Dean Baker
@ The Guardian:
The news that the UK, with negative growth in the fourth quarter of 2012, faces the prospect of a triple-dip recession,
should be the final blow to the intellectual credibility of deficit
hawks. You just can't get more wrong than this flat-earth bunch of
economic policy-makers.
They're pretty much batting zero. They
failed to foresee the collapse of housing bubbles in the US and Europe
and its consequent downturn. They grossly underestimated its severity
after it hit. And their policy prescription of austerity has been shown
to be wrong everywhere that applied it: in the US, the eurozone and,
especially, the UK.
By all rights, these folks should be laughed
out of town. They should be retrained for a job more suited to their
skill set – preferably, something that doesn't involve numbers, or
people.
But that's not what is happening. The people who got it
all wrong are still calling the shots in the UK, the IMF, the European
Central Bank, and Washington. The idea that job security would have any
relationship to performance is completely alien in the world of economic
policy. With few exceptions, these people enjoy a level of job security
that would make even the most powerful unions green with envy.
Of
course, the cynical among us might note that the highest earners have
done just fine. High unemployment rates undermine workers' bargaining
power, which ensures that almost all gains from economic growth go to
those at the top. In the US, the profit share of national income is near its post-second world war high.
Even
if this upward redistribution was not a deliberate goal, it certainly
affects the urgency with which policy-makers attend to depressed
economies and high unemployment. If the stock markets
were tumbling, as they were in 2008-09, there would likely be a lot
more attention devoted to fixing the economy. (And if you think a
plunging stock market has to mean that the economy is going down, you
need to study more economics.)
Instead of focusing on glaring issues, like how the economy is down 9m jobs from its trend growth path,
or how the typical worker's real wage has risen by just 2% over the
last decade, the policy people in Washington are debating how to reduce
the deficit. This makes about as much sense as debating the right color
to paint the White House kitchen.
