Izjemno dober zapis Adama Toozea o intektualni metamorfozi Paula Krugmana skozi zadnjih 50 let udejstvovanja. Gre za dvojno metamorfozo. Prva je glede evolucije njegove akademske misli oziroma profiliranosti znotraj ekonomskih struj. Začel je kot brilijanten doktorski študent na MIT z vpeljavo konceptov nepopolne konkurence v neoklasično teorijo in spreminjanjem slednje v “neokeynesiansko paradigmo” (ki sicer nima nobene povezave s keynesianizmom (razen vulgarne s sklicevanjem na rigidnost plač in cen navzdol ter možnosti nepolne zaposlenosti). Krugman je verjel v prosto trgovino in prednosti globalizacije ter zasmehoval vse, ki so kakorkoli od tega odstopali (bil je kritik Clintonove administracije). Potem pa sta se zgodili dve veliki krizi – azijska finančna kriza 1997-1998 ter velika recesija 2008-2009, ki sta bistveno spremenili njegov pogled na globalizacijo (predvsem finančnih tokov) in politike uravnavanja gospodarstva po finančnih krizah. Ko so najprej azijska gospodarstva in desetletje kasneje zahodne države zapadle v likvidnostno past in se je pokazalo, da je monetarna politika v takih razmerah povsem nemočna, je Krugman izkopal Keynesa in njegov IS-LM instrumentarij kot edini delujoč mix ekonomskih politik v takih razmerah. Iz bastardijanskega neokeynesianca se je Krugman prelevil v pravega keynesianca.
Druga Krugmanova metamorfoza pa se je zgodila glede pogleda na način delovanja akademske profesije. Krugman je večino kariere zagovarjal tehnokratski pristop k vladanju in k akademskemu prispevku k ekonomskim politikam. Ta pogled je temeljil na ideološki nevtralnosti ekonomije kot vede in ekonomistov kot svetovalcev, kar je bila podmena neoliberalizma. Če so ekonomija in ekonomske politike ideološko nevtralne, potrebujemo zgolj dobro izobražene in kompetentne tehnokrate, da oblikujejo in izvajajo ekonomske politike. No, bolj kot so se zaostrovale razmere v gospodarstvu s pojavom globalnih kriz, bolj je postajalo jasno, da podmena nevtralnosti ekonomije in ekonomskih politik ne velja oziroma da so bile neoliberalne politike zasnovane na ideoloških paradigmah, ki so jih zagovarjali neomonetaristi (med Friedmanom in Lucasom) in vplivnejši neokeynesianci. Postalo je jasno, da teh politik ni mogoče spreminjati na tehnokratski ravni, ampak da je potrebna sprememba politične paradigme. Metamorfoza od liberalizma k progresivizmu.
Za Krugmana se je velika politična streznitev zgodila s finančno krizo po letu 2008 in z načinom, kako se je se s krizo spopadla politika. V Obamovi vladi so sedeli sami sredinski ekonomisti, Krugmanovi kolegi, tehnokrati, ki pa so v iskanju političnega kompromisa samoiniciativno sklestili stimulus program in potrebne reforme na regulativni ravni. Nasproti pa jim je stala ideološko profilirana republikanska linija, ki je ideološko zavračala deficitno financiranje stimulativnih ukrepov in kmalu dobila večino v Senatu, s čimer je lahko blokirala vse resnejše reforme. Krugmana so razočarali oboji. Očitno je postalo, da ne samo, da progresivnih reform ni mogoče narediti v iskanju kompromisa med demokrati in republikanci, pač pa da jih ni mogoče narediti s pomočjo tehnokratske elite. Drugače rečeno, če želimo popraviti stanje v družbi, kamor so pripeljale neoliberalne politike po letu 1990, je potrebno z njimi narediti konec in začeti izvajati izrazito progresivne reforme. To pa v ZDA pomeni ne zgolj distinkcijo med desno (republikanci) in sredinsko politično opcijo (demokrati), pač pa tudi distinkcijo med zmernimi (oba Clintona) in progresivnimi demokrati (Elisabeth Warren in Bernie Sanders). In pomeni, da se je treba odpovedati nasvetom in kompetencam tehnokratske elite sredinske demokratske provenience, kot jo najbolje ponazarja Larry Summers.
