three pay cuts, each of ten percent. I said, people have no jobs. They are now time rich and cash poor. They can walk their own dogs, tend their own garden, iron their own clothes, mind their own children. They can't eat out.
Krugman admits that rich people are becoming richer while the middle class are shrinking down to the poorer end of the scale. Yet he likes rich people because they spend. Actually, they don't. The newly rich hedge fund managers he mentions, buying mansions to tear them down and build bigger mansions, may be so insecure as to splurge. But the really rich do not have money by spending it. They buy property and resources. Property to rent and to push up the cost of property for home and business owners. Resources which they corner, like land, mines, water, forests, industries so that poorer people are pushed off and cannot make a living. In 2016 more than 50% of the world's wealth is held by one percent of the world's people. Rich people cling to money which they will never need, buying four homes around the world so as to avoid being domiciled anywhere long enough to pay tax, leaving entire mansions and apartment blocks empty as a hedge against the end of oil. Rich people spend on luxury goods which gives money back to other rich people who get the goods made by immigrant factory workers. They employ people as cheaply as possible, because they need a distance to reassure themselves that they are rich and stop others getting to be rich.
Krugman bemoans that in America printing money is done by the state purchasing bank bonds to give banks cash, but then banks still do not lend as interest rates are low. In Britain, their quantitative easing which he doesn't mention, is done by paying civil servants with imaginary money, topping up their bank accounts with wages that have no gold behind them. Getting it to people who will spend in other words. A lot of this goes straight to banks of course in mortgages, credit card payments, school fees when many schools and colleges have taken out major loans for renovations so are essentially owned by banks. But it's an alternative that Krugman doesn't consider.
Krugman doesn't say what infrastructure he would recommend - in a world of rising seas, governments are having to consider sea barriers and shore evacuations. Why renovate a city you may have to abandon? Krugman also doesn't realise that everyone now hates the banks, so they are not taking out loans. As I write the European Central Bank has reduced its base interest rate to zero.
I recommend these books to anyone interested in the new reality of the world's economy. Most of them are written by journalists.
The Price Of Thirst
The People's Republic of Chemicals
Meltdown In Tibet
The Disaster Profiteers
Why It's Kicking Off Everywhere
This Changes Everything
The Elements Of Power
Retreat From A Rising Sea
What Has Nature Ever Done For Us?
Nickel And Dimed
Glaciers: The Politics of Ice
He begins by outlining the tremendous costs of a prolonged depression, especially in human terms. His humanity comes through strongly, not something one normally associates with economists. For example, he notes research which shows that a graduate qualifying during a downturn has his or her whole career affected adversely, not just for the duration of the recession. Long recessions cause permanent, irretrievable losses that leave nations with weak industries and poor skill bases, unable to take full advantage of any recovery. They can lead to political extremism - look at Hungary and Greece today.
The lessons of the Great Depression are outlined. Krugman sees himself as a "sorta-kinda New Keynesian" and argues that depressions are essentially due to lack of demand. This can be counteracted effectively by government spending of particular types - infrastructure spending, mortgage debt relief, temporary higher target rates for inflation, and effective devaluation of the currency and "printing of money". He criticises the stimulus package of President Obama as being far too timid and small to be really effective. Krugman does not think debts should not be paid off, but this should be done when the economy is stronger.
His remedies mainly apply to America but there is also discussion of the UK and Europe. He is scathing about the economic policies of the coalition government. As the UK has its own currency and central bank, Krugman states that we could easily apply a stimulus package without causing a troublesome run on the currency (he talks about the "confidence fairy" in debunking the excessive weight given to "confidence" in the design of policy). He shows that such countries (the USA, Japan, the UK, Sweden) are much less prone to being at the mercy of the market compared to those in the Eurozone. He contrasts Sweden and Denmark with Finland: very similar economies but as Finland is in the Eurozone, has suffered much greater speculative pressure. However, he is much more pessimistic about the Eurozone as a whole. The individual countries do not have their own currency, nor their own central bank and this, Krugman maintains, makes all the difference. The only solution he can see is Germany enacting, for a time, strong inflationary policies - totally against the grain in that country - combined with general wage reduction in southern Europe, again not likely to happen voluntarily.
So far, so Keynesian, but the really fascinating parts of the book lie elsewhere. For example, the "paradoxes": the "Paradox of thrift", where everyone saves (and so spends less) leading to generally declining income and shrinking of the economy. The "Paradox of deleveraging" - the more debtors pay, the more they owe. And the "Paradox of flexibility" - lack of demand leads to a cut in prices e.g. for labour - in short, wage cuts. Across the board wage cuts, incomes all reduced, but debt remains the same. It is such things which really counter the usual objection - you cannot cure debt by more debt. Krugman says we need to change the metaphors used to describe the economy in slumps. He shows that in a slump, normal concepts do not apply. He likens it to being on the other side of the looking glass, and I then saw it as akin to quantum mechanics compared to Newtonian physics, or the peculiar properties of materials at extremely low temperatures, e.g. superconductivity. Certain states need ways of thinking that are superficially not logical and counter-intuitive.
Another strong theme of the book is the increasing inequality in Western societies since the early 1980s (the time of President Reagan and "Reaganomics"). Krugman sees this time as the one where the dominant economics changes from Keynesian ideas to those of the laissez-faire economists who believe that human beings are logical and markets always do the right thing. This has the ring of doctrine, not science, and Krugman mentions the messianic tendencies of some of this ilk. Keynesian ideas were seen by conservatives as the thin end of the wedge - socialism would surely follow. Keynes was certainly not a socialist.
It was the time of deregulation of the banking sector and failure to regulate the "shadow banks" and the repeal of the Glass-Steagall act (to legalise, retroactively, an illegal merger in the banking sector!) All this went hand in hand with the increasing polarisation of politics in American (and the UK). The rich, consisting of corporate executives and "financial wheeler-dealers" in the main, somehow monopolised any increase in the GDP, leaving the incomes of the vast majority flat-lining. The rich managed to do this by fixing thing to their advantage: "soft corruption" at a political level: they had and have more access to power, they are articulate and influence disproportionately. They even influenced which economists had the strongest voice: To quote Krugman:
"The preferences of university donors, the availability of fellowships and lucrative consulting contracts...must have encourages [economists] not just to turn away from Keynesian ideas but to forget much that had been learned in the 1930s and 1940s".
Not only this, but Keynesians were actively discriminated against at some universities. This could sound like a conspiracy theory but it is not a club of rich people colluding to do something. It is a myriad of such people acting in their own interest in a myriad of separate, disconnected actions. These actions carry more weight than that of "little people". There is a net vector to such actions.
He outlines the story of the housing bubble, the subprime mortgage scandal and the ludicrous idea that risk can virtually be eliminated from the financial sector by complex "instruments".
The scope of the book is far wider than one might think from the title. He outlines much of what has gone wrong in the Western democracies over the past thirty years or so. The "culture wars" in the USA, sadly spreading to our blessed isle. The disregard of experts in favour of pure ideology. The disappearance of calm but passionate political discussion in favour of ad hominem attacks. In his postscript, he says: "Tribal allegiance should have no more to do with your views about macroeconomics than with your views on, say, the theory of evolution or climate change...hmm, maybe I'd better stop right there". Who says Americans don't do irony?