Subsequently, Hudson sent this message to gang of 8:
Mitch Green at UMKC has thoroughly re-edited and improved my article from today’s NEP and Counterpunch (and Steve Keen’s blog). MichaelThe edited version is a definite improvement and contains points for discussion, such as the Minskian aspect of MMT that requires reform in addition to fiscal policy adjustment and the neoliberal position regarding trade under a floating rate system holding that currency adjustments will resolve imbalances arising from disproportionate labor costs among countries.
It seems to me that Hudson is articulating a more nuanced MMT position, taking composition of debt into account, instead of challenging it arguing that the outsized role that FIRE has carved for itself, along with a tax structure that shifts taxes disproportionately onto labor relative to ability to pay, is leading to unsustainable private debt, public debt being used to funnel wealth to the top, and a trade imbalance arising from non-competitiveness of US workers due to their debt burden. The upshot is that there is a distributional problem that has become structural due to mishandling of debt.
Perhaps comments on the revised edition are called for.
Read it at New Economic Perspectives
Paul Krugman’s Economic Blinders
by Michael Hudson
12 comments:
Michael Hudson rocks.
Saw Krugman speak last night in Philly. Mentioned that his views are changing and now believes that private sector debt is a major player in the current crisis.
Agree that Krugman is "evolving," though not quickly or consistently.
PK is an effective spokesman for what passes for the left these days, so I try to be polite when I comment on his blog. I'd rather win him over than piss him off.
As I commented at Naked Capitalism, I will comment here – I am very frustrated by the Hudson/Keen approach in taking on Krugman. They recognize Krugman’s value in taking on the Austerians, but soon either dismiss or ignore it in their critiques – Hudson providing it no more status than “get[ting] in a fight with intellectual pygmies.”
Well, hate to break the news to Hudson, but those pygmies are coming close to bringing down the economies of Europe and have scheduled the US for a fall off the fiscal cliff at the end of this year as well. We have Boehner wanting to move the schedule up by using the debt ceiling again to cut federal spending sooner and by even more than previously agreed. We have Romney making the inevitable pivot to the GOP’s point-of-the-spear attack against Obama being “a prairie fire of debt is sweeping across Iowa and our Nation…” And, we have Democrat ‘strategists’ counseling Obama to counter by pushing the insanity of Simpson-Bowels austerity. Dr. Hudson may wake up to the pygmies not only owning the White House but all of Congress. He believes the best way to counter that possibility is to claw at the one guy with a megaphone that reaches millions suggesting we may be insane? I find that odd. It can only suggest that Krugman must of so grievously otherwise sinned that the pygmy fight becomes secondary. What could that sin or sins have been?
Hudson turns to Keen to tell us of at least one. You see, Krugman spend about 100 pages in his new book telling us how the bankstas nearly destroyed the global financial system and economies with their profligate money creation. One can take that understanding and use it to counter the pygmies and explain that federal govt debt had little, if anything, to do with the bankstas’ profligate money creation or resulting economic destruction. But no, Keen/Hudson need to undermine Krugman’s telling because he doesn’t get that the bankstas’ profligate money creation was much worse because they are not bound by their reserves – wow, the public persuasion firms, hired by the pygmies, smile knowingly at the political naivety.
Next, it’s the lack of Krugman getting that debt forgiveness must be part of the picture! Yet, in his “solutions” chapter, a sub-section on housing, Krugman states that in regard to mortgages, “…we should try debt relief again, this time based on the understanding that the economy badly needs such relief…” I guess Hudson has some inside knowledge that Krugman didn’t mean it. Also, maybe Hudson knows for sure that Krugman wouldn’t be for some sort of relief for student debt as well, although I’m hard pressed to find such a repudiation in Krugman’s other writings.
What it seems we are left with is the sin that Krugman doesn’t push for Hudson’s thought that the entire tax system needs to be shifted from income to property – an argument that not only has been going on long before Adam Smith had his first notion of things economic, but one that makes the notion of debt forgiveness seem rather puny in the political sphere. Yes, let’s get Krugman to crusade on that one – at least the pygmies will be entertained with hoisting him on his own petards.
After reading the revised article, I still come away with the impression that Hudson is being too hard on PK, particularly the line about how PK is not worried about government deficits, therefore PK is not worried about private debt. Huh ?
I like many of MH's proposals, but would have worded it a little differently. Something to the effect that "I agree with PK that we need more deficit spending to stimulate the economy, but I would take it a step further and write down private debts, reform the tax system, regulate the financial sector, and make public universities free, etc.."
My frustrations comes from recognizing the economic rightfulness and correctness of what both Hudson and Keen raise but within the larger context of what must be complete ignorance of not only the political sphere but the very nature of our society today. Krugman is well-aware of the latter; looking at what he suggests from only a perspective of economics is to remain completely unconscious of how much he is pushing the envelop. One could draw a scenario for this country where Krugman is jailed for what he writes – and that has little to do with the economic truth of bankstas’ profligate money creation was not reserved bound.