In Biden je za razliko od Obame naredil točno to. To na simbolni ravni pomeni zmago znotraj demokratske stranke linijo Sandersa in Warrenove nad linijo Hillary Clinton. Zanimivo bo opazovati ali se bo Krugman v prihodnje opravičil Sandersu za velikokrat neupravičeno kritiziranje. Če sprejema velik fiskalni stimulus, davek na premoženje in povišanje minimalne plače bo težko konsistenten sam s seboj z nadaljnjim favoriziranjem linije Clintonove nad Sandersovo linijo.
Paul Krugman’s latest collection of essays, Arguing with Zombies, first appeared in January 2020. Not only was it quickly buried by Covid, but he missed out on a thing all too rare for a pundit: the opportunity to declare victory. A year later, in Joe Biden’s Washington, Krugmanism rules. The gigantic scale of the $1.9 trillion Biden rescue plan, and now the proposed $2 trillion infrastructure investment programme, are testament to a rearrangement of the relationship between economic expertise and politics in the Democratic Party, a rearrangement which Krugman anticipated and for which Arguing with Zombies makes a powerful case.
Breaking with the technocratic assumptions of the Clinton era and the early Obama years has been an attritional process. In Krugman’s case it is the end of an arc that spans half a century. He is no longer at the height of his influence, but he still has huge reach through his New York Times column and on Twitter, where he has a staggering 4.6 million followers. For critics on the left it can be infuriating to watch high-powered centrists inching their way towards seemingly obvious political conclusions. But when they do, it is consequential. By tracing Krugman’s itinerary, we can shed some light on how we arrived in our current situation, with three centrists – Biden, Janet Yellen and Jerome Powell – undertaking an experiment in economic policy of historic proportions.
Krugman’s radicalisation took place over a fifteen-year period starting with the Asian financial crisis of the late 1990s. At the outset of the crisis, Krugman was still upholding the orthodoxy: the problem of the Asian states was their crony capitalism and excessive unproductive investment. But as the crisis intensified over the summer of 1998 he re-evaluated, becoming one of the most prominent critics of the IMF for its austere prescriptions, and even going so far as to endorse capital controls.
What motivated Krugman’s shift wasn’t principally fellow feeling for nations that were getting a rough deal; he was uncomfortable in the company of such figures as the Malaysian prime minister Mahathir Mohamad. Instead, he had experienced an alarming intellectual realisation. The Asian crisis was strangely familiar. It was a comprehensive crisis of the sort that Keynes had accounted for so brilliantly in the General Theory. This was most evident in Japan. When the Japanese boom of the late 1980s and early 1990s burst, its legacy was a depression. In particular, as prices slumped and banks creaked, people began to hoard cash, the ultimate safe asset, and there was a collapse in interest rates. In such a situation, using monetary policy to lower interest rates and revive investment no longer works. As the saying goes, you can’t push on a piece of string. This is the so-called liquidity trap of which Keynes warned.
Krugman’s rediscovery of the liquidity trap, and his proposal to rationalise it in terms of the expectations of economic agents about the future course of prices and interest rates, is his second major contribution to macroeconomics. In this second phase of his career, from 2000, he was at Princeton, in an economics department run by Ben Bernanke before he moved to the Federal Reserve Bank. Bernanke, an economic historian as well as a monetary theorist, was preoccupied with the Great Depression. In The Return of Depression Economics (1999) Krugman, who combines a love of history with a lifelong passion for science fiction, argued that the market revolution of the 1980s and 1990s caused a time warp, recreating both the advantages and the risks of the Edwardian and interwar eras. It was large-scale global capital mobility, financial innovation, low inflation and a commitment to balanced budgets that set the world up for a repeat of a 1930s-style recession.
