“This statements strike me as utter nonsense, a unjustified attempt to postulate an absurd extreme consequence of a market economy.”
If you had not used the three words, namely “nonsense”, “unjustified”, and “absurd”, I would not disagree with you. I suppose he described a hypothetical situation of a labor market.
“I do not see barring women from education and the job market as a solution, which is really what Beck is implying although he would not admit it.”
I don’t think that Ulrich Beck is against what you wrote in the above statement.
"In a free market economy there is choice, albeit limited by necessity and circumstance. "
I think that this is true and important. Thank you for your comment.
About Ulrich Beck
He is professor of sociology at Munich’s Ludwig-Maximilian University and the London School of Economics, and author of World at Risk.
“Mugged by the Moralizers”
“The irony is that in their determination to punish the undeserving, voters are punishing themselves: by rejecting fiscal stimulus and debt relief, they’re perpetuating high unemployment. They are, in effect, cutting off their own jobs to spite their neighbors.” “Mugged by the Moralizers” by Paul Krugman Opinion | Mugged by the Debt Moralizers - The New York Times
That is interesting . So what Krugman says is, simply, that in the times like now the goverments should spend more rather than less. And explains why:
“The key thing to bear in mind is that for the world as a whole, spending equals income. If one group of people — those with excessive debts — is forced to cut spending to pay down its debts, one of two things must happen: either someone else must spend more, or world income will fall.”…
“So what should we be doing? First, governments should be spending while the private sector won’t…”
The quotes (but better read Opinion | Mugged by the Debt Moralizers - The New York Times fully ) simply call for the counter attack. Could someone launch it, against the excessive goverment spendings, the burden on the future generations, etc. Or may be some cons and pros. Blindside was giving it a try somwhere above in the thread. I am not sure what I stand here for
I’d think one of the primary arguments against government spending in the face of economic depression is the possibility of inflation. With our current economic crisis, however, I believe the US has actually moved closed to deflation.
And obvious, the more debt the country takes will have to be paid off in the future. This leads to a greater % of the budget going towards interests payments.
Also, right now China is major bankroller of US debt. If China (or other countries) stops believing that US debt is an investment worth making, then the gov’t may simply be unable to borrow the necessary funds.
However, if the gov’t doesn’t spend right now, the US risks falling into decade of stagnation and deflation like post-crisis Japan.
May I understand it that, in your opinion, the pros for the current spending overweight the cons against it?
China (and India, Brazil etc) are currently working as “giant deflation mashines” (the words Fareed Zakaria used in “The Post-American World”), and the situation is far from such countries considering investment in the US debt not worth making?
I generally agree with Krugman’s economic positions. I think there are major pros for spending in the current economic climate. Once the US is out of the economic crisis, when unemployment drops down to 7% or lower, I think the gov’t should start making changes to balance the budget and reel in debt.
I also agree with you last statement, I don’t think there is a risk of countries not buying US debt right now or the near future. Admittedly, I’m no economic expert, but that is my layman’s opinion based on the information I have read.
@commasplice - I haven’t researched it but what makes you think the government didn’t spend money in Japan to get them out of recession. There are all kinds of highways to nowhere that have been built in the last 15 years in Japan. Not to mention extremely low interest rates. I don’t know that it’s obvious that spending is the answer.
@mark I thought Japan counteracted the crisis with monetary policy.
