Why the UK must reverse its economic course

By Lawrence Summers
September 17, 2012

It is the mark of science and perhaps rational thought more generally to operate with a falsifiable understanding of how the world operates. And so it is fair to ask of the economists a fundamental question: What could happen going forward that would cause you to substantially revise your views of how the economy operates and to acknowledge that the model you had been using was substantially flawed? As a vigorous advocate of fiscal expansion as an appropriate response to a major economic slump in an economy with zero or near-zero interest rates, I have for the last several years suggested that if the British economy – with its major attempts at fiscal consolidation – were to enjoy a rapid recovery, it would force me to substantially revise my views about fiscal policy and the workings of the macroeconomy more generally.

Unfortunately for the British economy, nothing in the record of the last several years compels me to revise my views. British economic growth post-crisis has lagged substantially behind U.S. growth, and the gap is growing. British GDP has not yet returned to its pre-crisis level and is more than 10 percent below what would have been predicted on the basis of the pre-crisis trend. The cumulative output loss from this British downturn in its first five years exceeds even that experienced during the Depression of the 1930s. And forecasts continue to be revised downward, with a decade or more of Japan-style stagnation now emerging as a real possibility on the current course.

Whenever policy is failing to achieve its objectives, as in Britain today with respect to economic growth, there is a debate as to whether the right response is doubling down – perseverance and intensification of the existing path – or recognition of error or changed circumstances and a change in course. In Britain today such a debate rages with respect to the aggressive fiscal consolidation that the government has made the centerpiece of its economic strategy.  Until and unless there is a substantial reversal of course with respect to near-term fiscal consolidation, Britain’s short- and long-run economic performance is likely to deteriorate.

An effective policy approach to Britain’s economic problems must start with the recognition that the principal factor holding back the British economy over both the short- and medium-term is the lack of demand. It is certainly true that Britain faces important structural issues, ranging from difficulties in promoting innovation to deficiencies in the system of worker training. But it is apparent from the relatively low level of vacancies, the reluctance of workers to leave jobs, the pervasiveness across industries and occupations of increased unemployment and the testimony of firms regarding the formation of their investment plans that it is lack of demand that is holding the economy back from producing as much as it could.

Keynes writing during the Depression compared Britain’s economic problems to a “magneto” problem, referring to the fact that a car might have many infirmities, but if its electrical system did not work, the car would not go, and if it were fixed, the car would go even with other problems. So it is today. Moreover, to an extent that is greatly underappreciated in the policy debate, short-run increases in demand and output would have medium- to long-term benefits as the economy reaps the benefits of what economists call hysteresis effects. A stronger economy means more capital investment and fewer cutbacks to corporate R&D; it means fewer people lose their connection to good jobs and get addicted to living without work; it means that more young people get first jobs that put them on ladders to success; and it means more businesses choose leaders oriented to expansion rather than cost-cutting. The most important structural program for raising Britain’s potential output in the future is raising its actual output today.

The objection to this view comes in many forms, but it is in essence that “reversing course on fiscal expansion now would undermine credibility, backfire with respect to growth by risking a spike in capital costs, and risk catastrophe down the road as debts became unsustainable.” This line of argument is profoundly flawed. First, the behavior of financial markets suggests that it is economic weakness rather than profligacy that is the main source of concern about credit problems down the road. Why else would the tendency be for the costs of buying credit insurance on the UK to rise overall as interest rates fall? In similar vein, a strong tendency has emerged in both the UK and U.S. for interest rates to rise and fall together with stock prices, implying that it is evolving optimism and pessimism about the future, not changing views about fiscal policy, driving market fluctuations. Second, the reality is that the primary determinant of fiscal health in both the U.S. and UK over the medium term will be the rate of growth the economy achieves. An extra percentage point of growth maintained for five years would reduce Britain’s debt-to-GDP ratio by close to 10 percentage points, whereas austerity policies that slowed growth could even backfire in the narrow sense of raising debt-to-GDP ratios and turning the unsustainability of debt into a self-fulfilling prophecy.

A change in the pace of fiscal consolidation is necessary for Britain to have a chance to avoid a lost decade of economic performance. It is, to be sure, not sufficient. Rather than starving public investment today, now is the time to add to confidence by making plans for structural reforms to contain the growth of public consumption spending over time. It is also time to take overdue measures to promote exports and, after years of appropriately low investment, to restart housing investment. But at a time when demand is needed for growth and the private sector is hanging back, the first priority must be for the public sector to stop exacerbating the contraction.