As Krugman put it in 2009, looking back to the late 1990s, ‘It was as if bacteria that used to cause deadly plagues, but had long been considered conquered by modern medicine, had re-emerged in a form resistant to all the standard antibiotics.’ His new mission was to travel back in time in search of an economic policy that would work as an antidote. For the world economy this might mean a return to the capital controls and regulated capital markets of the Bretton Woods era. To deal with the liquidity trap the prescription was either a massive fiscal policy (the classic Keynesian remedy), or a monetary policy sufficiently aggressive to relaunch the expectation of inflation, thus giving people an incentive to hold something other than cash. The problem was how to shift the long-term horizon of expectation. If monetary policy was to work, Krugman remarked, what the Bank of Japan needed to do was credibly commit to being irresponsible. That would scare the Japanese out of hoarding cash.
Japan’s problems were serious, but Krugman believed they were sui generis. By 1995, when Summers and Robert Rubin, formerly of Goldman Sachs, were installed at the US Treasury, Krugman had made his peace with the Clinton administration. These were, in Krugman’s words, the ‘mature, skilful economic leaders’ that America and the world needed, who ‘in a pinch would do what had to be done. They would insist on responsible fiscal policies; they would act quickly and effectively to prevent a repeat of the jobless recovery of the early 1990s, let alone a slide into Japanese-style stagnation.’ For Krugman at this point, responsible fiscal policy meant deficits in recessions, and healthy surpluses in the good times.
The crisis that arrived in 2008 fitted the script in so far as it dispatched the Republicans. Relations with China remained intact and the dollar held up. But contrary to Krugman’s confident expectation that the markets would adjust, this was a full-blown meltdown. We habitually describe 2008 as a crisis of the banks, but it was in fact a crisis of market-based finance. What melted down wasn’t just Lehman Brothers or Wall Street but the entire North Atlantic financial system. This was the fourth great push in Krugman’s radicalisation. After Japan’s slide into the liquidity trap, the Bush presidency and the discovery of the structural nature of inequality, the fact that a comprehensive financial crisis could hit the US itself shook his confidence deeply – and all the more so because he hadn’t seen it coming. ‘What I sometimes berate myself for,’ he wrote, is that like other mainstream economists he had failed to see that a crisis of the 2008 type was a ‘fairly likely event’. The rise of shadow banking and unstable funding like repurchasing agreements or ‘repo’ (short-term financing for dealers in mortgage backed securities and other bonds), should have set off alarm bells.
Once the crisis was properly recognised it was clear what had to be done – and Obama appeared to have the people in place to do it. His economic policy team were as thoroughbred a group of New Keynesians as you could wish for. What was needed was a huge fiscal stimulus to ensure that the US didn’t slide from a crippling financial crisis into a Japan-style, low-growth liquidity trap. It was the very obviousness of that diagnosis that made what happened next all the more upsetting to Krugman. In 2009 Obama and the Democratic Congress passed a stimulus, but it was hopelessly undersized – half what was required. And 2010 began with the president announcing not that more was necessary, but that it was time for belt-tightening.
In so far as Obama was involved, Krugman wasn’t surprised – he had never been a fan. Obama’s insistence on bipartisanship ran squarely against Krugman’s darker vision of the roots of America’s political divisions in racialised class inequality. The dogged opposition of the GOP, for its part, was only to be expected. What shocked Krugman was the failure of his own kind, the economists, to rally in a time of national emergency. Predictably, the Chicago School joined the GOP opposition, but what horrified Krugman was the undeniable evidence that Obama’s own economic experts were self-sabotaging, and that Larry Summers – once the teenage star of MIT and Harvard – was in the thick of it. It was he who led the push to cap the stimulus at well below a trillion dollars. ‘The overall narrative,’ Krugman wrote, was ‘tragic. A policy initiative that was good but not good enough ended up being seen as a failure, and set the stage for an immensely destructive wrong turn.’ ‘We used to pity our grandfathers, who lacked both the knowledge and the compassion to fight the Great Depression effectively; now we see ourselves repeating all the old mistakes.’
