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Dean Baker is co-founder of the Center for Economic and Policy Research. He previously was a senior economist at the Economic Policy Institute and an assistant professor of economics at Bucknell University. He has a Ph.D. in economics from the University of Michigan. His latest book, The End of Loser Liberalism, has recently been released to download free of charge on the CEPR website.
Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland.
Philip Pilkington: The overarching thesis of your book The End of Loser Liberalism is quite a provocative one. This isn’t just a book about economics as such. Instead, if I were to venture using a term that appears to be coming back in fashion, it’s a work of political economy. You write that the current political debate – wherein the left are seen as restricting and constraining the ‘free market’ while the right are seen as letting it free to work – is completely skewed. You write that liberals and progressives need to take a different line on this. Could you explain this basic premise in a little more detail, please?
Dean Baker: The conventional view is that conservatives place a huge value on market outcomes. It is common for progressives or liberals to deride them as “market fundamentalists”, as though they worship the market as an end in itself. By contrast, liberals/progressives are supposedly prepared to use the hand of government to override market outcomes in order to promote goals like poverty reduction or equality. I argue in the book that this view is completely wrong, and worse that it plays into the hands of the right.
I argue that the right has quite deliberately structured markets in a way that have the effect of redistributing income upward. The upward redistribution of the last three decades did not just happen, it was engineered.
I’ll give a few quick examples here. It is common to say that the right deregulated finance. This is only partly true. What they did was to take away the restrictions on what financial companies could do, while leaving in place the government insurance – explicit and implicit – that provides the necessary backdrop for a functioning financial market. In effect, they allowed the banks to have insurance without paying for it.
When most of the country’s major banks were literally on the edge of insolvency in the fall of 2008, very few of the “free market fundamentalists” were saying that we should let the market run its course. They were demanding that Congress, the Fed, and the FDIC do whatever is necessary to backstop the banks and keep them operating. The government’s intervention at that point prevented a full-fledged financial meltdown. This was the right thing to do for the economy, but it could have been down in a way that fundamentally altered the financial industry, so that the huge paychecks for top executives and high-flying traders would be rarer and smaller. Instead, the bailouts largely left the financial sector intact.
Now that the crisis is behind us the financial sector is again arguing that they should not be regulated. But, does anyone doubt that if Citigroup or Goldman’s bad trades brought them to insolvency that the government would again intervene to support these banks? It is absurd for progressives to ever accept this as an argument about whether we want government intervention or the market. Both sides want government intervention, the difference is that the right wants it to favor the banks’ management and shareholders while progressives want to ensure that it benefits the public as a whole.
To take another example: prescription drugs are expensive entirely because of government granted patent monopolies. The United States is spending close to $300 billion a year for drugs that would sell for around $30 billion a year in a free market. Incredibly, the right has been so effective in distorting public debate that restrictions on these monopolies, such as government negotiated prices for public health programs or explicit price controls, are seen as restrictions on a free market.
Patent protection of course serves a purpose: it is a way to finance the research and development of new drugs. However, it is nonetheless a government intervention into the market and, in fact, a very big one at that. We can think of the gap between patent protected prices and free market prices as being effectively a tax, which comes to more than $250 billion a year (5 times the size of the Bush tax cuts for the wealthy) and is projected to grow rapidly over the next decade. The biggest beneficiaries of this tax are the shareholders of the drug companies, top executives and a few lucky scientists.
Once we recognize that patent protected drug prices are not the result of a free market, but rather conscious government policy, we can ask the right question, which is whether there are better ways to support bio-medical research. The idea that we can finance research through alternative mechanisms should not be alien, since we already spend $30 billion a year on bio-medical research through the National Institutes of Health. But to have a serious discussion we have to recognize that the supporters of patent monopolies on prescription drugs are not free market fundamentalists. What we are debating the best form of intervention, not the government versus the market.
To take a third case, the value of the dollar is enormously important in determining the distribution of income. The over-valued dollar is the main factor behind the US trade deficit. It swamps everything else we may or may not want done in terms of trade policy, competitiveness policy or industrial policy. If the dollar is over-valued by 30 percent it is roughly the same as giving a 30 percent subsidy on all the goods that we import while imposing a 30 percent tariff on all of our exports. It is incredibly difficult for domestic producers to overcome this sort of disadvantage.
Furthermore, it is not an accident what sectors of the economy are exposed to international competition. In principle, almost any sector of the economy can be opened up to trade. For example, in the case of health care, we can have laws that make it very easy for foreign born doctors to train to US standards and then practice wherever they want in the United States. We can also set up a legal and institutional structure that makes it easy for people to travel overseas for major operations to take advantage of the much lower prices charged in many countries.
However, neither path has been pursued in our trade negotiations. The main area where our negotiators wanted ‘free trade’ was in manufactured goods. This put US manufacturing workers in direct competition with their much lower paid counterparts in the developing world. This policy has the predicted and actual effect of lowering the wages of manufacturing workers in the United States. And since manufacturing has historically been a source of relatively high paying jobs for the 70 percent of workers without college degrees, this trade policy put downward pressure on the wages of this group of workers as whole.
This downward wage pressure is aggravated by the over-valuation of the dollar. The over-valuation of the dollar is conscious policy that dates back from Robert Rubin taking over as Treasury Secretary in the Clinton years. Rubin publicly advocated a high dollar since his first days as Treasurer, but he got the chance to put real muscle behind this policy through his engineering of the bailout following the East Asian financial crisis. Rubin’s deal was that the countries of the region would repay their debts in full (no write-downs), but we give them the ability to do this by allowing them to run huge trade surpluses with the United States.
The harsh treatment of the East Asian countries was a warning to the rest of the developing world. They adopted a policy of accumulating massive amounts of reserves to avoid ever being in the same situation as the East Asian countries. This means lowering the value of their currencies against the dollar so that they could run large trade surpluses. This continues to be the policy pursued by most developing countries so that the flow of capital is running from poor countries to the United States, rather than the other way around as the story goes in economics textbooks.
In short the United States has deliberately put in place a trade and dollar policy that disadvantages the bulk of the workforce for the benefit of employers, importers and those looking to invest overseas. The fact that manufacturing workers have done badly over the last two decades has nothing to do with random market outcomes. It was the result of deliberate policy.
The point of the book is that progressives must focus on these and other ways in which the right has structured the market to benefit the wealthy at the expense of everyone else. The failure to recognize that the market has been rigged to redistribute income upward leads to both bad policy and horrible politics.