PHOTO: Britain’s Prime Minister David Cameron gestures while viewing a parade of British Olympic and Paralympic athletes through London September 10, 2012. REUTERS/Adrian Dennis/POOL

21 comments

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“British economic growth post-crisis has lagged substantially behind U.S. growth, and the gap is growing.” Gee Larry, I worry what might happen to U.S. growth when the bill comes
due for the Fed stimulus policies.

Posted by drh | Report as abusive

“Whenever policy is failing to achieve its objectives, …there is a debate as to whether the right response is doubling down – perseverance and intensification of the existing path – or recognition of error or changed circumstances and a change in course”

Exactly the same argument could and should be applied to current fiscal policy in the US, i.e. spend, spend, spend, which in almost four years clearly hasn’t worked either.

The difference between the failing policies in the US and the allegedly “failing” policies in the UK, is that the UK’s dependence on crumbling Europe and on foreign trade with crumbling Europe is significantly higher than that of the US.

Time will tell if America’s fiscal (and monetary)adventurism or the UK’s fiscal responsibility will result in stronger recoveries and stronger economies in the medium to long term. My bet is on the UK; see, their policy horizon is not next November’s elections.

Posted by CAL59 | Report as abusive

“Why else would the tendency be for the costs of buying credit insurance on the UK to rise overall as interest rates fall?”

At first glance, your argument’s validity appears to depend on your list of potential explanations being exhaustive (but I have not seen this list set out clearly here, perhaps due to my lack of education in economics).

Even so, this is an interesting observation; which might be taken to support my developing hunch that the relatively soft impact of the downturn in the USA and Britain (as compared to Greece or Spain for example), arises partly out of the lack of good alternative “safe” options for places to invest money (Argentina, for example, is still emerging from their second major default in 100 years). Naturally, future growth expectations figure into perceptions of “safety”, and fiscal freedom/ fiscal sovereignty figure in to those expectations.

Perhaps this validates (for now) the continued nominal pre-eminence of the West in economic affairs. (Still, I’d hate to see what would happen to these correlations if the rest of the non-Anglo-Saxon world gets a better clue about economics… We should be careful not to paint ourselves into ANY sort of economic dead-end, where competing nations might be able to further limit our manoeuvreability.)

Your opinion-piece has echoes of Gordon Brown’s favoured language on this subject: “one-dimensional approach”. Clearly, as you have helped to explain, we need to think about “safety”, “growth” and “fiscal policy” as part of the same multi-dimensional world. We should keep an eye on the types of indicators you describe (along with the changing economic indicators of our competitors), to see which factors are most likely to be important, now and in the near-to-medium-term future.

(Spelling is UK standard in this comment because this is an article about the UK.)

Posted by matthewslyman | Report as abusive

…To simplify my previous post with an analogy… Comparing macroeconomics to microeconomics…

It’s as though the bank just doesn’t care that one of their customers has accumulated debts of 100% of annual salary, as long as that customer has credible plans for increasing their salary in the future… (What matters to the bank is a combination of debt levels with overall “credit worthiness”, which can be assessed in a complex manner for large customers such as nation-states.)

Only, we’d better not be too smug about this state of affairs. Factors beyond our control might change our apparent credit-worthiness (or, the bank might spot some better opportunities and start calling in our debts), so that the friendly approach we’re currently enjoying from our creditors might change very quickly if they start smelling red meat (the bank might suddenly change our credit-card interest rates if they think they now have us effectively on the hook for slave labour)…

Some interesting counterpoints from your colleague, Edward Hadas:
http://blogs.reuters.com/edward-hadas/
http://blogs.reuters.com/edward-hadas/20 11/11/30/mr-fine-suit-visits-europe/

My take from all of this is that these correlations between economic indicators that you cite as evidence here, can be short-lived. We should not take them as axioms for our next economic theory…

Posted by matthewslyman | Report as abusive

Your message is, essentially, just believe and act as if things will work out and they will. You sound like but one of the great majority that doesn’t “get it”.

We are only now seeing the long term effects of inexpensive computers on business. They have made possible an expanding “just in time” efficiency for production, inventory and distribution in food, fuel, chemicals, widgets, etc.

They are largely responsible for the explosion in productive research in all fields, perhaps no where greater than in medicine and the ever-increasing miracles there available. Unfortunately, they have yet to enable “we, the people” to be productive enough on an individual basis to afford them and remain financially solvent.

Because it is no longer necessary to employ lots of people steadily to steadily produce widgets for a manufacturer, those jobs don’t go anywhere or ever come back. When production is precisely and accurately matched with seasonal demand, no longer are huge warehouses necessary. Those who once built these facilities, those who stacked, inventoried, pulled and shipped the widgets, and those that managed the place all have had to find other employment in a world with less and less of it.

