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David Brooks Is Projecting His Self Indulgence Again

December 27, 2011   ·   0 Comments

Source: Beat the Press

Job Creation

By Dean Baker:

Undoubtedly projecting from the fact that he can draw a nice 6-figure income for little obvious work, David Brooks complained in his column:

” Today, the country is middle-aged but self-indulgent. Bad habits have accumulated.”

For the most part the column is a confused diatribe against the Obama administration’s economic policies with a lecture on moral rectitude thrown in for good measure. He starts by condemning the efforts to stimulate the economy by telling readers:

“Today, Americans are more likely to fear government than be reassured by it.”

According to a Gallup survey, 64 percent of Americans polled said they believed that big government is the biggest threat to the country. Only 26 percent believed that big business is the biggest threat. As a result, the public has reacted to Obama’s activism with fear and anxiety. The Democrats lost 63 House seats in the 2010 elections.”

One might think that the fact that the Obama administration relied on a stimulus that was only designed to lower the unemployment rate by 1.5-2.0 percentage points might have played a big role in the election defeat. (Read the number of jobs the stimulus was projected to create, not the baseline forecasts for the economy.) If the government had used bigger stimulus to get the unemployment rate down to say — 7 percent — it is difficult to believe that the Democrats would have suffered such a big defeat last year, in spite of people’s fear of big government.

After dismissing the stimulative policies of the Great Depression, Brooks then gives us a beautifully crafted grand misunderstanding of economics comparing the economy today with the economy of the Progressive era:

“the underlying economic situations are very different. A century ago, the American economy was a vibrant jobs machine. Industrialization was volatile and cruel, but it produced millions of new jobs, sucking labor in from the countryside and from overseas.”

Today’s economy is not a jobs machine and lacks that bursting vibrancy. The rate of new business start-ups was declining even before the 2008 financial crisis. Companies are finding that they can get by with fewer workers. As President Obama has observed, factories that used to employ 1,000 workers can now be even more productive with less than 100.”

The fact that factories can produce large amounts of output with 100 workers is in fact evidence of economic vibrancy, not the opposite. This is called “productivity growth.” It is the main measure of the economy’s ability to raise living standards through time. The fact that 100 people in a factory can produce the same output as 1000 people did 30 years ago means that we are potentially much richer than we were 30 years ago. We can have the other 900 people doing other productive work. Alternatively, we can all work many fewer hours.

Whether or not this productivity growth generates jobs depends on the structure of the economy. If the productivity growth translates into wage growth, as was the case with the very rapid productivity growth of early post-war period, then it is likely to be associated with a vibrant jobs machine. On the other hand, if the One Percent pocket most of the benefits of productivity growth, then we may have real problems of stagnation and lack of job growth, since the Bill Gates of the world will probably not increase their spending much if they get another billion or two. The key issue here is the distribution of the gains of productivity growth, a simple fact that totally escapes Brooks.

Brooks then tells us:

“Moreover, the information economy widens inequality for deep and varied reasons that were unknown a century ago. Inequality is growing in nearly every developed country. According to a report from the Organization for Economic Cooperation and Development, over the past 30 years, inequality in Sweden, Germany, Israel, Finland and New Zealand has grown as fast or faster than inequality in the United States, even though these countries have very different welfare systems. “

This comment is highly misleading. While most countries have seen increases in inequality over the last three decades, even with the increases over this period countries like Sweden, Germany, and Finland are nowhere near as unequal today as the United States was at the start of this period.

Furthermore, it is not a simple fact of nature that the information economy will generate inequality, it requires the hand of Brooks’ friend: big government. People are getting rich off the information economy because the government enforces copyright and patent monopolies. These are massive interferences by the government into the market. As a result of government granted patent monopolies we pay close to $300 billion a year for prescription drugs that would sell for around $30 billion a year in a free market. This $270 billion redistribution of income is close to 5 times as large as the money at stake with the Bush tax cuts for those in the top 2 percent.

The government must also take increasingly repressive measures to ensure that this income keeps flowing to the top. The Stop Online Piracy Act is the latest example of the efforts of big government to ensure that the money keeps flowing upward. In short, this upward redistribution is not the natural workings of the market, it is the direct result of the work of the big government that Brooks doesn’t like and tells us the American people do not like either.

After the misleading economics, Brooks gives us a morality lecture:

“the moral culture of the nation is very different. The progressive era still had a Victorian culture, with its rectitude and restrictions. Back then, there was a moral horror at the thought of debt. No matter how bad the economic problems became, progressive-era politicians did not impose huge debt burdens on their children. That ethos is clearly gone.”

As a country we cannot impose huge debt burdens on our children. It is impossible, at least if we are referring to government debt. The reason is simple, at one point we will all be dead. That means that the ownership of our debt will be passed on to our children. If we have some huge thousand trillion dollar debt that is owed to our children, then how have we imposed a burden on them? There is a distributional issue — Bill Gates children may own all the debt — but that is within generations, not between generations. As a group, our children’s well-being will be determined by the productivity of the economy (which Brooks complained about earlier), the state of the physical and social infrastructure and the environment.

One can make the point that much of the debt is owned by foreigners, but this is a result of our trade deficit, which is in turn caused by the over-valued dollar. Brooks never said a word about the trade deficit or the value of the dollar, so insofar as there may be a real issue of indebtedness for our children, it is not even on Brooks radar screen.

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