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	The 1 Percent’s Solution by Paul Krugman The New York Times   Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close — at least in the world of ideas. At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.   Yet two big questions remain. First, how did austerity doctrine become so influential in the first place? Second, will policy change at all now that crucial austerian claims have become fodder for late-night comics?   On the first question: the dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity — Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. — faced withering criticism almost as soon as they came out.   And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings, while many economists raised fundamental questions about Reinhart-Rogoff long before we knew about the famous Excel error. Meanwhile, real-world events — stagnation in Ireland, the original poster child for austerity, falling interest rates in the United States, which was supposed to be facing an imminent fiscal crisis — quickly made nonsense of austerian predictions.   Yet austerity maintained and even strengthened its grip on elite opinion. Why?   Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price. Economists can explain ad nauseam that this is wrong, that the reason we have mass unemployment isn’t that we spent too much in the past but that we’re spending too little now, and that this problem can and should be solved. No matter; many people have a visceral sense that we sinned and must seek redemption through suffering — and neither economic argument nor the observation that the people now suffering aren’t at all the same people who sinned during the bubble years makes much of a dent.   But it’s not just a matter of emotion versus logic. You can’t understand the influence of austerity doctrine without talking about class and inequality.   What, after all, do people want from economic policy? The answer, it turns out, is that it depends on which people you ask — a point documented in a recent research paper by the political scientists Benjamin Page, Larry Bartels and Jason Seawright. The paper compares the policy preferences of ordinary Americans with those of the very wealthy, and the results are eye-opening.   Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is, “entitlements” — while the public at large actually wants to see spending on those programs rise.   You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.   Does a continuing depression actually serve the interests of the wealthy? That’s doubtful, since a booming economy is generally good for almost everyone. What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.   And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies? I hope not; I’d like to believe that ideas and evidence still matter. Visit the related web page
	Does the Richness of the Few benefit Us All? by Zygmunt Bauman Social Journal Europe   A most recent study by the World Institute for Development Economics Research at the United Nations University reports that the richest 1% of adult humans alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the total world wealth.   The bottom half of the world adult population owned 1% of global wealth. This is, though, but a snapshot of the on-going process… Yet more and more bad and ever worse news for equality of humans, and so also for the quality of life of all of us, are lining up daily.   “Social inequalities would have made the inventors of the modern project blush of shame” – so Michel Rocard, Dominique Bourg and Floran Augagner conclude in the article “Human species, endangered” they co-authored and published in Le Monde of 3rd April 2011. In the era of the Enlightenment, during the lifetimes of Francis Bacon, Descartes or even Hegel, in no place of Earth the standard of living was more than twice as high as in its poorest region.   Today, the richest country, Qatar, boasts an income per head 428 times higher than the poorest, Zimbabwe. And these are, let’s never forget, comparisons between averages – and so akin to the facetious recipe for the hare-and-horsemeat paté: take one hare and one horse.   The stubborn persistence of poverty on a planet in the throes of economic-growth fundamentalism is enough to make thoughtful people to pause and reflect on the direct as much as the collateral casualties of that redistribution of wealth. The deepening abyss separating the poor and prospect-less from the well off, sanguine, self-confident and boisterous – an abyss of the depth already exceeding the ability of any but the most muscular and the least scrupulous hikers to climb – is an obvious reason to be gravely concerned.   As the authors of the quoted article warn, the prime victim of deepening inequality will be democracy – as increasingly scarce, rare and inaccessible paraphernalia of survival and acceptable life become the object of a cut-throat rivalry (and perhaps wars) between the provided-for and the left-unaided needy.   One of the basic moral justifications for free market economics, namely that the pursuit of individual profit also provides the best mechanism for the pursuit of common good, has been thereby cast in doubt and all but belied. In the two decades preceding the start of the latest financial crisis, across the great bulk of OECD nations the real household incomes for the top 10 per cent grew much faster than for the poorest 10 per cent.   In some countries, real incomes of those at the bottom have actually fallen. Income disparities have therefore widened markedly. “In the US, the average income of the top 10 per cent is now 14 times the bottom 10 per cent” – feels obliged to admit Jeremy Warner, assistant editor of The Daily Telegraph, one of the dailies with a long record of enthusiastic affirmation of the dexterity and proficiency of the “invisible hand” of markets trusted by the editors and subscribers alike to resolve as many (if not more) problems as markets create. And he adds: “Growing income inequality, though obviously undesirable from a social perspective, doesn’t necessarily matter if everyone is getting richer together.   But when most of the rewards of economic progress are going to a comparatively small number of already high income earners, which is what’s been happening in practice, there’s plainly going to be a problem.”   * Access the complete essay via the link below. Visit the related web page
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