The Will to Act

In an interesting article in the November 25, 2010 New York Review of Books "The Way Out of the Slump," Paul Krugman and Robin Wells review three recent books from leading economists. The point of the article is that many economists recognize what is necessary to fix the domestic and global economies (or at least return to the growth of a few years ago, as "fix" holds broader connotations), but seem to lack the will to actually advocate for those positions. Among the obvious necessities at present is another Keynesian fiscal stimulus package. While it might not be politically realistic at the moment, it's hard to believe that Americans will readily accept 10 percent unemployment in the medium to long run (particularly when 10% really means closer to 16-20%). We also need to regulate banking/investment firms that continue to take huge risks, undermine the public good to line their own pockets, pay out huge bonus packages to CEOs who are essentially criminal in their disregard for the ramification of their actions (both to the economy and their own companies) and find ways to make companies spend and invest again. As I mentioned a few days ago, American corporations just had their most profitable quarter ever, but they have not started hiring new employees or investing.

The lack of political will to act is backed by the lack of will of experts to advocate for the necessary steps to actually start the economy growing again. Instead, they continue to focus on the threat of inflation (when the real threat is deflation) and on austerity measures that will only make matters worse. The same can be said of the global economy, which needs fundamental change to address growing poverty and inequality in the developed and developing world. The bankruptcy of ideas in the world today needs to be address or I fear we stand on the precipice of major global economic disaster.