Our medieval economic policy
Tightening the budget when we should be expanding will only make the economy weaker
A few weeks ago I referred to austerity economics—fiscal or monetary tightening when we need both to be expanding—as akin to the medicine of medieval times. Bleeding patients was thought to cure them, but it generally made them weaker and less resistant to disease.Skip to next paragraph
Before joining the Center on Budget and Policy Priorities as a senior fellow, Jared was chief economist to Vice President Joseph Biden and executive director of the White House Task Force on the Middle Class. He is a contributor to MSNBC and CNBC and has written numerous books, including 'Crunch: Why Do I Feel So Squeezed?'
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Paul Krugman uses the same analogy today and I was reminded of an aspect I hadn’t thought of before, having just finished a (great) historical novel covering the period in history when medicine was just beginning to wake up (World Without End by Ken Follett).
The way Follett tells it, by the end of the 14th century, private hospitals began offering alternative treatments to those in the monasteries. Monks were still practicing bleeding and other “austerity” measures, but early physicians were beginning to understand that such practices were…um…contractionary to your health.
So people began to migrate away from the monks and their ancient ways.
In other words, there was a market—you could choose, and once people were able to assess the different results, the choice was obvious.
And here is where the analogy breaks down. Unemployed workers, families unable to make their budgets on shrinking paychecks and falling incomes, small businesses suffering from a lack of foot traffic—they can’t go across the street and try a different macroeconomic policy.
They have to accept the austerity whether it’s coming from the Fed (“we’ve got some other tools here but we’re just not ready to use ‘em”), the Congress (“the President’s jobs plan won’t work”), the European Central Bank (“price stability uber alles!”), or the medievalists of Europe (“only by contracting will you grow!”).
I guess one could argue there’s an election market for such choices, and in some sense, the “throw the bums out” dynamic fulfills that role. But it’s a slow, cumbersome, and noisy process—there’s so much misinformation that it’s hard for people to sort out the facts, so you end up with politicians who claim to be different but have their leeches and bleeding bowls at the ready (see Republican field).
The only way out of this mess is to reach more people—voters—with the evidence-based facts of the case. It won’t always work—the noise machine is powerful and well-funded. But the truth will out.
I mean…I hope it will…it will…um…right?? Hello…anyone there??!!
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