A few weeks ago Zero Hedge offered a modest critique of Jeffrey Sachs after his disastrous performance in a round table debate with Hugh Hendry and Gillian Tett, in which the Columbia professor came out sounding as clueless as a first year economics major. It now appears that Mr. Sachs may be attempting to atone for his myopia memorialized by the BBC, in the following FT Op-Ed in which he unabashedly lashes out at Keynesianism. In it we read: "Mainstream Keynesian economics is facing its last hurrah. The global fiscal stimulus championed last year by the Obama administration is coming undone, repudiated by the same Group of 20 that endorsed it last year. Now, against a backdrop of a widening sovereign debt crisis, we need to abandon short-term thinking in favour of the long-term investments needed for sustained recovery." Such words of caution from a man who as recently as two weeks ago was encouraging precisely the very steps he is now purporting to be against. Nonetheless, we greet with open arms this most recent act of contrition by yet another economist who leaves the warm innards of the corpse of the economic false religion, and finally sees the light. Welcome Jeffrey.I'm not sure if Tyler Durden read the same, fallacy-ridden Op-Ed I did but I have to believe he did because I recognized the "money quote" he pasted in from the conclusion of the Op-Ed.
Now we face a world economy with weak aggregate demand in the US and Europe, bulging budget deficits, sovereign debt downgrading and consumers unwilling to borrow. Governments are fighting for market credibility via draconian cuts in spending. This too is the wrong approach. We should avoid a simplistic austerity to follow the simplistic stimulus of last year. Here are some suggested guidelines.Tyler opines that this "tirade" could've "come from the pen of any Austrian". Is it April Fool's Day today?
First, governments should work within a medium-term budget framework of five years, and within a decade-long strategy on economic transformation. Deficit cutting should start now, not later, to achieve manageable debt-to-GDP ratios before 2015.
Second, governments should explain, and the public should learn, that there is little that economic policy can do to create high-quality jobs in the short term. Good jobs result from good education, cutting-edge technology, reliable infrastructure and adequate outlays of private capital, and thus are the outcome of years of sustained public and private investments. Governments need actively to promote post-secondary education.
Third, governments must of course also ensure social safety nets: income support for the poor, universal access to basic healthcare and education, a scaling up of job training programmes and promotion of higher education.
Fourth, governments should steer their economies towards needed long-term structural transformation. External-deficit countries such as the US and UK will need to promote exports over the next few years, while all countries must promote clean energy and new transport infrastructure.
Fifth, governments and the public should insist that the rich pay more in income and wealth taxes – indeed, a lot more. The upward re-distribution of the past 25 years has made our economies into extravagant playgrounds for the super-wealthy. Politicians of both the mainstream left and right in the US and UK have fawned over those who pay their campaign bills in return for low taxation. Even playgrounds should collect tolls – when it is billionaires in the sandpit.
We need, in sum, to reset our macroeconomic timetables. There are no short-term miracles, only the threat of more bubbles if we pursue economic illusions. To rebuild our economies, the watchword must be investment rather than stimulus.
Tyler, you need to go back to Mises U and learn about the Austrian school of economics.
Austrians do not support: government-engineered "economic transformation"; public "invesments"; government subsidies for post-secondary education; social safety nets, universal government healthcare and government job training programs; government "steering" of economies; taxation, specifically of the rich.
In other words, there was nothing, I repeat NOTHING, Austrian about Sachs's proposal. In fact, it was just more neo-Keynesian mercantilist fallacies, also known as fascism.
Yes, that's right-- if you actually read Sachs's column he calls for more government intervention, not less. He is more fearful of the reign of the free market, not less, as an Austrian would be. He wants an economy characterized by "public-private partnerships", Soviet-esque Five Year Plans for government piloting of the economy and overall a set of economic circumstances in which enlightened academic technocrats and other noble, selfless public servants such as himself would be tasked with making decisions about tradeoffs and where to deploy scarce resources.
Far from running from Keynes to the Austrians, Sachs is running toward Jean-Baptiste Colbert, one of the early proto-fascist intellectuals of the burgeoning French absolute State and predecessor to Keynes, whose own fallacious mercantilist ideas were informed by his experiences working for the British Empire's colonial offices in India.
And Tyler Durden fell for it.