Today’s realities force managers that are effective and efficient to structure “jobs” such that they can be “mastered” by any literate person with basic math skills in a two week period. So long as there are more applicants than jobs, these minimum-wage positions offer little, if any possibilities for advancement.

Those “in charge” know it is less expensive to hire two twenty-hour part timers without “benefits” to do forty hours of work. Then, each can then do up to twice as much work when necessary without paying overtime.

Every job that can be simplified and/or automated increasingly will be. Computer controlled machines work up to 24 hours a day, 7 days a week without complaint, raises, “continuing education”, promotions, time off, breaks, sick leave, medical insurance, families, vacations, or retirement.

The elephant in the room is that population growth no longer translates into economic growth. The number of “jobs” necessary for society to function is decreasing as even as population is increasing.

People with no productive place in society are an ever-increasing challenge to educate and employ. As their percentage of a society becomes larger, so does their drag on the economy of which they are part.

In an agrarian society, more children meant more labor to work more land with greater efficiency. In the city, more children just mean more unproductive mouths to feed that may never leave “home”. Most population today is in the world’s cities.

No one yet offers a “blueprint for success” in a “new normal” when food, clothing, shelter and transportation are increasingly expensive leaving less and less purchasing power for the “wants” that have made western civilization the envy of the world. Generations raised to expect a “better life” than their parents are not only going to be disappointed. They’re going to be angry!

Posted by OneOfTheSheep | Report as abusive

With all due respect – to Mr. Summers and to commenters: It seems the analyses represent thinking within a fairly restrictive framework – a framework that only measures “success” in terms of national debt to income ratio. Such a framework only in the most abstract way acknowledges the only acceptable rationale for “an economic policy”. The only legitimate reason is to serve day to day well-being of citizens, including “the least of these”.

So far as I understand, massive quantities of productivity geared to serve citizen well-being of any country are not counted as relevant to measures of “economic performance”. I refer to activities such as raising gardens, distributing food locally, caring for infirm without collecting a fee, etc.

I also refer to subsistence fishing villages in India about to lose their local economy to whatever “investment interests” have convinced themselves a nuclear plant would be an “excellent development”. And from that situation, I refer you to Fukushima.

I also refer you to the Louisiana coast and bayou regions that experience constant barrage of toxins, and to the Fort McMurray Alberta region for the same conditions. I refer you to ocean life, to land-based life, to local citizens in all these areas and across this earth.

The “externalized costs” of “expansionist, earth-destroying” practices to support high consumption lifestyles are real costs – with infinitely far reaching consequences. Entire natural systems that underlie all support of all life on this planet are lost.

I recommend spending a weekend running thought experiments and explorations. “Expansion” and finding more ways to make, market, and buy “stuff” has run its course. We humans, if we have any legitimate claim to the intelligence we’re so proud of, must release dedication to expansionist, capital-driven interest-charging economic structures.

I’m not describing what we need as replacement – but we *do* need analytical minds like that of Mr. Summers to be put on task for what is needed rather than for what can no longer serve and furthermore is dangerous.

I also recommend viewing former NZ MP Marilyn Waring’s documentary: “Who’s Counting? Sex, Lies, and Global Economics” (by Terry Nash). The 95 min film can be viewed at http://www.nfb.ca/film/whos_counting.

Posted by MaggieMP | Report as abusive

What about Interest Starvation?? One reason I am not spending is that what I have accumulated by saving my nickels and dimes for decades is earning NO INTEREST! While low interest rates help borrowers, they kill savers. I majored in accounting, not economics, so I know the debits and credits have to balance. What you give one place comes from somewhere. You can’t just focus on low interest for borrowers and ignore the rest of the transaction.

I will start spending when the interest starts coming in.

Posted by RLamarSmithCPA | Report as abusive

Comments administration, please feel free to delete one of the duplicate posts and this note also if it’s possible! I apologize for double posting – an accident due to extremely long wait time (my DSL is slow – but this was an unusually long time). I clicked ‘stop process’ and re-sent. It appears the result was a double send.

