The bad gross domestic product number for Britain, announced on April 27, wasn’t a surprise — in fact, judging from market response, investors seem to have expected something even worse. Still, if you step back and look at what has been happening, it’s doubleplusungood: zero growth over the past six months, with every reason to be worried looking forward, as Prime Minister David Cameron’s austerity bites deeper.
Jonathan Portes, director of the National Institute of Economic and Social Research in Britain, got to the nub of it in an article for the Financial Times that day: “On fiscal policy, the message is that we should listen to economists, not credit rating agencies. Most mainstream economists argued that the impact of the government’s fiscal consolidation on confidence and consumer demand would be negative; so it has proved,” he wrote.
“Meanwhile, the argument that fiscal overkill was necessary to appease the credit rating agencies has again been disproved by market reaction — or the lack of it — to the Standard & Poor’s outlook warning last week in America, where U.S. Treasury yields hardly budged.”
In short, there is no confidence fairy; and S.&P. can call invisible bond vigilantes from the vasty deep, but they won’t actually come when called.
Mr. Portes hits, in particular, on a point I’ve tried to make a number of times: Right now, we’re living in a world in which basic economics points to conclusions utterly at odds with what Very Serious People are supposed to believe, and in which radical outsiders base their views on standard economics while orthodox types turn to heterodox, highly dubious speculations.
Economics 101, buttressed if you like by fancier New Keynesian models, says that contractionary fiscal policy is, well, contractionary.
Yet much of the world of movers and shakers bought into the exotic notion that expectational effects — the confidence fairy — would make contractionary policy expansionary. And they clung to this belief even as the supposed historical evidence in favor of expansionary austerity was thoroughly debunked.
And now we’re watching Economics 101 in the process of being confirmed. I wish I thought this would change anyone’s mind.
Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.
Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008.
Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including “The Return of Depression Economics” (2008) and “The Conscience of a Liberal” (2007). Copyright 2011 The New York Times.
We’re not backing down in the face of Trump’s threats.
As Donald Trump is inaugurated a second time, independent media organizations are faced with urgent mandates: Tell the truth more loudly than ever before. Do that work even as our standard modes of distribution (such as social media platforms) are being manipulated and curtailed by forces of fascist repression and ruthless capitalism. Do that work even as journalism and journalists face targeted attacks, including from the government itself. And do that work in community, never forgetting that we’re not shouting into a faceless void – we’re reaching out to real people amid a life-threatening political climate.
Our task is formidable, and it requires us to ground ourselves in our principles, remind ourselves of our utility, dig in and commit.
As a dizzying number of corporate news organizations – either through need or greed – rush to implement new ways to further monetize their content, and others acquiesce to Trump’s wishes, now is a time for movement media-makers to double down on community-first models.
At Truthout, we are reaffirming our commitments on this front: We won’t run ads or have a paywall because we believe that everyone should have access to information, and that access should exist without barriers and free of distractions from craven corporate interests. We recognize the implications for democracy when information-seekers click a link only to find the article trapped behind a paywall or buried on a page with dozens of invasive ads. The laws of capitalism dictate an unending increase in monetization, and much of the media simply follows those laws. Truthout and many of our peers are dedicating ourselves to following other paths – a commitment which feels vital in a moment when corporations are evermore overtly embedded in government.
Over 80 percent of Truthout‘s funding comes from small individual donations from our community of readers, and the remaining 20 percent comes from a handful of social justice-oriented foundations. Over a third of our total budget is supported by recurring monthly donors, many of whom give because they want to help us keep Truthout barrier-free for everyone.
You can help by giving today. Whether you can make a small monthly donation or a larger gift, Truthout only works with your support.