Now, it is certainly true, many economic indicators - both macro and micro - improved during the 1990s, and the Clinton administration (and people like Gene Sperling) should be credited for being a part of that.  Sirota

Surely, one of the more tiresome examples of DLC conventional wisdom.

Somehow, I don't remember these folks inventing Netscape, B2C, B2B, or even the Y2K panic.  Maybe they can be credited for sucking capital out of Malaysia, South Korea, and Indonesia and impoverishing those folks along with the Mexicans.

Unfortunately, the stock market boom which led to huge capital gains tax revenues has left the impression that "sound fiscal policy" (surpluses) rather than relaxed immigration policies and accelerating technology, the real causes, was responsible for improved "economic indicators."

Of course, what the surpluses were actually responsible for was the 2001 recession forecast six months in adavance by the Fall 2000 stock market swoon.

But then, surpluses always cause bad things to happen.

I think more theoretical attention needs to be given to the instabilities caused by free trade.  For poorer people, instability can loom larger than on averaging having lower prices for stuff.  After all risk aversion tends to be larger for people with lower incomes. 

I also think that we should consider tying reductions in trade barriers with increases in wage floors and their enforcement. 

We can use Progressa-style randomization to phase in the wage floors and measure their effectiveness in reducing poverty. 

We can also tie reductions to measures meant to reduce corruption/vote-buying.  In Mexico, many people see election day as their day to get a free torta.  They ought to get a little more than that for their vote.  In Ukraine, people used to get 5 dollars for their votes, but hopefully the prices will go up with increased competition. 

Maybe we can work with local church groups to raise the bribe prices for votes? 

I think that the key point is that we cannot dichotomize politics and economics, as experience has shown they are very much interconnected, and yet many economic trade models do just that, present particular commercial policy arrangements as optimal(in the Kaldor-Hicksian sense that discounts distributional considerations in Social Welfare Valuations.) and all alterations as "efficiency-reducing" interventions.

dlw

Sirota’s comments on growth seem rather wrong headed to say the least. He cites Kevin Drum and says he “couldn’t agree more” with this incredibly obtuse comment:

“But really, what's the point of economic growth if all the extra money is going to Donald Trump and the average guy is just treading water?” 

Certainly the point of which should be about income distribution, and not taken to disparage growth?

Growth is for example a biotech company inventing and producing the technologies and drugs which will treat diseases in the future. Growth is an automotive industry inventing and manufacturing the technologies to power tomorrow’s clean vehicles. Growth is jobs and capitalization of innovation. One may complain that the biotech or auto company isn’t distributing the wealth and may even be mismanaging the long term finances, but to devalue growth itself is senseless. 

Without growth we don’t have a future economy, capitalization, jobs, medical care, or any quality of life. Without growth we don’t have hybrid cars, energy independence, computers, ipods, none of it. A lack of growth isn’t like taking a vacation from which one can return anytime one wants. If people want to know what a struggling super power looks like, look at Russia: no access to capital, all the talented people fleeing to work someplace else where their ideas can be capitalized.

So, yes we need to do something about the distribution of wealth. But no, it’s just silly to ask what good growth is in and of itself. As wrong as income distribution in America is, it’s no excuse for that sort of nonsense comment. 

Sirota-  I believe that we need to renegotiate the trade agreements like NAFTA, China MFN, CAFTA and the WTO to put far stronger labor/enviro/human rights protections in place, no matter what the implications it is for macroeconomic statistics.

That is the sort of comment which keeps Sirota form any respect and is guaranteed to keep him impotent forever. It shows he starts with an ideology and doesn’t care about the results, he just wants to win “no matter what the implications are for macroeconomic statistics.” That’s absurd. There is no pragmatism there, just short sighted zeal. There are external economic realities which can’t just be ignored.

Ellen

I am a bit confused by your point.  

Are you arguing that private entities were responsible for the boom?  I think that is clearly true and it is one of the things that is most upsetting by many of the leftwing arguments.  There seems to be no questioning of who will create the wealth to be distributed.