We should focus on the key factors that determine market outcomes, not just accepting the outcomes and then using the government to pick up the pieces after the fact. There is a lot to be said for the right’s view of the market. It is an incredibly powerful instrument and we should be looking to structure it in a way that produces the outcomes we desire rather than just abandoning this task to the right. This is where the real action is: tax and transfer policy will always be a very distant second in its implications for income inequality.
From a political standpoint, if we don’t challenge the right’s structuring of the market we end up being ‘loser liberals’. We play the game, but then are unhappy with the outcome so we want to tax the winners to help the losers. That is truly awful politics, but this is where much of the left has been over the last three decades.
PP: Why do you think the left has been playing this game for so long? Do they see tax policy as being a silver bullet simply because it was, together with the other component of fiscal policy – that is, government spending – their weapon of choice since after the New Deal?
DB: I think there are three reasons.
1) There was a real shift in the 70s/80s in which the right actively embarked on a policy to redistribute income upwards. In other words, the attack on the incomes of the working class/middle class is relatively recent.
2) It is always possible to win something in the tax/spending battles, even if it is trivial. From the logic of the advocacy world, this can be everything.
3) The academic world, first and foremost the economics profession, helped to conceal the policy decisions that underlay the upward redistribution of the last three decades. They have helped to conceal that this upward redistribution was in fact the result of policy, as opposed to the natural workings of the market.
On the first point, there was little reason for progressives to give much thought to the underlying issues affecting the distribution since most of the population shared in the gains of growth through the 40s, 50s, 60s, and into the 70s. It was only in the last three decades that the right was actively changing the rules to make sure that income flowed upward. The progressive groups that could have responded, most importantly labor, were basically caught flatfooted. There were playing the same game that they had been always been playing, as though the rules had not been changed. Obviously this does not work out very well.
The second point is something that people outside of Washington may find difficult to understand, but inside the Beltway it makes perfect sense. We have all sorts of liberal/progressive organizations that exist to promote one or another progressive cause. Their top people all draw nice six-figure salaries and are important people who get invited to important meetings with other important people. Being able to get a few nickels or dimes for one or another program justifies that they are doing something useful. It keeps money flowing from funders.
The constituencies that they ostensibly represent may be getting killed because the Fed is raising interest rates to throw them out of work and lower their wages, or trade and dollar policy is taking away their jobs and depressing their wages, but no one is going to talk about that. Instead, the important people at the liberal/progressive organizations can boast about getting a few more bucks for one or another government program. This is a great win-win for everyone except the people who are screwed.
The third point has to do with the corruption of academia. It has produced a vast body of literature that studiously avoids asking most of the questions that I raise in The End of Loser Liberalism. There is virtually no literature that examines the efficiency of patent protections for prescription drugs relative to other mechanisms for financing research. This is a policy that raises the price of prescription drugs by more than $250 billion a year, yet almost no one examines it. You will find endless studies that look at the cost of trade barriers on shoes, but next to nothing on protectionist barriers that cost 100 times as much and jeopardize lives. Most people, including economists, never even give the issue of patent protection a moment’s thought. They are perfectly happy going through life as though this policy is something handed down to us by God.
The same is true for most of the other issues that are central in the book. The idea that Federal Reserve Board policy can affect income distribution is virtually taboo in the economics profession. Yet, we can clearly show that high rates of unemployment disproportionately affect those at the middle and the bottom of the wage distribution.
In the same vein, economists do their best not to know that foreign professionals are excluded from the United States by deliberate policy. I have had prominent economists tell me that there are no barriers because the person in the next office to them was born in India. In other contexts, economists would ridicule someone who said something so silly – it would be like saying that we had free trade in agriculture because we can buy tomatoes grown in Mexico. This is obviously ridiculous, but somehow economists think that this sort of argument makes sense when it applies to people like them.
Anyhow, the fact that the economics profession overwhelmingly supports the view that the rules that redistribute income upward are simply natural facts of the economy and market makes it much more difficult for people to challenge this position. Their arguments are easily dismissed by the media and others in authority position because ostensibly independent experts ridicule their position.
In short, the game is stacked in the outcome and it is also stacked against those who would call attention to the fact that it is stacked. This is not an easy road to follow, but if the point is to actually have an impact, it is the only road.
PP: That leads us nicely onto our next question, which relates more specifically to a point you raise in the book and elsewhere: what is with commentators on the origins of the present economic crisis? You point out in the book that they all seem to think that this was first and foremost a financial crisis. But it was not. First and foremost it was a mortgage bubble that took place in the ‘real economy’. Everything that took place in the financial sector – and I don’t want to excuse any of this, as there was plenty of grime – but everything that took place in the financial sector was really a symptom of underlying weaknesses in the ‘real economy’.
When I read this in the book it reminded me of what is going on today in Europe. I had a long conversation with a bunch of economists from many of the leading banks a few weeks ago and it took an almost Herculean effort to convince them that, at root, this was not a banking crisis. It was due to a flaw in the structure of the Eurozone and it only became a banking crisis after the fact, as it were.
I mention this because I think that this desire to see the current problems we face through the lens of finance pure and simple runs very deep. What do you make of it? Is it evasion on the part of commentators and the economics profession? Why such a tremendous blind spot in this regard?
DB: I think the focus on finance does two things. First, it provides a cover for the failure of the people who carry through and comment on economic policy. Finance can be complicated, bubbles are simple. The second reason is that it avoids a discussion of the underlying structural imbalances that few want to address.
On the first point, the real story of the economic crisis was not that it was too hard to see it coming, it was too easy. Economics is about making simple things complicated. The complexity both excludes most of the public from policy debates and also gives economists their status as masters of a complex discipline.
The basic housing bubble story was very simple. We had a sharp divergence from a 100-year long trend in which nationwide house prices had just kept even with the rate of inflation. Supply and demand in the housing market could not explain these rises. There was no remotely comparable increase in rents, which further undermined any explanation in terms of the fundamentals. And vacancy rates were already at record highs even before the crash, showing that inadequate supply could not possibly explain the run-up in prices.
All of this should have been easy to see. Furthermore, it should have been easy to see that the bubble was driving the economy. Housing construction was at a near record pace from 2002-2005, a rate that was completely inconsistent with the rate of household formation during these years. And, housing bubble wealth had driven the savings rate to near zero as homeowners spent based on the $8 trillion in bubble generated wealth.
