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Friday, May 04, 2012

Paul Krugman: Plutocracy, Paralysis, Perplexity

Inequality is contributing to the slow recovery from the recession:

Plutocracy, Paralysis, Perplexity, by Paul Krugman, Commentary, NY Times: ...Did the rise of the 1 percent (or, better yet, the 0.01 percent) cause the Lesser Depression we’re now living through? It probably contributed. But the more important point is that inequality is a major reason the economy is still so depressed and unemployment so high. For we have responded to crisis with a mix of paralysis and confusion — both of which have a lot to do with the distorting effects of great wealth on our society. ...
For the past century, political polarization has closely tracked income inequality, and there’s every reason to believe that the relationship is causal. Specifically,... the increasing wealth of a tiny minority has effectively bought the allegiance of one of our two major political parties, in the process destroying any prospect for cooperation.
And the takeover of half our political spectrum by the 0.01 percent is, I’d argue, also responsible for the degradation of our economic discourse...
Disputes in economics used to be bounded by a shared understanding of the evidence, creating a broad range of agreement about economic policy. ... Now, however, the Republican Party is dominated by doctrines formerly on the political fringe. Friedman called for monetary flexibility; today, much of the G.O.P. is fanatically devoted to the gold standard. N. Gregory Mankiw ... once dismissed those claiming that tax cuts pay for themselves as “charlatans and cranks”; today, that notion is very close to being official Republican doctrine.
And why is the G.O.P. so devoted to these doctrines regardless of facts and evidence? It surely has a lot to do with the fact that billionaires have always loved the doctrines in question, which offer a rationale for policies that serve their interests. Indeed, support from billionaires has always been the main thing keeping those charlatans and cranks in business. And now the same people effectively own a whole political party.
Which brings us to the question of what it will take to end this depression we’re in.
Many pundits assert that the U.S. economy has big structural problems that will prevent any quick recovery. All the evidence, however, points to a simple lack of demand, which could and should be cured very quickly through a combination of fiscal and monetary stimulus.
No, the real structural problem is in our political system, which has been warped and paralyzed by the power of a small, wealthy minority. And the key to economic recovery lies in finding a way to get past that minority’s malign influence.

    Posted by on Friday, May 4, 2012 at 12:33 AM in Economics, Income Distribution, Policy, Politics | Permalink  Comments (108)

          


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