It’s a matter of approach and realizing what arena one is playing in. What Keen and Hudson have to say about Krugman, and the way they say it, is all well and good within the academic arena. In the larger social and political arena, what they have to say and how they say it, becomes part of the hindrance to the solutions that they hope for.
Don’t get me wrong; Hudson’s notion that a Keynesian solution will just wind up feeding the FIRE beast is fundamentally correct and critically important. If done correctly, it could even have great political traction given the primary source of the Tea Party outrage – government bailouts for the elites that are bleeding us dry. With a little consideration of the politics and culture, it could be presented as a necessary added condition to Krugman’s heresy; rather than devolving into a politically sterile, and possible harmful, silly test of egos. At a minimum, they could make Krugman look relatively less crazy to the average person – now that would annoy the pygmies.
Salsabob, I think we have to look at it from the viewpoint of PK and MH-SK. PK is already considered by the right as to the left of Noam Chomsky, and he is serving a useful purpose by taking an approach that appears moderate and only slightly left of center. I would assume that he is adopting this strategy consciously and intentionally as pragmatic. He has a bully pulpit at the Times and wants to use it effectively.
On the other hand, folks like MH an SK are trying to move PK further to the left. I think keeping the pressure on in this direction is a good thing. PK is "rethinking" his stance to some degree and we have already seen some movement.
PK is a tactician, and tacticians do not care about truth but about tactics.
It's not wrong to side with tacticians time to time, and I'm not fan at all of PK and his ego (which will prevent him for acknowledging some critiques like the wrong money multiplier theory), but desperate times...
He is slowly changing discourse as the situation radicalises and gets worse. He is an smart guy and even if it looks like he does ignores some stuff I'm pretty sure in the inside he knows how it is.
If it was politically possible he probably would share the same agenda as Hudson. But again... he is a tactician, tacticians work with reality not with ideas.
And they adapt ideas to fitting reality. Is very cynical but is nothing new on humanity. Read Greek and Roman classics, this is already VERY VERY OLD.
In short: a tactician is a cynic (which is a realist), a cynic can and usually is right and will work with fitting reality to push his agenda. Grand ideas and critiques won't change the status quo, period. As much I would desire otherwise.
P.S: We have an other close case... MMR vs. MMT. The R in reality stands for 'plausibility to implement things in the current status quo': JG is non plausible, printing money for the wealthy, it is.
The problem cynics may have is that they have got how far the status quo may want to go wrong and how they will do it.
If that gets out of control, then we will have chaos, and then is when 'grand wrong ideas' take life on their own.
I'm still are confused about what's going on at this level... if it's a matter of morons or a matter mad people, a matter of egos, etc.
Michael Hudson was quite involved in advising the Iceland protestors. I think he had an influence on what happened in Iceland - particularly on the debt forgiveness that took place - see - Iceland forgives mortgage debt to save its economy
@ leverage... again, a very astute observation on your part.
as for the JG debate, i personally think that that is a non-debate, cuz i believe that congress is way ahead of the MMT/MMR crowd and established a JG eons ago--that being, a job in the Military.
i've lived in many a town here in the US and, in most, at some time in my life, a job in the military was the only game in town if you were seeking employment. and, unless you were physically (and/or emotionally disabled, they NEVER turned you down.
i honestly think the MMT/MMR crowd needs to take a step back and look at the US Military as an Employer of Last Resort (most job seekers rarely choose the military first--for obvious reasons) and look at how it has performed in US society & economy up until now.
i used to listen to that nut ron paul a while back and, occasionally, he would let slip that his real problem with american militarism is the "military keynesianism" that's behind it.
i've lived in many a town here in the US and, in most, at some time in my life, a job in the military was the only game in town if you were seeking employment. and, unless you were physically (and/or emotionally disabled, they NEVER turned you down.
i honestly think the MMT/MMR crowd needs to take a step back and look at the US Military as an Employer of Last Resort (most job seekers rarely choose the military first--for obvious reasons) and look at how it has performed in US society & economy up until now.
Exactly. The US is permeated by "military Keynesianism" through and through. The right complains that the "G" in "Y = C + I G + (X-M) is mostly social spending and foreign aid, and the rest waste, fraud and abuse. Security, including domestic security and intelligence services runs about 1T a year, the precise figure being indiscernable due to ways some of it is concealed.
And the GOP plan is to reduce taxes, shrink government, cut social spending, and increase military, security and intelligence spending, as well as exports of military goods. All makes sense from the MMT macro point of view, since at the aggregate level only the aggregates count not what makes them up, but it is rotten at the micro level, as Bill Mitchell recently pointed out. It's also not needed militarily unless the point of the military is to maintain and extend American Empire for the benefit of US business and financial interests, who get a free protection service and the spoils of conquest.
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