It was easy to see that there was a bubble, that it would burst, and that it would be a huge hit to the economy when it did, since there is nothing to quickly make up a loss of demand of 6-7 percent of GDP (which translates to $900bn to $1,050bn). It would be embarrassing for economists to say that they missed something that was right in front of their eyes, so rather than talk about the bubble, we hear discussions of the financial crisis. Of course collaterized debt obligations (CDOs) and credit default swaps (CDSs) can get very complicated. So, we get that it was all a very confusing picture and no one knew what was where, and then it all blew up. This gives the blanket “Who could have known?” amnesty to all the people who absolutely should have known.
While the financial crisis part of the story is of course true, it is secondary. There are countries that had relatively well-regulated financial systems, most obviously Spain, that are suffering every bit as much as the US. Spain’s problem was that it had a massive housing bubble driving its economy just like the US at the time.
The other part of the story is that no one wants to talk about the real imbalances that underlie the bubble economy. In the US it was a story of both weak wage growth, which limited consumption demand that was not induced by bubble wealth, and also a massive trade deficit. As a simple matter of income accounting, as long as the US has a trade deficit it must have either budget deficits or negative private savings, or some combination.
Since budget deficits and negative private savings are both seen as undesirable outcomes, any focus on the fundamentals would invariably turn toward getting the trade deficit closer to balance. And the textbook remedy is a lower-valued dollar. However, a lower dollar is bad news for the financial industry, for the firms (e.g. Wal-Mart) that have low-cost supply chains in China and elsewhere, and the yuppies who want cheap trips to Europe.
For this reason, we get a focus on finance and then lots of surprised economists who cannot understand why the economy is not recovering. In many cases we get almost a mystical story that financial crises doom economies to slow growth, as though there is some curse of a financial crisis that over-rides the basics of economics. Of course there is no such thing – there is just political opposition to pursuing the policies that would boost growth.
PP: Of course, the real irony here is that, as many have noted, mainstream economics models do not even take into account private sector debt imbalances, financial instability and financial crises. This makes it even more remarkable that the economists and the commentators have turned to these phenomena as scapegoats.
But that’s just the beginnings of the contradictions of this focus on finance. These days everyone – not just in the US, but in other crisis-stricken economies too (Ireland, where I’m from, being a case in point) – is talking about getting credit flowing again. But you’ve written in the book that there is, in fact, not only no shortage of credit, but also that there is no shortage of access to credit for those that desire it. Perhaps you could talk about this a little.
DB: I will focus on the situation in the United States since I don’t want to pretend to be an expert about credit conditions in Europe. I’ve always posed the same question to those who say that lack of access to credit is the reason for the prolonged slump, what is the evidence?
In the case of housing, the argument is that people can’t get mortgages. There is no doubt that mortgage conditions are tighter than in the peak years of the bubble, but of course we would want them to be. The question is whether there are people who would have been able to get mortgages in the pre-bubble years who are not able to get them today.
The evidence is from the Mortgage Bankers Association mortgage application index and this indicates that such is not the case. This is an index that measures applications for mortgages at banks and these account for more than half of all mortgages issued. The important part of the story is that it measures applications, not mortgages issued. If it really were the case that otherwise qualified borrowers were having difficulty getting mortgages then we should expect the ratio of applications to house sales to be soaring. The reason is that many homebuyers would have to put in two or three applications to get a single mortgage. Some people would put in multiple applications and still be unable to get a mortgage. But in actual fact we don’t see this pattern at all. Mortgage applications have pretty much tracked home sales downward. This would seem to imply that the potential homebuyers who are unable to get mortgages are the exception, not the rule.
In the case of businesses, it is important to realize that the United States is much less dependent on bank credit than most other countries. It is not only the largest corporations, but many mid-size corporations have direct access to the credit markets by issuing bonds and commercial paper. For these companies the conditions of the banks is pretty much irrelevant. If we want to know about their access to capital we just have to look at the interest rate on corporate debt. And this interest rate is very low right now, measured in either real or nominal terms. (The nominal interest rate on 10-year Baa bonds as of October 28, was 5.33 percent, lower than at any point before the crisis.) With interest rates this low, we know that firms that account for close to half of GDP have no problem getting access to capital.
Furthermore, if smaller firms were constrained by their lack of access to capital, but larger firms had access at very low cost, then there are a couple of things we should be seeing. First, many large firms would be extending credit to smaller firms with whom they do business. This could mean that a manufacturer extends credit to its suppliers so that they have the money needed to maintain production. Or alternatively, they could extend trade credit to retailers, allowing them to make payments after goods are sold. The other thing we should be seeing is that larger firms are rushing into markets to take advantage of the weakened state of their smaller competitors. This would mean that big retailers like Wal-Mart and Starbucks would increase their expansion plans, as would chain restaurants, because smaller competitors lack the capital to take advantage of the business opportunities that exist.
In fact, we are seeing the opposite. All the major chains have cut back their expansion plans. This is very hard to reconcile with the credit access story.
Finally, the businesses themselves don’t say that credit is a problem. The National Federation of Independent Businesses has been doing a survey for more than a quarter century that asks business owners what their biggest problem is. Only around 3 percent answer the availability or cost of capital.
In short, the evidence does not support the contention that the lack of access to capital is a major factor constraining the economy right now. Furthermore, if we look at investment in equipment and software, it is almost back to its pre-recession share of GDP, which is quite impressive given the extent of excess capacity in most sectors. So, the credit crunch story is a theory unsupported by evidence that seeks to explain a problem that does not exist.
Yes, the neo-liberals want a “free market” as THEY define it, meaning freedom to destroy freedom via monopolies, and freedom to dump speculative losses on the masses. They want less regulation for themselves, and more for you (i.e. a police state). They want more government intervention for themselves (e.g. bailouts) and less for you. They want bigger government and more spending for themselves (e.g. their wars and their security-intelligence complex) and smaller government and less spending for you (i.e. no domestic social programs). They want lower taxes for themselves, and more for you, so you keep paying interest to the bankers (which is the only destination for federal income tax revenue.)
Quite simple, really.
My vision isn’t very good but is your avatar Adolph Hitler? And if so, then why?
Ultimate Neoliberal..cough…Freemarketeer…it owns every thing!
And the point of the Hitler pic is for?
Lots of meat here. Thanks for the work. I want to go backwards up your post with my three hopefully additive points.
1. To me the spin about the stalling economy being due to anything other than the final death throes of rampant American consumerism is just that. How can consumerism exist when there are no jobs and income is stagnant?
