Public ideas
Stop worrying about public debt: private debt is the problem
Fred Schilling has put us onto an hour-long podcast by Steve Keen Tariffs: Why you got it all wrong on the Soar Financially program. Although the title is about tariffs – he gets on to tariffs eventually – his main message is about debt. Economists focus on public debt, while assuming that private debt will look after itself. But governments can handle debt in ways that the private sector cannot.
Keen considers the consequences of Trump’s policies directed to withdrawing public spending from the economy. Withdrawing so much liquidity from the US economy could have devastating consequences for the economy. (Alan Kohler in his nightly podcast figures that Trump’s tariffs and cuts to public spending will knock all growth out of the economy. Keen goes further and considers the cascading effects of cutting spending.)
He gets on to tariffs, which he justifies, not in terms of protecting existing industry, but in terms of helping spawn new industries. (That’s the traditional “infant industry” argument – theoretically valid, but the time to remove the trainer wheels never comes). He also gets on to Trump’s concern about sustaining a strong $US. It’s as wrong now as it was at Bretton Woods 81 years ago, when Keynes warned of the problems faced by a country whose currency has become the world trading currency. His advice to Trump” “You want your manufacturing to be strong, not your bloody currency”.
The economics of inequality in wealth
Two readers have drawn attention to a set of YouTube videos – Garys economics – by UK economist Gary Stevenson. Some are about UK issues, some involve financial advice (he has done time in the finance sector), some are about the US, and some are educational in his own style.
I dipped into his three sessions on inequality in the distribution of wealth – an issue overlooked by many economists and policymakers, who tend to be more concerned with income inequality.
His first session is a fairly orthodox description of wealth, covering housing and financial assets. (He neglects to mention human capital, however, a strange oversight for someone so well-experienced and qualified.)
His second session, where he talks about the economic consequences of inequality in wealth, covers in 30 minutes what Thomas Piketty covers in two long books. He goes into the ways in which wealth inequality develops its own positive feedback loop, over time enfeebling a nation’s economy as its productive capacity is directed to serving the needs of a small oligarchy. His description of the way labor and commodity markets revert to a feudal structure goes further than Piketty.
His third session is a criticism of the way economics is taught, generally ignoring issues of distribution. He describes a discipline that has over-invested in its own abstract models, and is threatened by any empirical evidence that may threaten those models. These are echoes of Thomas Kuhn’s ideas. That perspective is somewhat surprising in view of his own background, in the London School of Economics and Oxford University – two of England’s more liberal institutions.
His style is literally a kitchen-table style. His UK accent is hard to follow, but he provides subtitles for a wider audience.