Posts Tagged ‘Economic Plan’

Plan Needed To Get Out Of Deep Hole…

September 15, 2009

Obama, the Thinker in Chief, has spoken again: "I’ve always been a strong believer in the power of the free market. I believe that jobs are best created not by government, but by businesses and entrepreneurs willing to take a risk on a good idea. I believe that the role of government is not to disparage wealth, but to expand its reach…" (Obama’s speech to Wall Street, September 2009).

Um, the government “not to disparage wealth”? What a strange idea. OK, out of charity, let us attribute that latest curiosity to an errant speech writer…

The rest of the statement came close to saying that the best jobs are in the private sector, a statement that would have fallen under the blade of our philosophical axe. Indeed some jobs are best managed by the government since they not only do not need the profit motive, but the profit motive would interfere with them. In a sense they are the best jobs there are, because they answer only to the highest values. Saving a life in a fire is intuitively a higher calling than selling marshmallows.

So it is with soldiers, air controllers, nurses, medics, firemen. So it ought to be for life saving doctors (by contrast with plastic surgeons who are into beautification), and it ought to be like that for politicians (contrarily to the dismal situation of the USA).

Meanwhile, Paul Krugman also brandishes the axe of drastic simplification. As he puts it:

" let’s look at how deep a hole we’re in. Rather than going into the details of output gap calculations, let me present the most naive calculation: comparing actual GDP since the recession began with what it would have been if the economy had continued growing at its trend (from 1999 to 2007). It looks like this:

image

So we’re something like 8 percent below where we should be. That translates into lost output at a rate of well over a trillion dollars per year (as well as mass unemployment). And we’ll keep suffering those losses, even if GDP is now growing, until we have enough growth to close that gap. Since there’s nothing in the data or anecdotal evidence suggesting any gap-closing in progress, this is a continuing tragedy.

The situation would look worse, if one drew similar graphs, after removing from the GDP of the USA the contribution of the financial sector and the contribution of the pollution sector. Let alone the contribution of the private prison sector, unique to the USA, and so corrupting that judges were condemning people to get paybacks (and were themselves condemned in 2009). Removing the part of the GDP confiscated by the richest of the rich would make it appear even worse.

Obama himself has pointed to the oversize contribution of financials before, even suggesting, if I remember well, to re-compute the GDP after excluding financials. An excellent call.

Another example of such horror masquerading as a good is the artificial, and actually noxious boost to GDP brought by the pollution sector, in particular, traffic jams and smelly cars. The automotive fleet of the USA is half as efficient than the European one, for the same distance; thus, for the same distance, the contribution to the GDP of the USA by the inefficient automotive transportation sector is twice what it is in Europe. OK, Obama intends to fix this by increasing the efficiency of cars considerably (they may equal European 2009 efficiency in a decade or so).

The artificial boost from pollution to the GDP of the USA is even greater considering the massive usage that Europeans make of electric trains. The efficiency of electric trains is many times that of automobiles, and those trains contribute very little to CO2 emissions (especially in countries where electric production is clean). That, on the other hand, Obama intends to do nothing much about it (just one short very high speed line along the French Riviera will cost several times all the money Obama gave for high speed train travel for the entire gigantic USA!)

Noting that inventories have been building up, Paul Krugman observes that a double dip recession seems hard to avoid, and draws the logical conclusion: …"the implication of all this would be clear: we need more stimulus. Yes, it would add to federal debt — but isn’t that worth doing to help reduce an output gap that’s wasting our potential at the rate of more than a trillion dollars a year?"

Indeed some countries have been operating just fine with much larger deficits than the USA. There are indeed much worse things than a big deficit in what the government takes in relative to what it spends. It is completely obvious that taxes could be raised and the deficit erased. Another method would be carefully crafted, people serving, inflation (right now, inflation is carefully crafted already, hidden from the CPI, true, and in a way that serves the oligarchy, not the people).

The worse deficit imaginable is in education, followed by one in health care. The USA is increasingly affected with both deficits, in spite of Obama’s efforts.

What we need is more than a stimulus for the economy: we need a plan to get out of the present waning of comparative advantage, and the rosy future that could be ours. The USA needs to lead out of this planetary mess, instead of dragging us to the bottom of it ever more.

In the past, the USA did not lead in all ways, but it led drastically in some ways towards a better world: the reforms under FDR or LBJ were path breaking, ahead of anything anywhere. What happened to this spirit of partisanship to progress? Is not that better than bipartisanship to nowhere?

Now the USA is drastically dragging in all ways. Obama needs to present us with a long term, really stimulating plan, not just another short term stimulus.

In France industrial plans on nuclear plants (even of the thermonuclear type!), advanced very high speed trains and other electric transportation, future planes and rockets are in full swing, without counting a controversial, drastic refurbishing of the school, university and research system… And of the health care system (always a work in progress).

Some of the French and European industrial projects (such as very high speed, 250 mph electric trains, or drastically lower CO2 emissions for cars and factories) extend all the way to 2030. Meanwhile China has grandly thrown the gauntlet by declaring it would become number one in renewable energy (now, interestingly, the number one in renewables is coal diseased, but high tech Germany!). There is no doubt this will happen. Why? Because this is a government sponsored plan. The only way the USA can reply to this is with government sponsored plans. As in Europe, India, China, Brazil. And as in the USA, when the USA came to dominate. 

One would hope that the USA would start worrying this way, how to lead progress again, towards a better understanding of the universe and how to improve it, rather than just being hindered by the mess it contributed so mightily to in the Middle East, and the world’s financial system, not just to say the world thinking system.

***

Patrice Ayme


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