Monday, January 24, 2011

Libertarian Defense of Paul Krugman

As someone who defends Paul Krugman more often than not, I know I stand out from the libertarian mainstream. But given the realities of the form of state capitalism we live under — an essentially corporatist system whose resemblances to the “free market” are mostly coincidental — I find the Keynesians have it right when it comes to analyzing the causes of the Great Recession.

Those on the Right who think the problem is that the rich lack money to “invest in jobs” are living in a dream world. No, the rich invested money in Ponzi schemes like the real estate bubble precisely because they had more capital on their hands than they could find productive ways to invest. The economy was already plagued with excess industrial capacity that could barely be utilized, even with the level of demand revved up by debt on bubble-inflated equity. The rich already have more money than they’re willing to invest, because no sane person would hire people to produce more stuff in an environment where there are fewer employed people out there buying stuff — and the purchasing power of those who are employed is no longer inflated by home equity loans from ditech.
Simply put, it’s not the level of investment that’s the problem — it’s the level of demand.
Read the rest of Kevin Carson's Article
at The Center for a Stateless Society.

James Tuttle,
Regular Columnist, THL
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