Thursday, November 01, 2012

Serious Badass

Joined: 07 Mar 2008
Posts: 18812

PostPosted: Mon Oct 22, 2012 8:36 pm Post subject: Re: Learning about the Economy Reply with quote Add User to Ignore List
virgil wrote:
nockermensch wrote:
So, how the fuck is "austerity" an actual respectable platform? Who backs it, and more importantly, who actually gains when austerity plans are implemented?
Authoritarians. They don't care about the economy, they care only about punishing & controlling. The same motivation goes behind the abortion debate and the War on Drugs.

This. You will never understand the Austerians as long as you attempt to understand it in terms of wealth. As a simple matter of arithmetic, reducing government expenditures during a depressed economy makes the economy do worse. A falling tide sinks all boats. Austerians come from a standpoint of Confusion, Ideology, and Class Warfare.

Many of the arguments made for Austerity today were made in 1930 with equal seriousness by the Very Serious People of the day.
Winston Churchill, 1929 wrote:
The orthodox Treasury view ... is that when the Government borrow[s] in the money market it becomes a new competitor with industry and engrosses to itself resources which would otherwise have been employed by private enterprise, and in the process raises the rent of money to all who have need of it.
This is an understandable argument and makes sense to a lot of people. Basically there's a limited amount of borrowable funds, so the thinking is that if the Government borrows a dollar that this necessarily means that GM doesn't borrow a dollar and the economy hasn't been changed at all (save that one dollar worth of the economy has been moved from the private sector to the public sector). This is, of course, wrong. At least, it is wrong in a depressed economy for the simple reason that not all of the borrowable funds are being borrowed. If the government borrows a dollar, that is a dollar that GM already declined to borrow. So the entire "crowding out" scenario never happens.

Note that even when economies are firing on all cylinders the Treasury View is still wrong because there is some flux and give in the money markets and crowding out is almost never 100% - but it's a lot closer to being true. Close enough that people use it as a simplification when making models and then when actual recessions happen they have allowed themselves to be confused by the fact that their model uses a zero-sum public-private spending tug of war as an approximation and then when there are honest to goodness unused resources lying around and the effective competition is zero (or even less than one in many cases as government investment makes private investment more appealing), they are caught with incoherent models.

The other big one is the "household budget" analogy. People love this one because it makes intuitive sense: simply treat government budgets like family budgets. When a family has lower incomes, they need to spend less. Borrowing more can be done for a while, but eventually spending has to drop and paying back years of borrowing can be painful. This is completely unlike an actual government budget in pretty much every way. A government borrows primarily from its own people and pays back its debts to its own people. A government is also immortal and its spending literally creates the incomes of a sizable number of people in it. The household budget analogy is simple and intuitive and easy to explain to people and gets almost every salient detail of government finance completely wrong.

Many people in the Very Serious People class are rentiers. Even those who aren't find that most of their friends are. And so it is that they have a very great tendency to have rentier ethics. That is: they feel that earning interest is good while paying interest is bad. There's no logic there, every borrower needs a lender and every lender needs a borrower. Every "investor" requires that someone somewhere be a "debtor". But the people in suits are used to feeling superior over the unwashed masses who need to take school loans and don't make money from their mutual fund. So since these guys feel that it is morally superior to run a surplus and morally reprobate to run a deficit, they call for spending cuts when the money goes away.

Secondly, a lot of Austerians genuinely want poor people to suffer. You can see it plainly when they get get pissed off about people on food stamps having any fun. For these Austerians, any economic arguments are basically post hoc. They are in favor of massive cuts to the welfare state because they are in favor of massive cuts to the welfare state, and for no other reason. Cutting the deficit is merely a useful excuse to punish poor people for the audacity of being poor without having actually frozen to death like a good little match girl. You can see this disingenuousness most clearly in the deficit chicken hawks. It's all austerity now now now! except only when we're contemplating cutting social services or raising taxes on poor people. The instant we start talking about raising taxes on rich people or cutting the budgets for military and prisons the whole urgency of Austerity simply melts away.

Class Warfare
Many of the men in suits would rather be richer than you than to be richer than themselves. These people are already rich and have enough money to stay rich for the rest of their lives. The only thing they really fear is an uprising by communists or anarchists. The economy can go up, the economy can go down, and they will never starve. And so they perversely see their position as being best assured by crashing the economy into the sun. A falling tide may lower all boats, but their boat is very big and they will still be high up no matter how much the tide falls. But people on smaller boats can get eaten by giant fucking crabs.

Now superficially, this seems like a terrible plan. Communist revolutions don't happen for no reason, they happen because life is extremely desperate for poor people. But in our current system the amount of political power you have is almost linearly dependent on how much extra money your class has in aggregate to hurl into the open maw of the political system. Making everyone poorer has the demonstable effect of reducing the discretionary incomes of the middle class and poor by more proportionately speaking than it does to the rich. So the amount of the dollar/speech discourse that rich people get to dominate does go up when the economy suffers.


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