Krugman: We Need More Unemployment—to Save Us from Unemployment
It has been a long time since I read anything by Paul Krugman, and seeing his most recent column simply reminds me why I’ve not missed anything. As both an extreme Keynesian and political partisan, he long ago abandoned economic analysis for something economists should recognize as nothing less than what Mises called metaphysics.
Nonetheless, my curiosity got the best of me when he wrote that reopening the economy and allowing people to go to work almost surely will cause a depression. He writes:
Last week the Bureau of Labor Statistics officially validated what we already knew: Just a few months into the Covid-19 crisis, America already has a Great Depression level of unemployment. But that’s not the same thing as saying that we’re in a depression. We won’t know whether that’s true until we see whether extremely high unemployment lasts for a long time, say a year or more.
Unfortunately, the Trump administration and its allies are doing all they can to make a full-scale depression more likely.
Now, many of us believe that the massive monetary and “fiscal” interventions into the US economy from both federal and state governments are likely to create a depression and make the current rates of unemployment grow even more. That, however, is not Krugman’s point. In fact, Krugman seems to believe that there isn’t enough government intervention, which is a regular theme in his writings. Instead, Krugman is alleging that reopening the economy is what will usher in the next depression.
We have been there before. Who can forget Krugman’s 2011 clarion call to form real defenses against an imaginary invasion by space aliens in order to revitalize the economy? Anyone who has read (or taught) Keynesian economics knows that according to Keynesians, the economy always is a slip away from going into massive unemployment unless government (a) cuts interest rates until they cannot be cut anymore, and (b) engages in massive new spending to increase “aggregate demand” because “full employment” only can be reached when government intervenes, period.
But even I will admit that this column took me by surprise, although he has his usual partisan snipes. To the question of how we avoid an out-and-out depression, Krugman replies that we need to “stay the course” (in his words) and keep everyone locked up even longer. His reasoning is that if Americans are let out of home confinement now, all of the so-called gains that this country supposedly has made against the ravages of COVID-19 will be lost and then the rock will roll back down to the bottom of the hill. Krugman writes:
If we could get the coronavirus under control, recovery could indeed be very rapid. True, recovery from the 2008 financial crisis took a long time,
Article from Mises Wire