2. While I liked your examples of the corruption of academia I find the blindness of the economics “profession” to the history of American imperialism absolutely astounding. Along with the Shock Doctrine export of Chicago school economics to South America we also practiced suppression of unions and exploitation of their natural resources for American companies profits. This ties into my third point which is:
3. While the moves to redistribute income upwards and attacks on middle incomes started in the US in the 70’s the groundwork of giving corporations the rights of citizens in the 50’s set the stage for them to hone the art of establishing oligarchies in countries and puppet dictators before focusing on destroying their host citizens in the 70’s onward.
I fully agree with all you comments, but I believe one should be clarified:
“.. I find the blindness of the economics “profession” to the history of American imperialism absolutely astounding.”
Whenever one reads any blather from an American academic, one should refer to the membership list of one of the top five influence groups today, the Bretton Woods Committee (the lobbyist group for the international ultra-rich).
E.g., recently I heard Nials Ferguson of Harvard blather on that the economic meltdown was an “epiphenomena” — and of course, he is a member.
One finds a most interesting bunch on that list, especially those academics who forever proclaim that the meltdown “just happened” and it was “the system” and “nobody was to blame.”
Also, along with Dean Baker’s outstanding work, I would include these two recent and most excellent articles:
They killed the herd with too much growth hormones or cut their tongues out as a delicacy and left the carcase to rot in the sun.
Skippy…we need a new delicacy for the tops taste buds!
Dean Baker: “Economics is about making simple things complicated.” And as Baker said, that wasn’t an accident ut was engineered. A quote I’ll remember for it’s elegance economy.
Baker’s remarks in the same paragraph on the ease of spotting the bubble in US home prices as it occurs is also clear and concise. I recommend that summary both for those who continue to argue that bubbles can’t be spotted before they burst, and those who see bubbles in every exponential increase. There are real criteria for assessing what is a bubble.
I thought several bubbles were quite recognizable at the time. I was in the tech field when the .com nonsense was growing & all I saw was what the “hindsight 20/20” people reported after the fact. People push belief in the validity of the thing to benefit from it before it pops. It’s partially a self-fulfilling process. Maybe largely so.
This is the very best economic analysis since Veblen. Not only is it correct but also understandable. Nobody has any excuse for ignoring it. Now, we will see if anyone in power, Democrat or Republican, has any interest in the truth.
Someone should be dropping copies of this book from helicopters.
I believe you guys have linked to the wrong website above when you link to Dean Baker’s organization. Here’s the right link: http://www.cepr.net/. The one you linked to is in the UK and has an ‘and’ in the title (also spelled as “Centre,” which is a dead giveaway)
I found your site just before you published Econned. I read your site the first thing in the morning and keep on comming back because of the clear no nonsense approach. I would suggest doing the fundraising twice a year. Manny of us can afford small amounts several times a year. It is stimulating to support a worthwhile cause.
I am retired and got into the Financial Crisis scenario recently reading many books in addition to your site. I am evolving to the view that regulation does not work because the Congress does not enforce its own rules. I now favor a reduction of regulation to enable failure like MF Global. This is the only language the finance people understand. Banckrupcy, firing upper managemement, obliterate stock and bond holders. Yes it will be hard on us, but our children and grandchildren will see a better day
Yes – it would be painfull but Iceland and Sweden have shown that it might work. The insanity of bailing the banks out is just not sustainable
One wonders why people like Baker or any of the other luminaries on the Left never talk about the removal of money from politics. If you look at it logically, Right Wing movements are always fueled by Corporate Cash and its not clear if the leaders of the Left kept a sharp lookout for it. It would have been nice if they had constantly hollered and screamed about ‘take money out of politics’, ‘votes are being bought by fat cats’ in the same way the GOP now brays about voter fraud and ‘librul media’. Perhaps it was the Civil Rights struggle, if anything took the wind out of the Left’s sails it was that. Even today, who talks about Public Financing of elections on the Left? When was the last time you saw an article on this even in Mother Jones? Amazing. Its like the usual posture of the Left – just assume there is no public support, instead of creating public support. We can keep talking about the symptoms of the disease which is what this article is mostly about or we can lead and organize the fight.
It’s been a while and I’ve forgotten the details, but this is what I remember – and it’s probably as true as any new report gets.
During Bill Clinton’f first term, there was an strong effort to try and get money out of politics. Hillary (and the DLC) fought to prevent this because of the effect it would have on Democratic Party fund raising. She won and the rest of us lost.
I thought Thomas Ferguson’s recent article on this topic was really fascinating. In it he provides details of how the inside “game” is played…
“introduced by the Republicans in the 1990s, when Newt Gingrich brought in the earliest versions of “pay to play” and Tom DeLay consulted computer printouts of members’ contributions at meetings to decide on committee chairs. Everybody in D.C. is in on the game. Only the public is still in the dark.”
This article seems to provide a good explanation of why the money corruption is now so pervasive: seniority in the congress is now based on who brings the most money rather who has been there the longest.
I googled Newt Gingrich recently. Wow… that guy is pure evil. Thank you NakedCapitalism for educating me enough to see through his viscous criminal lies and better recognize his criminal objectives. Amazing how much your perspective changes with just a little bit of education. How could such evil continue to be so influential? The amount of damage Gingrich and his kind have done to this country is astounding. Really scary.
I remember that there were many people furious about what was going on in the Reagan years and later when the republicans controlled the house in the Clinton years. I didn’t pay attention… shame on me. I now know that they were true Americans… educated Americans.
Three points: 1) In the 1990’s, getting the money out of politics consistently polled at or near the top of US citizens’ concerns. This was one of Ross Perot’s big issues and, despite being absolutely trashed by the “responsible mainstream media,” he got 19% of the national vote in 1992; which leads to 2) The reason nothing was done and little was or is said (with a commendable exception of Dylan Ratigan) is that much of the publicity around this issue would have to come through the corporate media, which does very well out of selling air time to billion dollar presidential campaigns, and that the law would have to be changed by incumbent politicians who have succeeded under the current corrupt system; which helps explain why 3) As you say, there is little opinion leadership on this (and many other issues) from the “left,” which consciously frames policy around a “message” which responds to current public opinion polling, rather than the only poll which counts: our two minutes of democracy every two years or so.
After the Supreme Court decided Buckley v. Valeo, and now Citizens United, there is no way to get money out of politics without a Constitutional amendment.