However, if you are denying any role for the Clinton Administration I think you go too far.  If you recall that at the end of the Reagan Administration the federal budgetary system seemed out of control.  We were to have deficits "as far as the eye can see."  Thus the deficit was running the government not the other way around.  That had the making of giving control of the governemtn to the bond vigilantes and skyhigh interest rates.  The Clinton gained control of process was undoubtedly helpful to the boom.

Jeeze, Nick, for somebody who is "impotent" (and forever, no less), Sirota's analysis sure seems to push your buttons.

The Drum quote that you disparage may be a tad simplistic, but it's not obtuse -- rather, it does a fair job of capturing the growing gap between the haves and have nots in this country and how common measurements of economic well-being such as GDP provide a distorted picture if not weighed against other metrics and considerations of the consequences of "growth." 

Yes, in general, economic growth as it is typically defined is a good thing.  But the devil, as we're painfully learning again (I would have thought that the lesson of Reagan's voodoo economics would have been enough), is in those details of consequence.  Who's growing and how, and at who's expense?

You confuse innovation with growth. No one is advocating abandoning research or innovation. What is not needed is consumerism as a way to keep a society going.

Innovation is one of the few ways to have real growth by making productivity higher. Promising the underclass that they will get a few crumbs while the rich get the loaf has worked for millennia and it will probably continue to divert people from focusing on the great disparities in wealth within, and between, nations.

The US is wealthy enough that everyone could be living a reasonable lifestyle without any need for future growth. But to do that would require reallocating resources and wealth that is already in place. Whenever this is brought up the rich cry "class warfare". But, the UK did it during the 20th Century by means of death duties and the country ended up better for it.

The appeal to growth is just a way to provide false hope to those holding the short end of the stick. 

Bragan - btw, your point about economic disparity is well taken, and I totally agree with it and always have. However, an intelligent argument for that can only be made with solid economic footing rooted in reality.

We need pro-growth and pro-egalitarian policy which is based in pragmatism, not Sirota's brand of anti-growth, anti-everything, scatter shot angst. All his wheney radicalism does is scare the vast majority of Americans and make them wonder if hippies are running the left.

All people like Sirota achieve with their economic illiteracy is to weaken the cause of the middle class and poor by making them look foolish. Then it's all the easier for the wealthy to justify plutocratic rule with moderates who might otherwise be sympathetic.

We have to police our own. To make a rather extreme analogy but to make the point clearly, Sirota is like Lyndie England in the Iraq war. He may technically be on our side, but his methods are so inept that we're never going to win the war for "hearts and minds" on economics so long as we’re legitimizing people like him to our disadvantage.

Reagan sold trickle down because it sounded positive, and despite some absurdly “voodoo-like” premises, it did acknowledge the need for capitalization and some trickle down aspects of economic reality. Democrats can own these issues if we choose to. We can talk about more efficient models which then produce greater prosperity based in solid economics. Others do that far better than Sirota and if he had any sense he’d muzzle himself.

I think you're right, Robert, both on the issue of innovation and growth, and on Nick's confusion.

I had pointed out to him, as an example, the open-source software movement.  His objection is that it's not mainstream, which is simply incorrect, but even if it were, the fact that the movement is an engine for innovation that is independent of the conventional notion of economic growth is not refuted, even if he were to be correct.

Nick used here the example of the pharmaceutical industry.  Another red herring: he (or anyone else interested) should research how much of the funding for drug research is public money.  I took a stab at this recently, since I had heard that the figure was in the 40% range.  And I found independent research that supported estimates on that order.

Even to the extent that capitalization is a fuel that sustains innovation, is it not the spark that ignites it.  The sparks must come from the innovators themselves, and there is no science to that aspect of science.  There is nothing, then, that should lead one to believe that only "free market funding" can provide the fuel that sustains the spark.  And if it is instead a reasoned estimation of public benefit that allocates the fuel, that's all the better in my view.

johnOneOne – you have no idea what you’re talking about and are putting all sorts of straw men up, none of which I ever actually said.

For example, I never said Linux wasn’t a source of innovation.
btw, I've been eveloping SW since the ealy 90's and have no love for windows, but neither is Linux going anywhere without capital.

