2012년 2월 16일 목요일

메모 (Centrist, Limited Centrist)

※ Following is a reading note, with some underlines and annotations, so to see the original article please visit the source links marked at the titleㅡThis reader.

자료 1: The Dynamic Moving Center ( Paul Samuelson | Spiegel online, 11/12/2008 )

Paul A. Samuelson, 93: Based on my observations of economic history, both short run and long run, I believe that there is no satisfactory alternative to market systems as a way of organizing both economically poor and economically rich populations.

However, using markets is not the same thing as unregulated capitalism so beloved by libertarians. Such systems cannot regulate themselves, either micro-economically or macro-economically.

  1. Wherever tried they systematically breed intolerable inequalities. 
  2. And instead of such inequality being the necessary price to encourage dynamic progress via technological and managerial innovations, it instead breeds dysfunctional shortfalls in what economists call "total factor productivity."
Convincing proof of these points can be found in the deterioration in the US from 2001 to 2008. As CEO pay rose respective to median employee pay -- from a more normal 40 to 1 ratio up to and beyond 400 to 1 -- industrial progress deteriorated rather than accelerated.

In consequence, my view is incurably centrist. That should be the US goal for 2009 and onward. And I nominate it as the target goal for countries big and small. Libertarians are not just bad emotional cripples. They are also bad advice givers. I refer of course to the views of both Milton Friedman and Friedrich Hayek. The “serfdom” they warn against is not that of Genghis Khan or Lenin-Stalin-Mao or Hitler-Mussolini. Rather, they warn against the centrist states of the modern world. Think only of Switzerland, Britain, the US, the Scandinavian countries, and the Pacific Rim. Why do citizenries there report high indexes of “happiness” and enjoy broad freedoms of speech and belief?

President George W. Bush will figure in the history books as the worst president in the 234 years of US history. One of his inevitable legacies will be, among other things, the danger in 2009-2014 of a US majority that swings leftward far past center. If America turns protectionist, blame past Republican deregulating -- a fine instance of the Law of the Unintended Consequences.

Yes, public policy should regulate (rationally regulate) corporate life and should work to stabilize the macro economy. Yes, future fiscal systems can in a limited degree reduce the more glaring evils of inequality. However, a centrist system can do measurable harm if it acts too strongly to reduce inequality. My goal is the Limited Centrist State.

I am not a centrist because I can’t make up my mind about the Right and the Left. It is because each of those has proved itself to be so non-optimal that rationality and experience move me toward the dynamic moving center.

자료 2: Paul Samuelson: On economics, Obama would be wise to steer a middle course ( Paul Samuelson | The Independent, 19 JANUARY 2009 )

It will be massive doses of deficit spending that will pull America, Europe andAsia out of the slump

* * *

It is an old story when an up bubble in real estate is followed by a down bubble. Maybe soon after humans left their caves, that cyclical process began. However, what caused chaotic meltdown in Wall Street and around the globe this time was an utterly new factor – namely that this bust in home construction and mortgage borrowing impinged on the new Frankenstein inventions of mathematical financial engineers.

Virtually no pundits in Wall Street understood the strange things that were happening from week to week. Investment banks like Goldman Sachs and Morgan Stanley, as well as huge ordinary banks like Bank of America, suddenly discovered that their debts had soared way above their available assets.

Oddly, actions on Main Street, where people look for jobs and hope to earn enough income to save for both rainy days and eventual retirement, were slow to fall much in 2007 and 2008. But by now, as sure as the sun sets at night, Main Streets all over the world are hurting a lot. Their hurts are directly traceable to the Wall Street shenanigans. According to forecasters at the International Monetary Fund and the World Bank, the worst is still to come; and it may last longer than anything since the 1929-1939 years of the Great Depression.

(...) But more importantly, what occupies my heart as a scholarly economist is what's likely to happen to families in the first years of Barack Obama's presidency. How will he repair the damage from eight years of George Bush's bungling?

I must agree that government bailouts were necessary to forestall a complete economic collapse. President Franklin Roosevelt discovered that in his first 1933 post-inauguration week. But as the New Deal leader who saved the capitalistic system, Roosevelt learned that those bankers, after being saved, firmly refused to venture into making loans to risky businesses and families.

How then did the New Deal succeed in wiping out most unemployment by 1939? Today's economists under 60 years of age have forgotten the answer to that question – if indeed they ever did know the true answer. Even Fed Chief Ben Bernanke, a prize scholar at Harvard and MIT, was unduly influenced by the late Milton Friedman's crude monetarism when he wrote his PhD dissertation on the Great Depression in 1979.

Actually, neither the Federal Reserve nor the Bank of England did the heavy lifting that restored high employment and healthy growth in real Gross National Product by 1939. Why not? Early on and for much of the 1930s, central bank interest rates had dropped to nearly zero.

(... ...) current evidence and past economic history suggests strongly that during the Obama presidency it will be massive doses of deficit fiscal spending that will pull Europe, America and Asia out of the post-meltdown slump. Only after that will the Federal Reserve's normal tools begin to be restored to potency.

The new president will be splashed with contradictory advice. Here is my suggestion:

Seek the middle way by being a centrist. That's not because you can't make up your mind.
  • On the left are the failed notions of Marx, Lenin, Stalin, Castro and Mao. All of these were like idiotic Keystone cops when it came to organising any large economy. 
  • On the right are the extremist libertarian views of the post-Reagan crowd. Yes, market systems alone can preserve this millennium's affluence and progress. However, unregulated markets will generate their own demise, as we have seen.
Centrists are doomed to have to make compromises. In good times, it can be folly to keep bumbling Detroit auto companies in business. (Harvard's Joseph Schumpeter called this "capitalism in an oxygen tent.") When rates of unemployment swell to 10 per cent or above, a different decision might be justifiable. Dropping newly printed greenbacks from helicopters can be one way to generate growth. Such new currency will get spent rather than being hoarded or saved. However, spending that new currency on roads to somewhere will be better than roads to nowhere.

In Japan, construction-industry lobbyists determined where public spending should be directed. In America we can do better, provided that the old Bush gang has become only an unpleasant memory.

Moral: Be centrist in your decisions about helping the poor as well as the middle classes. Females and Hispanics and others who come late to the feast deserve justice in the centrist court.

Those who presume to give advice become boring fast. Still, I will offer a final important caveat. A centrist must, of necessity, be a "limited" centrist. A centrist can be successful only in a limited degree to lessen the inequalities that are inevitable in a market system. That's far from abolishing most inequality. To pursue that unobtainable, quixotic goal would be a sure way to plunge the modern world back into the past stages of stagnation.

The author, former professor of economics at the Massachusetts Institute of Technology, won the Nobel Prize in Economics in 1970.

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