Krugman was forced to confront the fact that there was something wrong not just with American politics and society, but with the discipline that had shaped him. The most penetrating essay in Arguing with Zombies is ‘The Instability of Moderation’, from November 2010. ‘Watching the failure of policy over the past three years,’ he writes there, ‘I find myself believing, more and more, that … we were in some sense doomed to go through this … A regime that by and large lets markets work, but in which the government is ready both to rein in excesses and fight slumps – is inherently unstable. It’s something that can last for a generation or so, but not much longer … the result is the wreckage we see all around us.’ For the policeman of orthodoxy of the 1990s it was a shocking admission to make.
The basic idea of the MIT school of the neoclassical synthesis as defined by Samuelson was that Keynesian macroeconomics and neoclassical microeconomics were not contradictory but complementary. As Krugman put it, if you can get macro right then micro will follow. ‘In the Samuelsonian synthesis, one must count on the government to ensure more or less full employment; only once that can be taken as given do the usual virtues of free markets come to the fore.’ It was a dichotomised view of the world, with two different modes of analysis enshrined in separate textbooks and separate career paths for micro and macroeconomists. But as Krugman insisted, ‘inconsistency in the pursuit of useful guidance is no vice. The map is not the territory, and it’s OK to use different kinds of map depending on what you’re trying to accomplish.’
Where Krugman’s analysis is truly scintillating, though, is in its anatomy of the political and intellectual instability of the neoclassical synthesis itself. One problem was a tension within the economics profession itself. Samuelson’s dichotomy had tempted generations of economic theorists into trying to close the gap between the micro and the macro. The sort of work that Krugman, Stiglitz, Yellen and others did had suggested how this might be accomplished. They started by taking complex aggregate crises and problems, such as mass involuntary unemployment, and sought to explain them in terms of the large-scale effects of micro imperfections. But they didn’t elaborate their brilliant insights into general models. When New Keynesians did set about that task in the 1990s, what resulted were the so-called Dynamic Stochastic General Equilibrium models. These finally achieved the longed-for synthesis of micro and macroeconomics. They were built on rational choice foundations with more or less imperfect markets (depending on the calibration of the model), labour market adjustment costs and so on. DSGE models were formally satisfying and well-suited to tracking normal economic conditions, but – as even their chief exponents had to admit – they had only limited capacity to describe, let alone predict, the violent financial shocks that struck the North Atlantic economy in 2008. The lessons of Asia and Japan in the late 1990s, the warnings of The Return of Depression Economics, had not been heeded.
As economics was ossifying as a discipline, Krugman explains, a parallel political story was unfolding, which contributed to the paralysis of economic policy in 2008. While fiscal policy was stymied by conservative opposition and worries about debt sustainability, central banks had retained a degree of freedom to act. This, in Krugman’s view, was Milton Friedman’s paradoxical legacy. Though Friedman is commonly regarded as one of the fathers of the market revolution, he was at heart a creature of Samuelson’s neoclassical synthesis. He combined his passion for markets and the ‘freedom to choose’ at the microeconomic level with an insistence that the economy as a whole must be stabilised at the macro level by monetary policy. What Friedman promised was that non-discretionary, mechanical regulation of the money supply would in due course stabilise prices too. When that turned out to be hopelessly naive – defining the money supply and controlling it proved impossible and prices responded erratically – central bankers resorted instead to ad hoc decision-making, personified by Alan Greenspan, the guru of the Federal Reserve in the 1990s and early 2000s. If they were independent of elected politicians they were also free to ignore academic economics. The massive interventions used to stabilise the financial system were ad hoc decision-making taken to the limit; by the same token these interventions also lacked political and intellectual legitimacy. The central bankers faced a political backlash which spilled over from fiscal to monetary policy and hobbled their response.
