Structural Flashbacks, by Paul Krugman, in NY Times: A few notes, largely to myself, regarding the renewed push by conservatives to declare our problems “structural”, not solvable just by increasing demand.
1. That’s what Very Serious People said in the 1930s too. Then the approach of war finally delivered the stimulus we needed, and all those structural difficulties turned out to be imaginary.
2. Ireland was praised for its wonderful flexibility; it was a shining example of the art of the possible, declared George Osborne. Then, when things went wrong, it was told that it must fix its deep structural rigidities.
3. Anyone who says something like “If deficit spending were the route to prosperity, Greece would be in great shape” should be immediately considered not worth listening to. People in my camp have repeated until we’re blue in the face that the case for fiscal expansion is very specific to circumstance — it’s desirable when you’re in a liquidity trap, and only when you’re in a liquidity trap. I know that some people like to project their own crudity onto others, but what they’re actually demonstrating is their own ignorance.
4. Anything along the lines of “we need long-run solutions, not short-run fixes” may sound sophisticated, but it’s actually just the opposite. Take it away, Maynard:
But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.