Yes, we have a very “activist” Supreme Court, don’t we? But BCRA (McCain-Feingold) made significant changes that were not touched by Citizens; I think simple legislation could have some impact, and state legislation could have an impact at that level. But the real problems are Buckley, which struck down FCC Charter provisions restricting money in electioneering, self-interested big media hostility to even discussing the issue, and self-interested incumbent satisfaction with the system that put them there, which includes, as Gerard says above, the Clinton/DLC/Obama strategy of capturing Wall Street money for the Democrats – at the cost of selling out the Democratic Party and the country. I should probably also point out that Obama has just overthrown the Fifth Amendment provision on due process in the Awlaki case without a Constitutional Amendment and just a whiff of public justification. But the best answer would be an amendment, which is not going to happen any time soon.
Yes, and all that money raising has Congress at single digit approval ratings.
And failing to address the underlying, fundamental issue Baker points to: the structure of markets.
so when nixon went to china he conspired with the communists to raise
the living standards of 500 million chinese in a generation at the expense
of american workers? all as part of a plot to screw over the american working
Not really. The more likely scenario is that he pushed free market practices in China to advantage the top 1% and let the chips fall where they may on everyone else. It was his focus, not his intent, that was misguided in part.
didn’t the chips fall pretty well for the chinese? was that the intent of the 1%?
“when nixon went to china”
When Nixon went to China it had no economic impact worth mentioning. It was about geopolitics – splitting the Communist bloc and so fort. What would have had Nixon, or the US, do, continue to pretend that the long standing government of the world’s most populous country didn’t exist?
Better to talk about Billy Clinton, who put so much effort into PNTR and WTO membership for a country that was years from meeting the basic standards for them. Then talk about GW Bush and Obama for failing to do anything about the problem.
you are correct re: geo-politicing in the nixon era, although I do personally know a banker who went to china with kissinger and nixon, who came back from the junket with a souvenieer ‘little red book’
and, you are right about bclinton – most favored nation my a**
but, I hope you would agree that both gwbush & bobama dont have the temerity to do anything other than fail “to do anything about the problem”, or as its otherwise thought of, letting amoral, unpatriotic, fake free marketeers write the laws.
sorry, they all FAIL.
At this point, the only hope of getting all or parts of Free Trade repealed or removed would be for a political party-movement to come to power explicitly on the platform of getting all or parts of Free Trade removed.
I would vote and/or work for such a party, but I don’t have the skill or knowledge or drive to help found such a party. I hope someone does.
There are still Democrats in office who voted against every form of Free Trade. Perhaps they could quit the Democratic Party en masse and start a Real Democrat Party of their own. They could make a real point of saying:
Free Trade is the New Slavery. Protectionism is the New Abolition. And see whom they could convince and recruit.
real democratic party – ha!
that can only funny when considering what the democratic party has become…sad/funny, I mean –
I would argue that patents have become a barrier rather than a protection for innovation. Patents increase the costs and risks of innovation. Your success may depend more on the skills of the lawyers that you contract (how much do you want to spend in lawyers), rather than on the hypotetical benefits of your innovations.
This is a statement I certainly agree with. The period should be reduced considerably or even eliminated that allows to have protected profit from overpriced drugs.
Innovation is not simply a matter of money but has a lot to do with achieving a high degree of satisfaction for the inventor. The present companies with the financial cloud are actually rather hindering innovation as they try to control the industry and their financial interests as number one priority.
Not a barrier to “innovation” as much as a barrier to ‘opportunity for innovators’. The patent system exponentially destroys opportunity moving down the social chain. How could those at the bottom afford to play such a game, either getting a patent, protecting a patent, or trying to license a patent?
If you are referring to “innovation” from people at the bottom then yes the patent system is a “barrier to innovation”. But let’s then look at the issue from the middle… what if someone has a really good idea and goes out to get help to develop the idea… what happens then? That’s where the subject gets REALLY ugly.
Dean is the best. His book “The End of Loser Liberalism” should be mandatory reading for anyone wanting a better understanding of the interplay between economics-finance-politics.
Good interview. Question though on the idea of currency devaluation and trade surpluses: how does wage stickiness factor into this? Given wages are stickier than price in the short-run, would it not offset much of the economic benefit of the trade surplus? I’m not much of an econ expert so sorry if this is an obvious question.
If you devalue the currency wages need not fall. However, imports would rise in price. So, my guess is that Dean would support devaluation and wage RISES in order to compensate for the increase in the cost of living when imports become more expensive.
But I don’t want to put words in his mouth…
Thanks, Philip! That certainly clears it up a bit.
Yes, and OWS banners criticising ‘capitalism’ could use a tweak because it is bank skimming which destroys our economy, not true capitalism.
If we had true capitalism, our crashing banks would have been granted the right to fail, and other, better-managed banks would have risen up to take their place.
Jamie n’ Lloyd n’ Vikram n’ the rest of them? They are just sickeningly-high-priced non-capitalist skimmers. True capitalist bankers who could actually work for a living and eschew handouts would actually BENEFIT all of us.
“OWS banners criticising ‘capitalism’”
Agreed. Personally I’d love to see OWS banners and a chant that said “We Want Capitalism!”. Extra fun to watch the apoplexy of Very Serious Persons trying to explain why such demands are nonsense.
I think it’s important to remember too that “true” capitalism doesn’t exist. The economy–and the financial sector–is made through policy on the broadscale. “Honest” bankers are no truer to the spirit of capitalism than were owners of textile mills 150 years ago; people who use money on the market to make more money will engage in whatever activity earns them the most. Hence we should promote policies that preclude crooks and criminals from destroying lives, the planet, our political process, etc.
A lot of good stuff in this interview. However I think that any framing of the issues with left vs. right is off the mark. I agree with Barry Ritholtz who says it’s the people vs. corporations. Left vs. right and Democrat vs. Republican are now nothing but a smoke screen and a distraction from the real conflict. If you take the current trend and extrapolate it to a final outcome you will wind up with the corporate enslavement of the human race because in the end it is all just “good business” to do so.
Why is a low dollar bad for the financial industry? I’m not arguing, just interested in what the answer is if anyone would be kind enough to enlighten me. Thank you!
Basically because a low dollar can buy less Yen, Euros etc.
If you’re a financier in the US, most of your assets are going to be denominated in dollars. So, say you have T-bills to the tune of $100,000. If the dollar devalues by 20%, your investment declines too.