Posted by MaggieMP | Report as abusive

You are correct in your overall theory. You are incorrect in your analysis. When things don’t work, you should change your theory. Your theory, based on Keynesian economics, is to engage in massive government spending. Your analysis is incorrect because the UK did not cut government spending. Instead, the UK increased taxes. Increased taxes and government spending caused the recession in the UK. First of all, higher taxes reduces the incentive to produce, sell, create, etc. The same thing that is expected to happen here once the fiscal cliff starts and taxes are increased. Secondly, government spending takes money away from the private sector in taxes or debt. When the debt levels get too high, then government spending saps the strength out of the private sector. Only the private sector creates wealth, so when you take money away from the private sector you destroy wealth. The Latvian and Scandinavian countries learned the lesson and they are thriving. The Obama Administration is intent on class welfare and so our recession – depression has already started.

Posted by alanguil | Report as abusive

Much wisdom in “OneOfTheSheep”‘s observations. Many bodies and brains, not enough employment in a system that is increasingly automated.

We understand the advantages of automation – but “bodies and brains” remain a tremendous asset presently cast aside. I’ve a fairly radical proposal – one solution is to finally treat labor-intensive work as the valuable service it has always been.

Why not employ crews to dismantle or retro-fit older buildings, thereby salvaging materials or restoring buildings otherwise declared “scrap”. Why use fossil fuel gobbling machinery to destroy standing live timber, use more ff machinery to haul newly cut timber to mills where more energy is used to dress the lumber – then haul it off marketers, and eventually transport it to sites cleared for construction (more ff use to flatten and haul already-cut/milled lumber to landfills in site preparation)?

Engines roaring, fossil fuel going up in smoke, from start to finish. With presumably sober minds and straight faces we actually claim it’s rational to risk total ocean destruction to extract more oil, at increasingly poor ratios of fuel consumed for fuel gained. (As to land based extraction systems, we see how fracking consumes and risks fresh water … lunacy compounded.)

History explains how sweat labor came to be de-valued. But this is a choice. If a human working with muscle takes longer – the earth and all of us may be better served. The difference in a new economic paradigm is that this labor will need to be given due respect. Laborers will need to be understood as key to earth-care. Instead of long hours at minimal pay, they should work shorter hours (body wear/tear in mind) and should be paid a decent living wage, with good benefits. Because of shorter work hours they will have more energy and interest in developing latent talents that are impossible to pursue when one is aching and exhausted. They’ll have time for families and for participating in civic affairs.

(Anyone who believes ‘labor-intensive’ work does not require creativity, ingenuity, and problem solving has never farmed or re-built an older home or designed/dug water systems!)

From construction to agriculture and many other industries, it seems to me we’re ignoring possibilities. We’re letting ourselves be trapped by paradigms that we’ve come to believe are “natural laws of the interactive dynamic earth.”

Economic systems are a construct intended to serve. They can be revised. They are at best “sort of” modeled after natural dynamic systems. The real world (the one that needs trees, insects, vibrant land and viable oceans), is a dynamic “event” – not a static place waiting for direction from an economic system. This real world cannot be bent or enslaved to a system that in fact operates like a machine. Well – we can keep trying – but we won’t like the results, in fact they may not be survivable!

We genuinely need to ‘get real’ and take on the task that confronts us.

Posted by MaggieMP | Report as abusive

Would someone please explain to me what Mr Summers is saying? I get lost by the time I finish reading one of his sentences, but it seems t o me that he is saying “growth is good lack of it is bad”. I doubt that the UK government would disagree but the question is how to achieve it. He appears to recommend to follow Keynes’ suggestion of 80 years ago, or so. That is, more government spending. But many would argue that governments have been following Keynes for decades (hence huge government debts) and have exhausted their abilities to spend. Mr Summers is no doubt aware of such arguments but he says nothing about them. Ultimately, his recommendation, it seems to me, is simply “trust me”.

Posted by GivaFromOz | Report as abusive

As a non-economist, please explain a couple of issues for me.

Firstly, why do you cite the USA experience as an example? The US economy is being held up by an ongoing fiscal deficit, which is nearly 50% of their taxation income. This looks like highly risky behaviour, which will leave a legacy like that of Japan.

Secondly, hasn’t Japan followed the strategy of attempting to stimulate its economy? Yet it has failed, racking up a government debt to the level of about 200% of its GDP in the process. Yet isn’t this the strategy you are advocating.

I might be naive, but it seems to me that businesses lack confidence because there is a doubt that governments around the world can actually fund themselves. If this situation could be remedied, this would be more likely to trigger a return to economic health than a simplistic attempt to jump-start the economy.

Posted by GrahamLovell | Report as abusive

And could someone PLEASE delete duplicate posts! It looks like a few others had the same ‘symptoms’ as I did … comments stayed as if not submitted for incredibly long times. I even went on a 2 hr errand trip while one seemed to go nowhere! My last post is the greatest disaster in duplication – it bothers me … makes me want to grab the website and “fix it”!! THANKS IF ANYONE CAN TAKE CARE OF THIS!