What I did say is that relative to mainstream OS like OSX and Windoze it’s a miniscule market share which is a fact. It’s an entirely enthusiast driven movement and highly unique, meaning it’s not much of a model for anything besides Linux. I don’t see cars, phones, or anything much else being developed open source. Nor are any major applications with market share. All of those require capitalization. Even Red Hat Linux and other mission critical versions of Linux required capitalization. Besides, Linux was derived from Unix which was a Bell Labs invention in the 60’s and 70’s and that certainly represented capitalization. So did Irix.

open-source software movement.  His objection is that it's not mainstream, which is simply incorrect

Open Source Linux has almost no market share, that is a fact. It’s a hobbyist OS. You tell me, what's the market share of Linux boxes, and what percentage of them are not commercial packages such as Red Hat? 100x more copies of Windoze are pirated in China than people run Open Source Linux for free!

My best friend is a Linux nut, and even he'll admit it's a miniscule enthusiast movement. I have Linux, only out of several critical applications I use, only one runs on it, which is pretty good, for Linux.

he (or anyone else interested) should research how much of the funding for drug research is public money.

Another straw man. Where did I say Pharma is not funded by government? You have no idea what you’re talking about and some serous issues with reading comprehension and straw man arguments. Regardless, the majority of even drug research (one of the more highly subsidized industries) still comes from the private sector. That’s simply a FACT. Hence, capitalization is important.

Even to the extent that capitalization is a fuel that sustains innovation, is it not the spark that ignites it. … There is nothing, then, that should lead one to believe that only "free market funding" can provide the fuel that sustains the spark.

That’s just complete and utter BS, and any economist would laugh you out of the room with such utterly factually challenged garbage. Paul Krugman, Gene Sperling, pick anyone. It’s borderline retarded to argue against the importance of capitalization in lieu of public funds or open source or anything else. It’s like saying we don’t need oxygen because we have food and salt. You're obviously an open source ideologue, but your economic opinions are really lacking.

Public funds account for a miniscule portion of the private sector. If it’s spent wisely it has often been the catalyst for innovation, and I’ve often advocated for exactly that. AFAIK know I’m the only person here that has repeatedly made long posts on exactly that subject, taking South Korean Internet development for example.

But regardless, the vast majority of funds still comes from the private sector to capitalize that, to create jobs and prosperity. That is the point, that is why growth and access to capital matters. Without capital, no Red Hat Linux is created, no Scandinavian telecoms, no SKorean internet. That’s a fact. Be a crank if you want.

I do think, however, that liberals need to start changing the terms of the debate.  I'm (obviously) no economist, but even I'm getting to the point where when Bill Kristol, looking for light at the end of the Republican tunnel, says, the economy is doing great because we have 4% growth, I jump out of my chair and say "but we have 3% wage growth and 6% inflation - I'm 3% down in this scenario."  Hopefully, reasonably intelligent working Americans who vote moderately Republican are getting there as well.

I don't think average Americans fear the Sirotas of the world as much as they fear the characterization of progressive policies by Republicans.  The fear has always been that we will tax their employers into bankruptcy.  Now that these corporations seem to be going bankrupt daily without our help, it may be time to remind people that corporate profits are not a good in and of themselves, but in fact we are most economically sound when growth is distributed more equitably, and that nearly all of our economic policies at present are far too heavily weighted in favor of corporate America.

This entire Book Club thread has been thrilling for me to read, btw.  A friend of mine was chastising me for getting all of my new "filtered" through the blogs.  There seems to be a fair amount of disagreement on this one, though. 

Posts like yours

There can be a lot of disagreement among legitimately qualified and practical people about what course to take or even what the destination should be. But people like Sirota don’t even qualify to be in the discussion with his absurdly vague and naive talking points.

are a perfect illustration of why Democrats have lost their base vote and have a hard time winning elections.  You are pretty much saying that only educated people deserve to be heard from.  Good luck with that, you elitist fool.

Sit around your coffee shop,if you like and mutter to your friends about what a shame it is that the working classes are so stupid as to vote against their own economic interests.  But above all don't EVER stop to think that since both the Republicans and the dominant Democrats are offering basically the same race to the bottom, that maybe it's not they but you who are stupid.