Tuesday, May 7, 2013

Paul Krugman on the need to end the now discredited move toward fiscalausterity

I only occasionally deal directly with economic topics, not because I don't know anything about economics but because economic issues are not usually among the interesting things that come out of Korea.

But in this global world, there is a lot of pressure on Korea to act like established Western nations too, so if they start adopting a good policy or a disastrous one, the same thing might eventually start to happen in Korea as well. During the economic crisis of 1997 and 1998, for example, there was a lot of pressure on Korea by the so-called "developed economies" to start privatizing everything from utilities to rail networks, which might have undermined the country's ability to provide cheap transportation for the masses, one of the things I love about Korea.

And from what I'm reading from the likes of Paul Krugman, It would not be good at all for Korea to follow the path of austerity, which he blames for prolonging and worsening Europe's economic crisis and even the United States' economic woes. The crux of his argument is that support for austerity is based on faulty data and reasoning, and it is an idea promoted by conservatives who don't see the value in government programs in the first place.

Here's an excerpt from his article in the New York Times:
And there’s a reason for that association: U.S. conservatives have long followed a strategy of “starving the beast,” slashing taxes so as to deprive the government of the revenue it needs to pay for popular programs.

The funny thing is that right now these same hard-line conservatives declare that we must not run deficits in times of economic crisis. Why? Because, they say, politicians won’t do the right thing and pay down the debt in good times. And who are these irresponsible politicians they’re talking about? Why, themselves.

To me, it sounds like a fiscal version of the classic definition of chutzpah — namely, killing your parents, then demanding sympathy because you’re an orphan. Here we have conservatives telling us that we must tighten our belts despite mass unemployment, because otherwise future conservatives will keep running deficits once times improve.

Put this way, of course, it sounds silly. But it isn’t; it’s tragic. The disastrous turn toward austerity has destroyed millions of jobs and ruined many lives. And it’s time for a U-turn.
Take heed. Austerity may be killing us, metaphorically and (in some cases) even literally.



  1. Krugman seems a particularly poor source on the austerity debate. He is leading a charge saying austerity is bad because Reinhart and Rogoff had some errors in their data. Extrapolating this sort of policy position from R&R is just as has as extrapolating a hard limit in the debt ratio. It makes the same mistake of confirming a prior bias without sound evidence.

    I would recommend Larry Summers (hardly a right winger) on the Subject far above Krugman. I think his take on the issue is (pardon the Fox News reference) is probably the fair and balanced one: http://www.huffingtonpost.com/2013/05/05/larry-summers-reinhart-rogoff_n_3220124.html?utm_hp_ref=business

    1. Interesting read. Still, the take-away point is that neither of them are supporters of austerity, and it probably wouldn't be a good policy for South Korea.


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