Posted by MaggieMP | Report as abusive

The main reason is when the United Kingdom’s economy recovers and expands it discredits all of the arguments by Statists like Mr. Summers who advocate destructive monetary policy. The United States is experiencing its most anemic recovery from a recession in its history and Mr. Summers writes as if America is the ideal for the world to follow. What total folly.

In fact stimulus does work to rebound from recoveries. Stimulating the economy by cutting taxes and pursuing strong dollar monetary policy led to our most vigorous rebounds from recessions under John Kennedy and Ronald Reagan. They relied on the Microeconomic vitality of the private sector when they cut taxes and attracted capital by raising interest rates.

Mr. Summers needs to read more of the work of Nobel Laureate Robert Mundell.

Posted by thesafesrufer | Report as abusive

@MaggieMP,

Thanks for the kind words. You are obviously a “thinker” and your words sound straight from the heart. I would offer my differing “take” on some of your suggestions for consideration, no offense intended.

Whether slaves, serfs, peasents, or today’s “minimum wage” workers, the economic value of “bodies and brains” is determined by supply and demand. The brain of an author just beginning their first work may have “tremendous potential” for the future, but few, if any, know or even suspect it. That, and five bucks buys me coffee at Starbucks.

Like a geological survey, mere “potential” is worth only a fraction of the value of a proven, pumping well. The brain of prolific authors of “best sellers” can be referred to as a “tremendous asset” because there is tangible evidence of genuine economic value.

I am old enough to remember women whose lives were infinitely improved as “progress” and “relative economic affluence” made available the early washing machines, electric irons, gas stoves, indoor plumbing, electric light, refrigerators and air conditioning. Where would you draw “the line” between needs and wants?

No longer did their hands shrivel from constant immersion in caustic water, get scarred from handling poorly balanced stove-heated cast irons, chopping or splitting wood for the stove. Backs did not ache or become bent carrying water from an outside source.

With indoor plumbing, summertime was no longer a time of disease; people didn’t live half their lives with the pain of rotting teeth, fewer women and infants died in birth and appendicitis is no longer a death sentence in most of America. The family “lived better” before the sun came up and after it went down because one could see better with electric lights that were safer and brighter than candles, kerosene lanterns or gas light.

I don’t think you could sell many women of today to go back to the “good old days” I have described. The Industrial revolution was all about replacing human sweat with animal sweat, steam “energy”, electric “energy”, or “petroleum energy”; the latter three largely being produced by burning wood, coal or oil (or refining same).

Would you people on bicycles or treadmills to generate electricity? People aren’t hamsters, but if that was the sole energy source for TVs, we might have less obesity.

You are 100% right that the ratios of fuel consumed for fuel gained are rapidly dropping and no one can argue with a straight face that man is not eagerly destroying the earth’s rain forests and overfishing it’s oceans. Why? The reason is simple.

There are too many people on this earth for it to support with an “American” quality of life. This has been a truth ignored by those who should know better for far too long.
@MaggieMP,

Thanks for the kind words. You are obviously a “thinker” and your words sound straight from the heart. I would offer my differing “take” on some of your suggestions for consideration, no offense intended.

Whether slaves, serfs, peasents, or today’s “minimum wage” workers, the economic value of “bodies and brains” is determined by supply and demand. The brain of an author just beginning their first work may have “tremendous potential” for the future, but few, if any, know or even suspect it. That, and five bucks buys me coffee at Starbucks.

Like a geological survey, mere “potential” is worth only a fraction of the value of a proven, pumping well. The brain of prolific authors of “best sellers” can be referred to as a “tremendous asset” because there is tangible evidence of genuine economic value.

I am old enough to remember women whose lives were infinitely improved as “progress” and “relative economic affluence” made available the early washing machines, electric irons, gas stoves, indoor plumbing, electric light, refrigerators and air conditioning. Where would you draw “the line” between needs and wants?

No longer did their hands shrivel from constant immersion in caustic water, get scarred from handling poorly balanced stove-heated cast irons, chopping or splitting wood for the stove. Backs did not ache or become bent carrying water from an outside source.

With indoor plumbing, summertime was no longer a time of disease; people didn’t live half their lives with the pain of rotting teeth, fewer women and infants died in birth and appendicitis is no longer a death sentence in most of America. The family “lived better” before the sun came up and after it went down because one could see better with electric lights that were safer and brighter than candles, kerosene lanterns or gas light.

