Monday, December 1, 2008

Media Failure and Depression

Two Wall Street Journal columnists discuss the tragi-comic decline of American mass media. First, Dorothy Rabinowitz notes that CNN has hired an "advocate of aromatherapy and regular enemas", Deepak Chopra, to comment on the recent terrorist strike in India. Chopra, perhaps predictably but still comically, blamed the US for the Pakastani terrorist strikes. CNN thinks so much of Chopra's New Age counter-terrorist analysis that he was brought onto the Larry King's slapstick caricature of a news talk show:

"Two subsequent interviews with Larry King brought much of the same -- a litany of suggestions about the role the U.S. had played in fueling assaults by Muslim terrorists, reminders of the numbers of Muslims in the world and their grievances."

Moving from the comic to the tragic (or is it the other way around?) (and h/t Manoj Dalvi), Amity Shlaes notes that Paul Krugman advocates a massive public works program to spur the economy. Just some preliminary thoughts on this. First, the October unemployment rate of 6.5% is about one fourth of the 25-30% it was at the bottom of the 1930s and well below what it was for much of the 1970s and 1980s, when 6.5% became to be thought of as full employment. Second, although declining oil prices (which I thought were supposed to help the economy in July but now in December are said to cause a depression) have caused a 1.3 percent down tick in the inflation index in October, the year-to-year inflation rate for 2008 was an above-average 3.8% as of October, according to the Bureau of Labor Statistics. Thus, Krugman's passionate advocacy of a cure of massive public works spending is a curiosity given that no one really knows what the symptoms of the "disease" are.

Quoting three economic historians, Stanley Lebergott, Lee Ohanian and Michael Darby, Shlaes points out that while public works spending had almost no effect on improving employment, higher taxes and government spending crowded out the 1930s recovery. Thus, incompetently managed public sector jobs crowded out the recovery in more productive private sector employment. Despite public works spending, the Great Depression dragged on for 10 years. The Great Depression was a monetary phenomenon that would have been further prolonged by Paul Krugman's far-fetched public sector construction scheme.

Krugman's advocacy of public works as a cure for an as-yet non-existent "depression" says more about the field of macro-economics than about the need to pay attention to Krugman or the failing newsletter for which he writes. Krugman is little more than the promoter of an oil well or an Internet website. Like a wildcatter or Internet promoter, Krugman aims to sucker taxpayers into paying for the Obama administration's graft.

1 comment:

Anonymous said...

Krugman is the only person who is making sense in this debate. He has been prescient.
Manoj Dalvi