It is a measure of Krugman’s increasing despair that by 2013 his jaundiced view of American class society converged with his worries about the intellectual framing of economics. As Republican and Democratic centrists struggled to fashion a bipartisan majority around a programme to slash the deficit, it dawned on Krugman that the entirety of what he had once confidently described as ‘responsible’ economic policy was shot through with class interest. Talk of fiscal sustainability wasn’t just bad economics; it was, Krugman now believed, class war by stealth. In End This Depression Now (2012), Krugman broke one of the taboos that separate mainstream New Keynesians from their left-wing heterodox counterparts. He invoked the Polish economist Michał Kalecki, whose work is commonly cited as having bridged Keynesianism and Marxism. In 1943, in wartime exile in Oxford, Kalecki had explained why delivering stabilisation policy in a sustained way, as Keynes envisioned, might not be possible in a class-divided society. At the depths of the crisis, Keynesians would be summoned by the powers that be to do the minimum that was necessary, but as soon as the worst had passed, well before the economy reached full employment, the same policies would be anathematised as undermining ‘confidence’. The balance of what was ‘sensible’ would be set by the interests of the wealthiest and most secure. Their principal concern wasn’t full employment, but profit, which dictated stimulus in a slump and restraint whenever profits were squeezed by increased wages in a tightening labour market. Five years before Samuelson, in his classic textbook of 1948, laid out his vision of the complementarity of macroeconomic management and market-based microeconomics, Kalecki had already shown why it would end in failure.
Krugman reassured himself by adding that Kalecki was far more of a Keynesian than he was a Marxist, but quibbles aside, Krugman’s own transformation could hardly be denied. The members of the American left he had savaged in the 1990s were now his friends. He was talking about power in the starkest terms. But the question was unavoidable: once you lost your faith in the state as a tool of reformist intervention, once you truly reckoned with the omnipresence of class power, what choices remained but fatalism or a demand for a revolutionary politics? Between those alternatives, respectively unappetising and unrealistic, there was perhaps a third option. America had, after all, been here before. FDR’s New Deal too had been hemmed in. It had delivered far less than promised, until the floodgates were finally opened by the Second World War. The Great Depression, Krugman wrote, ‘ended largely thanks to a guy named Adolf Hitler. He created a human catastrophe, which also led to a lot of government spending.’ ‘Economics,’ he wrote in another essay, ‘is not a morality play. It’s not a happy story in which virtue is rewarded and vice punished.’
‘If it were announced that we faced a threat from space aliens and needed to build up to defend ourselves,’ Krugman said in 2012, ‘we’d have full employment in a year and a half.’ If 21st-century America needed an enemy, China was one candidate. On foreign policy, Krugman is perhaps best described as a left patriot. Where he had once downplayed the impact of Chinese imports on the US economy, he now declared that China’s currency policy was America’s enemy: by manipulating its exchange rate Beijing was dumping exports on America. But to Krugman’s frustration Obama never turned the pivot towards Asia into a concerted economic strategy.
You might argue that in Covid we have found an enemy of precisely the kind Krugman was imagining. As far as Europe is concerned, an alien space invasion isn’t an implausible model for Covid. This novel threat broke down inhibitions in Berlin, and the Eurozone’s response was far more ambitious than it was after 2008. But America isn’t the Eurozone. For all Krugman’s gloom, it didn’t take a new world war to flip the economic policy switch. All it took was an election. Almost immediately after Trump’s victory in November 2016, the fiscal taps were opened. As under Reagan in the 1980s and Bush in the 2000s, all fear of deficits disappeared.