I don’t think you could sell many women of today to go back to the “good old days” I have described. The Industrial revolution was all about replacing human sweat with animal sweat, steam “energy”, electric “energy”, or “petroleum energy”; the latter three largely being produced by burning wood, coal or oil (or refining same).

Would you people on bicycles or treadmills to generate electricity? People aren’t hamsters, but if that was the sole energy source for TVs, we might have less obesity.

You are 100% right that the ratios of fuel consumed for fuel gained are rapidly dropping and no one can argue with a straight face that man is not eagerly destroying the earth’s rain forests and overfishing it’s oceans. Why? The reason is simple.

There are too many people on this earth for it to support with an “American” quality of life. This has been a truth ignored by those who should know better for far too long. The “Population Bomb” that concerned ordinary U.S. citizens in the sixties left the public conscience and has since quietly exploded worldwide. Is the ostrich in danger any safer in denial with head in sand?

There are billions in Africa, China, India, South and Central America that aspire to own the cell phones, TVs, homes, cars and food they see on television the world over. Will they accept your suggestion that these things will remain forever beyond their grasp, and that of their children and their children’s children? Good luck with that.

If a majority of human’s “purpose” is to provide “sweat labor” their whole life, how is their existence better or of more significance than that of a horse or an ox? Respect is like a “good reputation. It is something earned again and again, and not something given once and forever. On what possible basis would such “sweat labor” earn the respect you suggest?

Indeed, I would argue that if mankind does not very soon devise and implement efficient and environmentally sustainable sources of economic energy and food production, humanity is destined to turn this big blue marble into a big brown marble. We live in a time that most do not realize is one of the most peaceful in history; and yet there are more than enough crazies “out there” that would happily reduce this planet to radioactive slag within moments of gaining access to the necessary tools of destruction.

The only credible alternative is that the world will prioritize the resources necessary to establish colonies on the moon, Mars, and outward that can ultimately be self-sufficient. So long as humanity’s “eggs” are all in one basket, i.e. on this Earth. all the hopes, dreams, sweat, and sacrifice represented by all of man’s recorded history is in grave peril.

You can create any kind of society you want just by how your tax system penalizes and rewards people. When the U.S. taxes individuals who achieve increasing economic success at a “proportional rate”, at some point the incentive to “produce” disappears. “Success” is thus discouraged.

When illegal immigrants who jump our borders and America’s own” poor, unmotivated, unskilled, and unemployable are rewarded with tax incentives, literally “by the head” to produce ever more of themselves, these become an ever-increasing proportion of our population. History will look back and ask “What were they thinking?”

I believe a choice must be made between quality of life and quantity of life. Only by embracing the promise of technology can man discover the best and brightest path forward. The necessary economic “seeds” must be planted and carefully nurtured to maturity if our existence on this Earth is to become more sustainably productive and the lives of ordinary citizens more “meaningful”.

Posted by OneOfTheSheep | Report as abusive

To pretend that UK deliberated the essence of the economic argument is ridiculous. Country Supper Dave and Murdoch’s Boy George promised to sell the rest of BSkyB to Rupert’s boy James. Rupert also demanded lower taxes, and that can only be done if the debt is reduced, so that is the basis for the decisions to abandon logic and economics. When Dave flew out to Murdoch’s yacht with his best buddy Rebecca, he promised to slash public spending and in exchange, Murdoch agreed to use his multi-headed press machine to elect Dave. So Larry Summers and Gordon Brown can discuss how stupid the economic decisions are till the cows come home, but UK’s decision are not based in science but in the art of the deal. And Dave is looking to have one more term so politics and secretive insider deals will rule.

Posted by sylvan | Report as abusive

Correction: This is the first Hadas article I intended to refer to:
http://blogs.reuters.com/edward-hadas/20 12/06/27/both-sides-losing-austerity-fig ht/

Posted by matthewslyman | Report as abusive

Mr. Summers, OneOfTheSheep, and other commenters:

OneOfTheSheep: I’ve been mulling how best to reply (and promise to only click ‘submit’ once no matter what on my screen makes it look as if my message is not uploading!).

One of my problems in replying is that I can’t isolate repairing the economic system’s early 21stC woes from a need to rethink, revisit, revise all civilization’s paradigms for the last several hundred years if not longer. I’m not kidding, and don’t want this kind of complexity for any of us – but given the state of things, I think “everything” is called to question.