According to wikipedia, it was the late response of government spending that finally led to GDP growth in Japan
"Economist Paul Krugman described Japan’s lost decade as a liquidity trap, in which consumers and firms saved too much overall, causing the economy to slow. He explained how truly massive the asset bubble was in Japan by 1990, with a tripling of land and stock market prices during the prosperous 1980s. Japan’s high personal savings rates, driven in part by the demographics of an aging population, enabled Japanese firms to rely heavily on traditional bank loans from supporting banking networks, as opposed to issuing stock or bonds via the capital markets to acquire funds. The cozy relationship of corporations to banks and the implicit guarantee of a taxpayer bailout of bank deposits created a significant moral hazard problem, leading to an atmosphere of crony capitalism and reduced lending standards. He wrote: “Japan’s banks lent more, with less regard for quality of the borrower, than anyone else’s. In so doing they helped inflate the bubble economy to grotesque proportions.” The Bank of Japan began increasing interest rates in 1990 due in part to concerns over the bubble and in 1991 land and stock prices began a steep decline, within a few years reaching 60% below their peak.[6]
In response, Japanese policymakers tried a series of government stimulus programs and bank bailouts. A 2.4% budget surplus in 1991 turned to a deficit of 4.3% by 1996 and 10% by 1998, with the national debt to GDP ratio reaching 100%. In 1998, a $500 billion bank rescue plan was implemented to encourage bank lending and borrowing. The central bank also attempted to increase inflation (which devalues savings over time), to encourage consumer spending. Krugman wrote that by 2003, the Japanese economy began to recover, helped by imports from the U.S. and China that helped Japan achieve a real growth rate of 2%. He wrote the recovery was “provisional” and there was significant risk of a return to a liquidity trap.[6]
Economist Richard C. Koo (リチャード・クー, Richādo Kū?) wrote that Japan’s “Great Recession” that began in 1990 was a “balance sheet recession.” It was triggered by a collapse in land and stock prices, which caused Japanese firms to become insolvent, meaning their assets were worth less than their liabilities. Despite zero interest rates and expansion of the money supply to encourage borrowing, Japanese corporations in aggregate opted to pay down their debts from their own business earnings rather than borrow to invest as firms typically do. Corporate investment, a key demand component of GDP, fell enormously (22% of GDP) between 1990 and its peak decline in 2003. Japanese firms overall became net savers after 1998, as opposed to borrowers. Koo argues that it was massive fiscal stimulus (borrowing and spending by the government) that offset this decline and enabled Japan to maintain its level of GDP. In his view, this avoided a U.S. type Great Depression, in which U.S. GDP fell by 46%. He argued that monetary policy was ineffective because there was limited demand for funds while firms paid down their liabilities. In a balance sheet recession, GDP declines by the amount of debt repayment and un-borrowed individual savings, leaving government stimulus spending as the primary remedy."
“Japan has remained trapped in this spiral[self-reinforcing deflationary spiral] despite the equivalent of trillions of dollars in stimulus spending, more than a decade of near-zero interest rates and even unconventional steps by the central bank similar to those now contemplated by Mr. Bernanke, like purchasing corporate and government bonds to increase the money supply.” U.S. Hears Echo of Japan’s Woes By MARTIN FACKLER and STEVE LOHR U.S. Hears Echo of Japan’s Woes - The New York Times
The above description is from the article Commasplice mentioned. Paul Krugman thinks that not only monetary policy but also expansionary fiscal policy are needed to recover from the economic crisis, but some might want “shock treatment” of laisser-faire economy.
“In fact, Japan’s experience is a key element of the case against monetarism. Just printing notes does not work . . .” Friedman On Japan - The New York Times
“We really, really need expansionary fiscal policy along with Fed policy; and we’re not going to get it.” More On Friedman/Japan - The New York Times
So this is interesting. The fed announced they are set to buy up $600 billion in debt to try and stimulate the economy. The Fed is adopting quantitative easing as a strategy. I hope this strategy works, but banks might sit on their money.
I don’t think there are many countries that have had strong and constant flows of immigration like the US has had. Even Canada, which now is pretty multicultural and accepts many immigrants from all around the world, has only been like that for last 40 years or so. It’s really hard to find another country to compare the US to in that respect. Canada is maybe the closest, but I think there’s way more discord in the US (which is odd, considering that Canada has almost broken up 2 times in the recent past).
I’m not so sure it’s a good thing if there is no consensus at all about what sort of social arrangements you want to have. Most countries, over time, have developed some kind of consensus position around which people’s opinions diverge. It seems like there are 2 large groups in the States who want to live in completely different countries - although perhaps that is overstated by the media.
The obvious solution seems to be to just devolve power to the states and let them all be different from each other. States that want to have medicare for everyone can join together and create that system. States that don’t want to participate don’t have to. And so on. Unfortunately, they are forced to battle these things out at the federal level.
That’s just kind of a “social contract” reference. What sorts of things do you want the government to do or not do. What sorts of things and practices should be legal and illegal. There seems to be a lot of really deep divisions about this on so many different issues. I was responding to Dooo’s comment that it was a good thing that Americans don’t agree about what sort of country they want to live in.
