Book review: Current economic troubles are curable
"End This Depression Now!" By Paul Krugman, W.W. Norton & Co., 271 pages. Hardcover, $24.95.CHARLESTON, W.Va. -- The current recession that began in 2007 continues to leave more than 8 percent of American workers unemployed. That could change if federal government leaders became more active in creating jobs to put people back to work.
Today, Americans face the greatest economic downturn since the Depression in the 1930s. But federal leaders -- in both the White House and Congress -- refuse to take the dramatic steps needed to move the nation back into prosperity.
Instead, counterproductive blame games dominate our "halls of power."
Today, at least 6 million Americans have been without jobs for six months. Another 4 million have been without jobs for more than a year.
But 24 million people are unemployed, according to the federal Bureau of Labor Statistics, if you include those people who have given up looking for jobs.
One in four recent college graduates are either unemployed or working only part-time.
These are among the disturbing facts presented in "End This Depression Now!" a new book by longtime "New York Times" columnist Paul Krugman.
Krugman is also an economics professor at Princeton University and winner of the 2008 Nobel Prize in Economics.
Throughout his book, Krugman argues against economic austerity promoted by many leaders in Congress, especially Republicans.
"When everyone tries to save more (and therefore spends less) ... income declines and the economy shrinks."
John Maynard Keynes, a leading economic theorist who lived from 1883 to 1946, once wrote, "The boom, not the slump, is the time for austerity." Krugman believes government officials should focus more attention on his work.
Robert B. Reich, an economist and U.S. Labor Secretary from 1993 to 1997, wrote in "Time Magazine" in 1999 that Keynes' "radical idea that governments should spend money they don't have may have saved capitalism."
Government regulations and economic equality are major issues discussed throughout this readable new book.
During the 1930s, our government enacted many pieces of legislation, most of which have been gutted or eliminated during the past 30 years.
"Step by step, the rules and regulations that had been put in place in the 1930s to protect against banking crises were dismantled," Krugman writes. Both Republicans and Democrats participated.
During his presidency between 1977 and 1981, Jimmy Carter began deregulating airlines, trucking companies, oil and natural gas producers and financial institutions.
The "final blow to Depression-era regulations" came when Bill Clinton was in the White House, Krugman argues.
The Glass-Steagall Act of 1933, which separated commercial banking from risky investment banking, was repealed in 1999. That act had gone a long way to protect the banking deposits of ordinary people for 66 years.
Elizabeth Warren, a Democratic Senatorial candidate from Massachusetts who headed the federal Consumer Protection Bureau in 2010-2011, is among those urging reenactment of Glass-Steagall today, particularly in the wake of JP Morgan Chase's recent $2 billion loss from risky, questionable investments.
The voices of working people weakened after unions saw a sharp drop in their membership after Ronald Reagan's 1981 confrontation with the Professional Air Traffic Controllers Organization (Patco). Reagan threatened to fire nearly 13,000 federal workers who were on strike.
Krugman also describes sharp increases in economic disparities during the past 30 years, which saw dramatic increases in the incomes of the wealthiest Americans.
In 2006, for example, the 25 highest-paid hedge-fund managers made $14 billion -- three times the total amount earned by all 80,000 school teachers in New York City that same year.
"End This Depression Now" criticizes people like Alan Greenspan, chairman of the Federal Reserve Board between 1987 and 2006, who did nothing to control risky subprime mortgage lending, which led to major economic losses and banking problems.
Krugman argues "Obama and his aides never even tried for something big enough to do the job."
Obama's stimulus bill and recovery legislation put money into emergency programs, Krugman writes, but did little to generate long-term federal spending on projects like fixing roads and infrastructure.
The federal bailout of major banks and financial institutions, backed by Obama, saved those banks from collapsing and restored investor confidence by the spring of 2009.
But while the Federal Reserve took major steps to rescue banks, it did little to create jobs and rescue workers from unemployment.
In late 2009, Krugman argues, the national political discourse, strongly promoted by Republican leaders in Congress, "pivoted from jobs to [federal] deficits," with the Obama administration participating in that change.
The end to further federal stimulus funding, cutting back public investments, also caused spending cutbacks and layoffs by state and local governments across the country.
Krugman also urges other federal actions.
U.S. officials should sanction China for currency manipulation to help its own foreign trade profits. And political leaders should promote environmental upgrades to our manufacturing facilities -- projects that would stimulate the economy.
Krugman criticizes Ben Bernanke, who hired Krugman at Princeton when Bernanke was chairman of the university's economics department.
In "Earth to Bernanke" in the April 24 New York Times Magazine, Krugman says the chairman of the Federal Reserve System should allow some higher inflation to stimulate spending, create jobs and lower unemployment rates. Bernanke called Krugman's proposals "very reckless."
There is a moral imperative to change federal policy, Krugman concludes. It is "unconscionable" to let official unemployment rates remain above 8 percent.
"The economic doctrine that demands austerity also rationalized social injustice and cruelty. ...
"We need more, not less, government spending," Krugman concludes. "Tens of millions of our fellow citizens are suffering vast hardship, the future prospects of today's young people are being eroded with each passing month -- and all of it is unnecessary."
Today, the causes of our major economic problems are not mysterious.
"In the Great Depression leaders had an excuse: nobody really understood what was happening or how to fix it," Krugman writes. "Today's leaders don't have that excuse. We have both the knowledge and the tools to end this suffering."
Reach Paul J. Nyden at email@example.com or (304) 348-5164.