I believe you and I have exchanged thoughts before with particular focus on people accused of lacking motivation due to having been “spoiled” by “nanny state policies” (Neither of us used that term but I think it captures the concern.) We disagreed as to cause. I’m pretty sure we still do. (I’d suggest we’ve created a situation of ‘warehousing’ people with a predictable loss of ‘spark’ among many, and it’s become trans-generational.)

I do agree that “there are too many people on this earth for it to support an ‘American’ quality of life.”

I also fully understand how labor saving devices of the most ordinary household type and similar devices in workplaces have “freed up” talent, study, and skill for countless individuals, especially women. I do want to add that this has been true in societies that have made these gains, and to point out they’ve done so with ‘out of sight, out of mind’ dependency on rather brutal exploitation of earth and its peoples in the farther reaches. There are places in the world today where impoverished miners have half the expected life-span of people living in “advanced” societies who rely on their work. If there were a map of the world to show unhealed places of toxic and severely damaged earth surfaces – both at land and sea – I think the scope of our “advanced living systems” would be clear. (I’ve looked every so often for such a map – no luck yet.)

I understand advantages of ordinary labor saving devices. I was raised in a ‘wringer washer’ home and later lived slightly more than a decade with no plumbing at all (child in cloth diapers, a challenge!). I will point out that neither my grandmothers nor my mother were diminished by using wringer-washers. All were well educated, and although farming, all had time to participate in civic and broader cultural affairs.

In any case, I didn’t mean to suggest we should scrap advantages gained. I meant we should scrap *some* of what we think we’ve gained that in truth is simply excess (estate sized homes with 1 bath per bedroom; more broadly – planned obsolescence to increase sales).

I also meant to suggest we should scrap energy practices that increase the severity of our crisis, (fossil fuel use for replacing reparable homes, when anyone who’s run a sound thought experiment surely would realize the attendant externalized, ignored, costs to the very earth that we depend on).

We in modern industrial nations, especially but not only the US, are most responsible for earth damage on such a scale that earth cannot keep up to our pace. It cannot repair and replenish itself fast enough. Emerging nations may be clamoring for what we’ve got – but they’re not the problem. The problem is the one you identify: too many people, not enough earth.

We got to where we are by following practices increasingly geared to ‘funneling’ people into a cash economy, (now morphed to a ‘debt’ economy – significant difference, but I’ll leave that aside.) Enclosure acts – laws to justify denying access to life-giving resources – began the funneling process.

Enclosure acts have continued in other guises – NAFTA displaced high numbers of small corn growers in Mexico; investment interests that aggressively pursued control of food lands as far back as the Irish potato famine continue. Land is used to grow specialty crops for export while local, displaced, peoples starve. This happened in the Sahel region. It will happen again as large parts of Africa and highly productive food lands elsewhere are bought up.

Few corporate farm practices that replace small holder skills are “earth friendly”. Capital and chemical intensive farming has multiple threads of unhappy consequences. Part of the point I want to make is that land *distribution and access* as per the current economic system is *not* interested in “best outcome for all life and the earth that supports it”. Current corporate agricultural methods are generally oblivious to “earth care”, and since we’ve run out of “frontier space” on this earth, we’d best examine what we’re doing with the bits we’ve got!

Those with their life decisions limited by concern for “investment income” will wring their hands and “suffer” with those who starve. They’ll explain to themselves that excessively elaborate homes are “unrelated” to the suffering. They’ll say “we need more jobs so these people who’ve been displaced can enter the cash economy”.

They’ll want to build a factory or a service center .. the paradigm goes on … eventually, when they’re unable to find ways to put people to work making baubles or services to buy and sell, and when the earth has been reduced to an empty toxic ocean, and land where no birds sing … then will they say, “Oh, maybe we could have approached this differently.” ?

IMO, they are stuck in a paradigm that needs to be deeply examined.

Some years back funneling people into a cash economy seemed to eventually ‘work out’. People displaced by enclosure acts people could be employed in factories. A lot of them died in the streets as well as the factories, of course, but for larger financial interests – commandeering key resources and restricting access worked. Others willingly or unwillingly traveled to geographical frontiers and “built new lives” (usually this required destroying systems and people already living there.) Now that we’ve “been there, done that”, what next?

I’m not denying lots of significant gains made ‘over-all’ between then and now, but we can’t say it was bloodless and I’m not ready to say that bloody and early deaths of some were absolutely unavoidable and therefore OK.

We have no idea how the world would have ‘unfolded’ if we’d structured our economic system differently. We are where we are.

My concern is that we can’t continue. Things have reached the point where we’re about to “bring down the house” – that being earth itself.

