Paul Krugman | The Lack of Courage Among Policymakers

The Oxford economist Simon Wren-Lewis recently asked on his blog: “Why does the economic policy pursued or proposed by the left in Europe often seem so pathetic?”

He was citing the government of François Hollande in France as the prime example, but also the limpness of the Labour Party in Britain. And he suggested that the answer is a matter of resources and organization: “Seeking out good advice (and distinguishing it from bad advice) takes either money or time,” Mr. Wren-Lewis wrote. “An established government finds this much easier than an opposition or a new government.”

Well, I can’t speak to the European situation, but we had our own version of the sorta-kinda left utterly failing to take on austerian macroeconomics in the United States – President Obama’s “pivot” from jobs to deficits, which actually began in 2009, back when Democrats still controlled both houses of Congress.

And nobody can make the resources argument there; not only was Mr. Obama a sitting president with a Congressional majority, but modern U.S. progressivism has a large policy-analysis apparatus outside the government, much of which was arguing strenuously against the pivot.

Yet there was Mr. Obama in November 2009 warning, on Fox News no less, that excessive deficits might cause a double-dip recession.

So how did that happen? Based on my observations, I’d put it down to the influence of the Very Serious People, whose views on economics tend in turn to be driven largely by the financial industry.

It’s hard to believe, but back when Mr. Obama was on Fox News saying that the deficit was a huge threat, there were also widespread rumors that he would soon replace Tim Geithner, the former Treasury secretary, with … Jamie Dimon, the chief executive of JPMorgan Chase.

And what those finance-industry people were telling Mr. Obama was to beware of the invisible bond vigilantes.

I would guess that it’s much the same in Europe. The Labour Party should be listening to economists like Jonathan Portes and, well, Mr. Wren-Lewis, but I’m sure that its leaders are much more interested in the views of well-tailored men from the City.

Mr. Hollande may be a man of the left in a way that nobody in American politics is, but he’s still getting advice from bankers who tell him that fiscal rectitude is everything. (And although France may be well to the left of the United States in most respects, it has nothing like the intellectual infrastructure of the American progressive movement to counter the alleged wisdom of big money.)

I guess you could say that it was ever thus.

But the nature of our current economic situation is that smart policy requires that you ignore what supposedly responsible people, who sound as if they know what they’re talking about – and hey, they’re rich, so they must know something – have to say.

And no government of the moderate left has had the intellectual and moral courage to do that.