If an economist wants to get places, he had best tell politicians and bureaucrats what they want to hear. The danger is that if says it often enough, he will himself come to believe it.
Larry Summers is an economist. When Bush was in power, he believed in Bushonomics, which got him into trouble in an academic environment of rigid, mindless, and unthinking left wing orthodoxy. Now, however, it seems he firmly believes in Obanomics.
In his interview with a financial times blogger, Larry Summers explains that whatever Obama wants to do for political reasons, is also the right thing to do economically. Obama, supposedly, faces no tradeoffs between his goals. He can have it all, can do everything. None of his objectives are going to get in the way of other of his objectives. That must be very nice for Obama to hear:
As the panic has subsided, the trendy new economic issue has become “exit strategy” – as in, when and how do governments shift from costly and aggressive intervention to levels of spending and taxation that are sustainable over the long term?
Summers rejects the premise of the question.
When I visited Cuba, it became apparent to me that not only did the Cuban government lie to visitors and to its subjects, it most of all lied to itself – that power isolated the powerful from knowing what was in fact happening in Cuba. Not only does the Democratic party believe that Cuba has wonderful medical care, so does the Cuban elite.
The most striking fact about the new American economy is that businesses that do not produce value, that have failed catastrophically and ruinously at producing value, but which have cosy connections to the state, such as Goldman and Sach, make profits for the super rich, which profits soar into the stratosphere. The new economy is very very good for the well connected businessman, good for the union boss, bad for the ordinary consumer, and very very bad for the entrepeneur.
This new American economy, Summers hopes, will be “more export-oriented” and “less consumption-oriented”; “more environmentally oriented” and “less energy-production-oriented”; “more bio- and software- and civil-engineering-oriented and less financial-engineering-oriented”; and, finally, “more middle-class-oriented” and “less oriented to income growth that is disproportionate towards a very small share of the population”.
The second most striking fact is that any technology that actually is environmentally oriented – such as replacing coal power with nuclear power, or even solar power, gets struck down on a multitude of legalistic grounds by environmentalists whose true goal is the destruction of western civilization and swift and massive reduction of the human population. They favor symbolic environmental technology, such as rooftop solar, but any environmental technology that actually has the potential to replace coal, such as solar thermal tower power, is swiftly crushed. I very much doubt it is Obama’s goal to destroy western civilization, but it is his goal to keep the ayatollahs of Gaia happy, and Summers tells him that keeping them happy will have no costs, only benefits, which is what Obama wants to hear.
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