Tuesday, 10 August 2010

Crackpot Krugman

Paul Krugman is a respected American intellectual and economist.  He won the Nobel Prize for economics in 2008 for his work on international trade theory.  However, President Obama was awarded the Nobel Peace Prize last year despite committing 30,000 more troops to the warzones in Afghanistan.  Anyway, Krugman is a very distinguished economist, and he has a column in the New York Times, in which he prognosticates about the future of the American economy.  Krugman is a charlatan.  Johann Hari enjoys quoting Krugman to justify his economic and social views i.e ''Paul Krugman says fiscal stimulus is very effective, therefore it must be true.''  This is akin to saying ''Hitler despised Jews, therefore Jews are inherently inferior to our people.'' 

Krugman's latest column is a piece about the lights going out because of fiscal contraction.  Krugman believes that because the State is 'awash with cash' because it can borrow at very low interest rates, it shouldn't be cutting spending.  To Krugman, the State is good and the market is bad.  Nothing can come between Krugman and his adoration of the State.  What he fails to realise is that the State is there because of the economic activity of the private sector.  Without a viable private sector, the State couldn't exist.  He is a Keynesian in extremis.  However, as all Keynesians do, he conveniently omits 50% of Keynesian economic theory.  Keynes stated that in boom time, austerity is good.  The government should keep public spending low, taxes high, and it should have a budget surplus.  When Krugman sings the praises of American and British fiscal stimulus, he dosen't tell us that both countries had enormous budget deficits and high public spending.  This is the opposite of what Keynes said should be done. 

Krugman bemoans 'anti-government' rhetoric, which has 'convinced many voters that a dollar collected in taxes is always a dollar wasted, that the public sector can't do anything right.'  That is because it is true.  The public sector is inefficient because it is not subject to the market pressures of the private sector economy.  A company in the private sector has to justify its existence everyday if it wishes to continue.  They are very efficient.  When Margaret Thatcher privatised the state owned industries, they went from being very inefficient cash hoovers to some of the most efficient and productive companies in Europe.  The public sector is guaranteed a permanent income, and therefore dosen't feel any obligation to maximise efficiency.  It is also heavily Unionised, and the bosses of these Unions are Luddite militants who believe efficiency is a dirty word to be avoided at all costs.  Any spending cuts must inevitably hit the nebulous 'front-line.'  If the government reduces expenditure by 2%, the Unions will say that teachers, nurses and police-officers will be sacked and burned for fuel.  It is this hyperbole that has poisoned the political debate in Britain, because the Labour Party expresses faux outrage at every necessary spending cut.  If the debate was a little more intellectual, the public would be ready to accept the need for fiscal retrenchment.  It was disheartening to see the Labour Party accuse the Tories of monstrosity and callousness when they announced they would cut £6 billion from spending if they won the election.  The Labour Party utilises people like Krugman and Stiglitz to justify their economic vandalism.  They pretend that no dissenting opinion exists within the economics profession, when there are many sound economists who propose very different solutions, such as Greg Mankiw, Friedman, Hayek, Alessina, Lilico, Evans-Pritchard etc.  Krugman is a fraud and the more people know the better.

No comments:

Post a Comment