Another, perhaps larger, aspect to this is that a strong dollar attracts financial inflows. There’s a million and one reasons for this. Among them, the fact that the dollar is seen as a ‘safe’ currency that holds its value, so investors channel money into the US through Wall Street. (Also why oil is denominated dollars).
This is a pretty massive question though. Although I strongly disagree with both author’s conclusions, it’s worth checking out the following books for more information (and history) on the strong dollar/dollar hegemony dynamic:
Global Minotaur is probably an easier and more pleasant read. It’s also up-to-date. But both lay out the shifts in exchange rate policy quite well.
Indeed, this is one of the only places I disagree with Baker. I think the strong dollar policies run far deeper than Wall Street. I think they have to do with US military strategy, geopolitics — just about everything really. I don’t think devaluation is a realistic policy goal because of the powers that stand behind this. So, I’d be more inclined toward massive deficit spending.
“I think they have to do with US military strategy, geopolitics …”
How does an overvalued dollar help there?
A counterargument is that the military has long been interested in maintaining a strong domestic industrial/technological base. They’re not thrilled with being so dependent on foreign components. What’s that, the chip at the heart of our new whiz-bang DestroyAll 3000 was designed and fabbed in the PRC? If you think it’s hard to detect malicious software, wait until you try it when similar capabilities are built directly into the chip. The DoD is keenly aware of such possibilities.
You don’t think having the world’s governments gives you certain… erm… geopolitical and tactical advantages vis-a-vis your neighbours? Okay…
Typo: “…having the world’s RESERVE CURRENCY…”
Sorry. Weird typo. Alex Jones would make a lot out of THAT Freudian slip!
“You don’t think having the world’s governments gives you certain… erm… geopolitical and tactical advantages vis-a-vis your neighbours?”
First, it’s unclear how having an _overvalued_ dollar helps maintain it as the world’s reserve currency. Nowadays people like Treasuries because they’re seen as the safest bet around, but in less uncertain times who wants to hold a currency if they think the value will inevitably drop? During much of the 00’s many _Americans_ were shorting the dollar.
Second, the post-Bretton Woods Era and the 70’s are over. Many people (particularly non-Americans it seems) are obsessed with the supposed advantages of having the world’s reserve currency, but the “exorbitant privilege” long ago become an exorbitant noose.
For international power creditor/debtor relationships are far more important. During the Suez Crisis Eisenhower strong-armed Britain by threatening to dump their bonds. Nowadays China could do the same to the US.
Alex wrote: ‘.. the post-Bretton Woods Era and the 70′s are over. Many people (particularly non-Americans it seems) are obsessed with the supposed advantages of having the world’s reserve currency, but the “exorbitant privilege” long ago become an exorbitant noose.’
There’s a degree of truth in this. Certainly, we’re seeing the Triffin Dilemma come home to roost —
And the governor of the People’s Bank of China, Zhou Xiaochuan, pointed that out in 2009 —
All that said, I think Philip P. has it right in pointing to the longer-term geopolitical and military advantages that having the dollar as the world’s reserve currency affords the U.S.
Specifically, for instance, it’s often argued that the vastness of the DOD’s budget is drained from American taxpayers’ pockets.
But it could equally be argued that states like China’s and Russia’s are footing the bill for the Pentagon’s aircraft carriers, foreign bases, etcetera, when those nations’ governments are constrained to accept U.S. dollars (as China is so as to maintain its currency’s peg against the dollar), which their central banks can only then redeem by buying U.S. treasure bills.
Here’s Michael Hudson arguing exactly that, for instance —
‘World Tired of Paying Bill for US Military’
Mainly because banks tend to invest and own a lot of assets overseas. A lower dollar makes those assets more expensive to obtain and decreases potential buying opportunities.
Mr Baker does a disservice to his work and the larger efforts to simply address the big problems in an new /accurate way by clinging to the false left vs right pair- of siamese two party -digms. There may be a left as he describes, but they are certainly not in positions of power today. Both party’s fit the mold of the problem he describes… and we the peeps, especially in the occu-movement better get our heads around that or this kind of false fight will guarantee failure.
Please take your firm grasp of the issues and formulate them in terms of systemic failure… because the halls of power are as bipartisan on them as can possibly be. As Jane Hamsher says it’s all rotation of villains. Beyond theatrics there are no good guys or gals allowed.
It seems to me that if Dean Baker thinks finance wasn’t a major cause of the current economic disaster, he needs to read Econned. Baker is certainly right about the housing bubble, but the deeper causes behind the bubble were financial – see Econned and Bailout Nation by Barry Ritholz.
Econned provides the story of the fraud that allowed the housing bubble to inflate to such extraordinary size, as well as the reason that bank losses were so much larger than they otherwise would have been (with the aid of financial gambling and chicanery like the synthetic CDO).
Dean’s point is that we have high unemployment right now because of the collapse of the housing bubble. The financial crisis didn’t cause the unemployment. It may have contributed to the fear and the mass layoffs, but the jobs haven’t come back despite the fact that banks are now profitable again.
The fact that the jobs didn’t come back means that unemployment isn’t the result of the financial crisis, but instead the result of $1 trillion in missing demand that had been driven by the housing bubble. Home construction and investment was driving the economy prior to 2006/2007, as well as credit expansion (people using their homes as ATMs, etc.). $8 trillion in added housing wealth made people feel richer, so they saved less and spent more (further driving the economy). When that went away, we suddenly have millions of unemployed resources sitting idle.
When you simplify the story like that, it makes the solution much more obvious; which is the government needs to be stimulating the economy enough to cover the missing demand and enough to employ the idle labor that is sitting on the sidelines, unable to find a job. The financial crisis stuff is an important component, but not necessary to understand if you want to know why we have a lack of demand in the economy.
Yes. And this point is broader. The structural weaknesses in the ‘real economy’ were what led the US to require major asset bubbles to keep the whole thing ticking over in the 90s and the 00s. Thus, the rot that occurred on Wall Street was really just a symptom of this.
I think this is the strongest point of Baker’s book. One that I’ve been echoing on here for some time (much to the chagrin of some readers). It’s time to face reality, though… the financial crisis did not occur in a vacuum. It was firmly tied to a low-wage model that required asset bubbles to ensure sufficient demand for products.
“The structural weaknesses in the ‘real economy’ were what led the US to require major asset bubbles to keep the whole thing ticking over in the 90s and the 00s.”