I’m – as they say – “not religious”. But I do have a deep reverence, even awe, for “life living itself” in all its forms. You mention ‘off planet’ solutions, I’m noticing these more often in on-line dialogue. Personally, I don’t think we’re mature or wise enough and rather hope we settle-up here first. At this time, the ‘off-planet’ solution strikes me as similar to wanting a new house because we’ve trashed the perfectly functional one we had.

My proposal that labor be given a well-honored role among real, on-earth, solutions requires, as I said, a new attitude. I don’t suggest that “brains” are the problem, I want labor brought in among solutions in such a way that laborers have opportunity to lead lives of greater enrichment using their own brains, which have had access to education. I also don’t mean muscle should replace machines – in fact, my plan depends on robotics!

What I most hope to achieve is to chip through paradigm walls. Those who’ve most found ‘status quo’ comfortable are least inclined to even realize how ‘paradigm bound’ their models and thinking may be.

Most of the above (my own particular ‘hand-wringing’) may in the end be moot. The time of our discovering we’ve pushed earth one nudge too far seems possible sooner rather than later. But even with possible significant depopulation through starvation, war, and radioactivity “everywhere”, it’s my concern that the survivors will have little “natural earth dynamics” operating on their behalf. How long will it take oceans and toxic lands to repair themselves – 2, 3, generations – more? And then what.

Will we have learned nothing that might make “the next run-up to high civilization” an improvement? Will we still believe we should create scarcity for the sake of impoverishing one another and try to control who gets to claim wealth and power? Will we still believe in ‘enemizing’ one another to justify killing over resources, using gee-whiz toys in grand battles? Will we once again coach our children that empathy and cooperation, as normal and natural as aggression, must be dampened down because they are “weakness” in the “grown up” world? Will we repeat empty mantras about ‘democracy’ while simultaneously limiting participation?

I think we’re at a far more “interesting place” than we’re willing to admit.

Posted by MaggieMP | Report as abusive

@MaggieMP,

Our concerns have morein common, perhaps, than not. I find it stupid beyond words to focus attention on differences, i.e. where there is NO agreement (what can’t be done), than on were there is agreement (what CAN be collectively accomplished). The “journey of a thousand miles” always begins with that first step. As in the military, if one does what they can, where they are, with what they have, who can ask for more?

As in the military, if one does what they can, where they are, with what they have, who can ask for more? I agree that “…we’re at a far more “interesting place” than we’re willing to admit.” If anything that’s a gross understatement for the peril currently facing the human race. I, too, am “not religious”.

That’s almost a “given” if one is concerned about the long term survival of humanity and believes humanity to be at ever increasing risk of self destruction if there be no divine origin, direction, or long term “plan” to pull our “fat out of the fire” that we, ourselves, both light and fuel.

Without a time machine it is simply not an option to “… revise all civilization’s paradigms for the last several hundred years if not longer…”. And I think you hope for a solution better than I see as genuinely possible.

The “developed nations” of the world will continue to control the wealth and policies which will prevail for the foreseeable future. Their priorities do not and will not place a high priority (beyond rhetoric) on improving the lifves of people for whom there is no purpose or “future” (in the “Western sense”, beyond mere reproduction). They will not voluntatily impoverish themselves to “warehouse” the existing billions of humans already existing, leaving it to famine, sickness, war, or some combination thereof to “cull the herd” as has occurred throughout history leaving clear consciences.

The only alternate resolution for “…too many people, not enough earth” is the ‘off-planet’ solution. As you say, “We are where we are” and “…we can’t continue…” our present course if humanity is to survive. Once we sufficiently destroy this planet’s ““natural earth dynamics”, there simply won’t be a “… next run-up to high civilization”.

I think we MAY have a “shot”, still, at long term survival; but if I had to place odds, I think we’re going to blow it. Humanity’s “fate will be decided in the next few decades.

Posted by OneOfTheSheep | Report as abusive

I have to laugh when I read any article by Summers (or Geithner) telling the EU and its member countries how to do ANYTHING regarding their economy. It is like the pot calling the kettle black since Summers and his ilk led us into our economic downturn with their theories and actions.

In this case, maybe Summers could come up with some ideas to help us in this so-called “recovery” from the recession-without-end. On second thought, maybe he should not!

Posted by AZreb | Report as abusive

Enough already! The President’s reelection was decided after the first debate. Mr. Summers fails to realize Americans rejected Barack Obama and his far left agenda in 2010, and they will do the same in 2012. This election is a gut ideological battle for the direction of the country. The United States of America gets off its ass November 6th!

Posted by Straightup | Report as abusive