One unhappy lesson we’ve learned in recent years is that economics is a far more political subject than we liked to imagine. Well, duh, you may say. But, before the financial crisis, many economists — even, to some extent, yours truly — believed that there was a fairly broad professional consensus on some important issues.
This was especially true of monetary policy. It’s not that many years since the administration of George W. Bush declared that one lesson from the 2001 recession and the recovery that followed was that “aggressive monetary policy can make a recession shorter and milder.” Surely, then, we’d have a bipartisan consensus in favor of even more aggressive monetary policy to fight the far worse slump of 2007 to 2009. Right?
Well, no. I’ve written a number of times about the phenomenon of “sadomonetarism,” the constant demand that the Federal Reserve and other central banks stop trying to boost employment and raise interest rates instead, regardless of circumstances. I’ve suggested that the persistence of this phenomenon has a lot to do with ideology, which, in turn, has a lot to do with class interests. And I still think that’s true.
But I now think that class interests also operate through a cruder, more direct channel. Quite simply, easy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent.
The story so far: For more than five years, the Fed has faced harsh criticism from a coalition of economists, pundits, politicians and financial-industry moguls warning that it is “debasing the dollar” and setting the stage for runaway inflation. You might have thought that the continuing failure of the predicted inflation to materialize would cause at least a few second thoughts, but you’d be wrong. Some of the critics have come up with new rationales for unchanging policy demands — it’s about inflation! no, it’s about financial stability! — but most have simply continued to repeat the same warnings.
What the professor described here is pervasive in every sector of our society. When you put it all together, what this describes is our descent into an almost completely corrupt state; one where the paralysis of government is almost complete, but not quite; where the plutocrats have almost gained control, but not quite.
We have two windows ahead of us. Election 2014 doesn’t look very promising, so far. For those of us who vote blue, it has been disconcerting to watch the increasing disconnection of the Democratic leadership from its core constituencies either through statements or lack of them. As disconcerting, has been the growing number of op-eds in progressive media outlets openly criticizing the top leadership. I’m, quite frankly glad, but I am also pessimistic that these warnings will have any effect in time for Democrats to get back on message for November. I’m afraid it’s going to take another 2010 to cause a shakeup and then the next two years preparing for 2016 for new leadership to take over. I hope, I really do, that it won’t be in vain.