Don’t lump the 90’s and the 00’s together. While obviously there was a stock bubble, particularly a tech stock bubble, in the 90’s the effect of the collapse of an that equity bubble was far less than the collapse of the debt bubble that fueled housing.
Also there was real underlying growth in the 90’s. Increases in productivity and new technologies that were a much more robust growth path than building vast numbers of empty McMansions. Some of the things that put a damper on that were the overvalued dollar, that only became seriously overvalued after Bobby Rubin’s “solution” to the Asian Crisis. Also Billy Clinton’s championing of premature PNTR and WTO membership for China, and last but not least the outsourcing craze.
It’s falling on deaf ears. It’s the hegemony of debt and credit all day, every day. Pluses and minuses on federal balance sheets–eternal and timeless accounting relationships and Excel spreadsheets going all the way back to the Medici, Accounting 101.
Don’t you get that?!!
Of course you can lump them together. Productivity was far outstripping real wages in both eras:
Hence, demand logically had to come from elsewhere. Some came from government deficits — that is, until Clinton and his team of economic geniuses ran surpluses. So, instead the household and the financial sectors loaded on the debt big time.
But recall that both major competitors, Japan and Germany, were AWOL throughout the ’90’s – Japan attempting to recover from its own disastrous bubble, and Germany focused on an enormously expensive reunification as well as attempting to shore up former Soviet states, including Russia.
AWOL in what sense? A classic way for a country (and Japan in particular) to recover economically is export led growth. That competes with US production.
In fact our trade deficit really started to ramp up after the Asian Crisis because the “destroyed” economies of various East Asian countries were recovering through increased exports. Impoverished neighbors are bad for business – which is one of the reasons the Marshall Plan was so brilliant. We want countries who can afford to buy our products and whose workers insist on more than a nickel an hour.
“Of course you can lump them together. Productivity was far outstripping real wages in both eras”
From the (Canadian) data you show that trend goes back at least as far as the 80’s, so what leads you talk about about the 90’s and 00’s as though they had so much in common, while ignoring earlier decade(s)?
“instead the household and the financial sectors loaded on the debt big time”
The accumulation of (gross) private debt has been following an exponential path since 1945. See first graph here:
So again you lump the 90’s and 00’s together as though they had something important in common, while ignoring other decades that had the same characteristics. Simultaneously you ignore the differences between the 90’s and 00’s.
“Some came from government deficits — that is, until Clinton and his team of economic geniuses ran surpluses.”
Form a sectoral balances POV it was far worse that they allowed the trade deficit to increase so much. That has essentially the same effect and yet, unlike debt reduction, no justification whatsoever.
Good points, though I think an argument could be made that the depth of the demand loss was significantly impacted by the excesses of the financial system.
I think describing the demand problem without reference to the private debt overhang may not get us to the best way out of this mess. It seems that some of the loss in demand can be attributed to the level of debt people are carrying, so addressing that part of the problem directly, as well as increasing demand by government spending on infrastructure, might be a more effective use of our limited resources.
Though I am sure that given enough stimulus, the debt problem would automatically be overcome (WW2).
“We should focus on the key factors that determine market outcomes, not just accepting the outcomes and then using the government to pick up the pieces after the fact…
This is where the real action is: tax and transfer policy will always be a very distant second in its implications for income inequality.”
I agree. Given the trajectory we seem to be on, income transfer absent a broader industrial policy aimed at developing the “main street” economy is an engine for the growth of the population that the government *itself actively maintains in poverty.*
Pulling up in the eleventh hour and putting “the losers” to work for their workfare “paycheck”– for which they will nevertheless be demonized by some part of the public– is “awful politics.”
It also conveniently camouflages the reality that the government actively structured the national economy to produce so many “losers” in the first place.
If the government created it, the government can also un-create it and create something new, which is what they really don’t want anyone to know. And apparently it’s working because we never hear anything about it.
So, if workfare maintains people in poverty and enables policy makers to hide the other ways that the government structures the national economy, then not only is it “awful politics” that enables demonization but, by itself in the absence of a broader industrial policy, an awful and fundamentally oppressive policy. It’s just putting in the last screw.
“Loser liberalism” pretty much sums it up.
“Economics is about making simple things complicated. The complexity both excludes most of the public from policy debates and also gives economists their status as masters of a complex discipline.”
Yeah, that too.
I am sympathetic. Baker does discuss wealth inequality but not the criminality of the kleptocratic system which produced it and the class war which defends it. The history of the last 35 years is not one primarily of greed but of theft. Baker touches on how the liberal orgs have become co-opted but the real story is not just about cooptation but the active promotion of the corporatist agenda by the Democratic party and Establishment liberals even as they paid lip service to progressive and New Deal principles.
I would take exception too to Baker’s emphasis on dollar policy. This sounds a lot like repackaged beggar thy neighbor stuff. At most it is only one element in producing a fairer economic system. The other two are regulation and taxation. Unlike the other two, taxation can be used to directly transfer wealth back from the 1% to the 99%.
I also agree with PaulArt. None of this is going to happen as long as the current completely corrupt political classes remain in place.
I agree with Ignacio’s point that patent, and I would add copyright, indeed IP law in general, is used by corporations to control their market share and profits and actively discourages innovation.
Finally, I think Baker is off in the distinction he tries to draw between the real economy and the “financialized” paper economy. The housing bubble began in the real economy but was facilitated by Greenspan’s easy money, no regulation policies. Sure the bubble would have burst and there would have been a recession, but as Yves showed in Econned, what made this bubble a systemic event was all the bad paper issued by companies like Magnetar in 2006 a year before the bust, and two years before the meltdown. Similarly, the spikes in commodities are not driven by a strong dollar but by the financialization of and speculation in those markets. Likewise, decisions about offshoring are only partly the result of a strong dollar. Again as Yves has often pointed out, labor accounts for around 10-15% of most manufactured goods and offshoring has a lot of extra costs associated with it. Both in social and in straight economic terms, offshoring doesn’t make much sense. But add in the blind demands of financialized markets and it becomes a necessity. And look at the size of the two economies, the real and the paper. The paper economy is vastly larger, and as recent events in Europe demonstrate, we can see which is the more powerful
Wherever the phrase “free market fundamentalists” is used,
responders could try substituting the phrase “rigged market racketeering”.
free market fundamentalists –> rigged market racketeers.
free market fundamentalism –> rigged market racketeering.
If anyone thinks this phrase-substitution might be useful, feel free to use it.
I like it!
Thanks. Feel free to use it wherever possibly appropriate, then. Perhaps it will catch on.
