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Thursday, June 13, 2013

Paul Krugman, "Sympathy for the Luddites": The Dark Side of Technology

Is Paul Krugman correct? Most of the time? Some of the time? How much credence should we place in this Nobelist's op-eds? Well before turning to Krugman's op-ed of today's date, let's take a short trip down memory lane and go all the way back to . . . May 23, 2013, i.e. three weeks ago, when Paul praised "Abenomics" in a New York Times op-ed entitled "Japan the Model" (http://www.nytimes.com/2013/05/24/opinion/krugman-japan-the-model.html?_r=0) and wrote:

"The good news starts with surprisingly rapid Japanese economic growth in the first quarter of this year — actually, substantially faster growth than that in the United States, while Europe’s economy continued to shrink. You never want to make too much of one quarter’s numbers, but that’s the kind of thing we want to see.

Meanwhile, Japanese stocks have soared, while the yen has fallen. And, in case you’re wondering, a weak yen is very good news for Japan because it makes the country’s export industries more competitive."

Fascinating. But now read from CNNMoney this morning  (http://money.cnn.com/2013/06/12/investing/nikkei-japan/index.html?iid=HP_Highlight):

"The market swings have been wildest in Japan, with the Nikkei (N225) now 20% off its recent peak and officially in bear market territory. At the same time, the yen has strengthened to 94 per dollar for the first time since early April.

Prime Minister Shinzo Abe, who came back to power in December, has launched an aggressive campaign to boost Japan's economy following 15 years of deflation. The plan -- dubbed Abenomics -- includes coordinated government spending, central bank stimulus and structural economic reforms.

Investors responded to Abenomics by selling the yen and buying Japanese stocks. The weak yen helped boost shares of Japanese exporters, including Toyota (TM), Sony (SNE) and Kirin (KIRI). But those stocks and others have been punished this week as the yen regained ground.

. . . .

Meanwhile, the Bank of Japan is walking a fine line as it attempts to achieve an inflation rate of 2% without driving up interest rates on government debt. The country's gross public debt, after years of budget deficits, is projected to hit 230% of the size of the country's economy by 2014."

Kind of reminds me of when Krugman said of Occupy Wall Street in October 2011 (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html):

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."

Yup, he sure hit the nail on the head that time, too.

Back to the present. In his latest New York Times op-ed entitled "Sympathy for the Luddites" (http://www.nytimes.com/2013/06/14/opinion/krugman-sympathy-for-the-luddites.html?_r=0), Krugman warns of the effects of technology on the labor force:

"Today, however, a much darker picture of the effects of technology on labor is emerging. In this picture, highly educated workers are as likely as less educated workers to find themselves displaced and devalued, and pushing for more education may create as many problems as it solves."

Krugman concludes:

"Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).

So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

I can already hear conservatives shouting about the evils of 'redistribution.' But what, exactly, would they propose instead?"

Okay, I'm also in favor of a "strong social safety net," but what happens when you increase "taxes on profits and/or investment income"? Answer: businesses and high wealth individuals move to more "hospitable" locales, eliminating even more jobs.

So what is Krugman advocating, "Abenomics," involving massive deficit spending, or simply higher corporate taxes?

Darned if I know.

1 comment:

  1. Krugman has not yet gotten the memo that
    "...work hard and play by the rules ..." has a new meaning since 2009. The rules changed.
    Took me four years+ to understand that.
    Want to refi your mortgage? Stop paying - only way to get a government refi.
    Better yet: use your retirement savings to keep your mortgage current. Why? Because you could have a million dollars in your IRA, but it is only legally considered income for tax purposes, not to qualify for a real refi.

    Working hard? ROFCrying. Success in America has been all about being a smooth liar since the Age of the Harvard MBAs began in 1978.

    What Krugman writes in this column sounds like the Brooklyn-based Working Family Party platform. I was there in 2002 when Krugman, Liz Warren, and WFP's Dan Cantor had a panel at the NYC Harvard Club in 2002. (DiBlasio is the WFP standard bearer for NYC mayor)

    K2K

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