Compelling as Krugman may have found the Kaleckian vision, it does not describe the United States in the 21st century. The balance of class forces Kalecki had assumed in the 1940s no longer exists. In America in 2017 big business did not object to running the economy hot. There was no real threat of wage pressure: a flutter of strikes perhaps, but nothing serious. No chance of inflationary expectations becoming embedded in adjustments to the cost of living. No wage-price spiral. Everything to gain from tax cuts for corporations and the rich. The Kaleckian scenario, from today’s point of view, presumed too much countervailing force from the left and by the same token too many constraints on active economic policy.
It’s telling that despite the apparent political affinity between Krugman and the proponents of MMT, its heresies revived his impulse to play policeman. After long and fruitless exchanges, Krugman declared that MMT was either silly or merely old-fashioned Keynesianism warmed over. In 2020 these doctrinal debates were overtaken by the reality of the Covid shock. In March 2020, as more than twenty million Americans lost their jobs in a matter of weeks, Congress united around a gigantic fiscal stimulus. At the Fed, the centrist Republican Jerome Powell embarked on a programme of intervention that dwarfed anything contemplated by Bernanke. And with a Democratic majority in Congress the impetus has carried through to 2021. The mantra on everyone’s lips is a blunt statement of Krugman’s position. Do not repeat the mistakes of the early Obama administration. Go large. If the Republicans have now decided to be fiscal conservatives, ignore them. There has been no opposition from big business. What the Chamber of Commerce did not like was the $15 minimum wage. Once that was dropped, it did not oppose the $1.9 trillion plan; it seems that business fears legislative intervention more than it does Kalecki-style pressure in the labour market.
The Krugmanification of the Democrats wasn’t won without a fight. There are fiscal hawks in Biden’s entourage. At one point he even counted Larry Summers as an adviser. That didn’t last: the empowered left wing of the Dems wouldn’t stand for it. But although he is no longer in the inner circle, Summers hasn’t surrendered. Opposing untargeted stimulus checks, calling for more focus on investment, he recently declared the Biden administration’s fiscal policy the most irresponsible in forty years – the result, he remarked bitterly, of the leverage handed to the left of the Democratic Party by the absolute refusal of the GOP to co-operate.
The first instinct of the wonks inside the Biden administration is to counter Summers’s arguments on his own terms. Their models show, they insist, that the risks of overheating and inflation are slight. What they don’t say is that being credibly committed to running the economy hot is precisely the point. This is what Krugman meant in 1998 when he called on the Bank of Japan to make a credible commitment to irresponsibility. To avoid the risk of a liquidity trap what you want to encourage is precisely a general belief that inflation is set to pick up. In the late 1990s Krugman, like a good New Keynesian, envisioned monetary and fiscal policy as substitutes for each other. In 2021 America is getting a massive dose of both. As the Fed announced in August last year, the plan is to get inflation above 2 per cent and to dry out the labour market. The bond markets may flinch, but if the sell-off gets too bad, the Fed can always buy more bonds.
While Summers, clinging to his generation’s assumptions about the proper balance between politics and technocratic judgment, wants to drag the conversation back to inflation and ‘output gaps’, what is actually at stake is the future of the republic. In 2020 America came through something close to an existential social and political crisis. That crisis is now understood by large parts of the Democratic Party not as an unforeseeable shock, but as enabled by the forty years of ‘responsibility’ that Summers invokes as the gold standard: successive Democratic administrations failing to address inequality and handing the game to the utterly unscrupulous Republicans. With the pandemic still running through American society, and the midterms looming in 2022, the most irresponsible thing to do would be to risk electoral disaster of the sort the Democrats experienced in 2010. No one has made this case more consistently than Krugman. ‘Debt isn’t and never was an existential threat to our nation’s future,’ Krugman wrote in February. ‘The real existential threat is an illiberal GOP that looks more like Europe’s far-right extremists than a normal political party. Weakening policy in ways that might help that party’s prospects is a terrible idea – and I think Democrats realise that.’
Vir: Adam Tooze, London Review of Books