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Thu May 10, 2012, 04:27 AM

Excerpt from Krugman's new book End This Depression Now


Reprinted from End This Depression Now! by Paul Krugman. Copyright 2012 by Paul Krugman. With the permission of the publisher, W.W. Norton & Company.

Focusing only on the long run means ignoring the vast suffering the current depression is inflicting, the lives it is ruining irreparably as you read this. But that's not all. Our short-run problems - if you can call a slump now in its fifth year "short-run" - are hurting our long-run prospects too, through multiple channels.

I've already mentioned a couple of those channels. One is the corrosive effect of long-term unemployment: if workers who have been jobless for extended periods come to be seen as unemployable, that's a long-term reduction in the economy's effective workforce, and hence in its productive capacity. The plight of college graduates forced to take jobs that don't use their skills is somewhat similar: as time goes by, they may find themselves demoted, at least in the eyes of potential employers, to the status of low-skilled workers, which will mean that their education goes to waste.

A second way in which the slump undermines our future is through low business investment. Businesses aren't spending much on expanding their capacity; in fact, manufacturing capacity has fallen about 5 percent since the start of the Great Recession, as companies have scrapped older capacity and not installed new capacity to replace it. A lot of mythology surrounds low business investment - It's uncertainty! It's fear of that socialist in the White House! - but there's no actual mystery: investment is low because businesses aren't selling enough to use the capacity they already have.

The problem is that if and when the economy finally does recover, it will bump up against capacity limits and production bottlenecks much sooner than it would have if the persistent slump hadn't given businesses every reason to stop investing in the future.

Last but not least, the way the economic crisis has been (mis)handled means that public programs that serve the future are being savaged.

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Reply Excerpt from Krugman's new book End This Depression Now (Original post)
eridani May 2012 OP
AynRandCollectedSS May 2012 #1
tclambert May 2012 #2
muriel_volestrangler May 2012 #3
eridani May 2012 #4

Response to eridani (Original post)

Thu May 10, 2012, 06:49 AM

1. I love Krugman!

He never misses a chance to remind the 1% that THEY are the ones that created this massive crisis and should not expect the rest of us to suffer endlessly while they whine about "only" getting 2 million dollar bonus checks instead of 4 million dollar bonus checks.

Go Paul!

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Response to eridani (Original post)

Thu May 10, 2012, 07:27 AM

2. Imagine, if you will, a massive government jobs program reduces unemployment to 2% . . .

or some other number that essentially means we have a labor shortage. Companies desperate for workers would have to, have to, raise wages, improve benefits, and treat their employees with respect. In other words, many businesspeople would hate it. It would increase their labor costs, which they instinctively think is a bad thing. If they lift their eyes away from their own quarterly statements, though, they would see that if every business faces the same circumstances, it does not confer any competitive advantage or disadvantage. In fact, if everybody's workers make more money, well, those are their customers who have more money. And that would be very, very good for business.

Wouldn't that be a nice world to live in?

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Response to eridani (Original post)

Thu May 10, 2012, 03:13 PM

3. Your link goes to a piece about Occupy

The nearest it gets to Krugman is a link to a copy of a different excerpt from Krugman:


or a link to a 2 paragraph excerpt from his blog.

Is this what you meant to link to?


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Response to muriel_volestrangler (Reply #3)

Thu May 10, 2012, 11:41 PM

4. Yes--thanks for the correction n/t

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