I also think a slight tweaking of Dr. Baker’s phrase “loser liberals” to make it even stronger and harsher
might be good too. And so I offer “liberal loser liberals”.
That indicates a stronger knowledge that the “loser liberals” seek defeat on purpose, whether because they believe in beautiful loser defeatism, or because they are secret upper class collaborators and quislings, or some combination.
So . . . . liberal loser liberals.
As an aside, has anyone here read or is currently reading Lawrence Lessig’s Republic Lost? In Chapter 4, I find it quite amusing that he just presents as fact that copyright protection is a great thing the government does by giving producers of movies or music a monopoly on their product to choose the price they wish to charge in order to get the return they want for their investment. That is just presented as obvious interference in the free market that everyone can agree is great and the best way to go about compensating creativity of artists.
I’m guessing he doesn’t read Dean Baker, as Baker presents it as a means of redistributing wealth upward. I’m inclined to agree with Baker on this one, and also Ha-Joon Chang who are written extensively on how copyright has been abused in this country — continually expanded to protect the profit margins of major corporations like Disney.
An emergency legal swift response team from Disney has be dispatched to your residence.
Skippy…I’d start running now if I was you.
Really? Weird, I sort of remember him endorsing Boldrin & Levine’s Against Intellectual Monopoly.. Maybe he didn’t quite get it, or maybe he just has an “open mind”.
I note no mention of a specific target for a dollar devaluation, unless the example of 30% is intended to be it.
1) The dollar has been dropping against most other major currencies for a decade.
Isn’t Baker really making the “China Yuan undervalued” argument? And isn’t it evident that any devaluation big enough to offset the wage differentials would take years to implement else you blow up a dozen countries as well as slow down Western growth as was evident with QE2 because virtually all essential commodities are priced in dollars? And does it not assume what cannot be assumed, and that is that Asian partners don’t simply devalue down in tandem defeating the entire purpose of the exercise?
2) We are already seen the future of any dramatic currency war/race to the bottom – having just blown Europe apart in the process. They just cut interest rates, will cut again, and are going to print money like there’s no tomorrow before we’re through.
3) The problem isn’t the dollar or the Yuan. The problem is US-based multinationals and banks have created the conditions that most favor themselves to the exclusion of everything else. Macro monetary policy is the wrong tool, its aggressive use will do more harm than good, and it again is at bottom opting for a “path of least resistance” approach, when only a direct confrontation with corporate power across the policy spectrum, from taxation to trade to compensation (Exec and other absurd white collar pay comes back to earth and wages up) – the works.
4) At bottom, what we have is a crisis in morality and ethics. It is very deeply entrenched and far broader than anyone cares to admit . Yet we simply MUST face up to it and what it will take to reverse it or we are all just blowing smoke.
Done in a rush and it shows. Please ignore the obvious errors and accept the gist for what it’s worth.
I agree, for both patents & copyrights, they are both in desperate need for reform, and they are at the heart of concentration of wealth.
I seriously don’t see life as too sucky for musicians. It may be that they spend time on the road; the bigger picture is that technology has leveled the playing field and now many more can participate. And the subsequent explosion of musical talent is incredible! We can safely give a lot of credit to the ease of file sharing. It’s the same with video, invention, bio-medicine: The best part of all of these come about by sharing research…more than by hoarding.
Reduction of intellectual property terms to a more socially and internationally balanced level seems like an obvious goal, for many reasons. It’s how we progress, it’s it?: Teaching and learning. /rant over :)
Although I appreciate this article, I wonder why it doesn’t mention the infusion of corporate and special interest money in politics, which I feel has greatly added to our woes.
“Economics is about making simple things complicated.
I have often thought that…sometimes this site intimidates me because I don’t know why common sense in our world seems to be convoluted by way of intellectual ideas that are out of reach for the average Americans…of which I am one and as bright as I am.
As a executive who has worked in mortgage banking for years, first at a TBTF bank, and luckily now at a small, extremely successful bank, I believe in a common sense view of banking. You take deposits in. You lend on those deposits. And you don’t bundle those loans up into complex financial vehicles. You keep the majority of them on your own books so that you have “skin in the game”. You have a balanced porfolio of deposits and lending by type. Maybe I am wrong…but I do believe it can be that simple. It certainly works for my successful bank. And I believe it is an ethical way of doing banking. Growth is good, but being the best for the customer is better….because that is how a bank grows organically.
INTERNATIONAL ECONOMIC RELATIONS
Interesting interview, but the above is a non-sequitur.
The total value of GNP [= GDP + (Exp – Imp.)], where GDP = C + I + G. (GNP = Gross National Product, GDP = Gross Domestic Product)
GDP is some $14.53T. (In current dollars, 2010.)
Exports and Imports recently are respectively $1.84T and $2.34T; or respectively 12.6% and 16.1% of GDP. The difference of Exports minus Imports subtracts $0.5T from GDP to give GNP.
The impact, I suggest, on GDP of the Import/Export trade imbalance is negligible. More importantly, are the Terms of Trade that influences internal (domestic) pricing. There, the Bureau of Economic Analysis is not very conclusive about its impact, saying only that
Meaning, I submit, that there is an impact but it is difficult to tell what it may be or its overall influence. That influence may be most felt on petroleum prices, which is a commodity internationally traded in dollars.
As regards, International Economics and its relationship with the US economy, I’ll fall back on my old hobby-horse: The fact that America has been bled dry of higher-cost low-skilled labor means that it behooves the nation to invest greatly in primary, secondary and tertiary education to enhance general skills levels – and thus offer graduates a decent job at a decent wage.
This objective, I feel, is ineluctable – so, please, enough of the nonsense about austerity measures that require cuts in educational spending. We are shooting our youth in the foot and they will be limping for the rest of their lives.
Low-skilled workers will have great difficulty in finding other than low-paying service employment (fast-food outlets, care of the aged, etc.).
Believe me, the current plight of the US has been happening in Europe for more than a decade. I have seen with my own eyes what it does to levels and kinds of employment on offer.
Remember next November, what the Troglodytes in Congress have done to American education by their mindless insistence on cutting state subsidies used to maintain teaching levels.
If I recall Econned correctly, Yves contends that while the housing bubble itself would have been bad enough, the demand for more mortgages, of any quality, to fuel the poorly-regulated and perversely-incentivized financial industry was like throwing kerosene on the fire. DB seems to be contradicting that, or am I misinterpreting DB or Econned?