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Krugman writes: "Last week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It's not an official recession yet, but the only real question is how deep the downturn will be."

Portrait, New York Times columnist Paul Krugman, 06/15/09. (photo: Fred R. Conrad/NYT)

Pain Without Gain

By Paul Krugman, The New York Times

20 February 12

ast week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It's not an official recession yet, but the only real question is how deep the downturn will be.

And this downturn is hitting nations that have never recovered from the last recession. For all America's troubles, its gross domestic product has finally surpassed its pre-crisis peak; Europe's has not. And some nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain's slump has now gone on longer than its slump in the 1930s.

Worse yet, European leaders - and quite a few influential players here - are still wedded to the economic doctrine responsible for this disaster.

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-127 # Martintfre 2012-02-20 10:40

Governments being liberal with other peoples money is the root of this evil.

As Milton Friedman observed - the welfare state is never productive enough to support the welfare state.

+85 # angelfish 2012-02-20 11:16

Actually, Martinfre, the 99% are no longer able to sustain the greed of the 1% who have been sucking the Life's Blood out of them for over forty, that's 40, years! Not to worry, however, Justice WILL be served on Election Day! The People, UNITED, will NEVER be defeated!

+60 # soularddave 2012-02-20 11:41

Martin, How many hundreds of Billions of dollars of taxpayer money have been spent on the WELFARE of the big banks, investment companies, their CEOs, and on corporations? Note that some has been paid back, but at the expense of just whom?

I suggest we should have supported those who pay taxes commensurate with their ability to make money, and those (children, aged, disabled) who have been excluded from the economy for the moment.

+43 # Todd Williams 2012-02-20 12:08

Folks, don't even bother explaining simple economics to Martin. He is incapable or doesn't want to understand basic principals. We all know what has occurred and why. And as the Rethugs want to cut more spending at the state level, laying off public employees and depressing state economies, then our recovery will be slower than usual. These are facts. Undeniable. Irrefutable.

-8 # Martintfre 2012-02-21 05:44

Amazing how many people jump to the false conclusion that if your opposed to one form of welfare you must be for another.

Corporate welfare is the evil that requires low people in high government places to busy them selves granting low people in high corporate places special favors - like bail outs, and stock take overs and other overt forms of fascism we have seen from the current administration as well as prior administrations .

+8 # Texas Aggie 2012-02-20 21:56

Milton Friedman was wrong about everything he said. Why do you think he's right this time?

His monetary theory that got him the Nobel Prize was dropped by the US Treasury after it didn't work at all. His "greed is good" got us the present mess. His policies in Chile have been discarded because they don't work. Do you quote him on the theory that "he can't be wrong all the time?"

+1 # Carbonman1950 2012-02-21 23:08

Mr. Friedman also contended that reducing tax rates would produce higher tax revenues, but he was wrong about that too.

0 # GabbyHayes 2012-02-23 10:15

where is there a welfare state?

+39 # cordleycoit 2012-02-20 11:20

Again why not change the whole thing around and try the alternative to a failed capitalism. Marx does not work and there aren't enough prisons or troops to enforce Uncle Miltie's market fascism, a la Chile.Why are we not approaching the problem with an open and inquiring mind?

+41 # danigo 2012-02-20 11:37

Europeans are scared as hell of the US markets, or at least they should be because they have gotten caught many times buying into the financial innovations. The "austerity measures" imposed on Greece are to a large extent an attempt to appease "the markets". But Europe surely must see what is happening in the U.S. even if they pretend not to see. The U.S. has invested in military infrastructure, such as foreign bases and weapons systems, instead of on domestic infrastructure. There is no credible state enemy that justifies the level of military spending. The only way to pay for all the military expense is to tax the non-military productive sectors. This places a huge burden on the private sector. The only ones who profit today are the Wall Street whealer-dealers who "invest" in politicians who do their bidding. The whole system is screwed up. Face it. What we have in America is military socialism where spending is made in non-productive destructive ventures and weapons systems. Milton Friedman was very persuasive in the 70's. But re-reading him today I wonder what was so inspiring about him. He got it all wrong.

+30 # Todd Williams 2012-02-20 12:12

Partially true, danigo. But remember the Obama stimulus package bailed out the auto industry and did spend other money on public works projects. Certainly, not enough was spent, but it was a start. Our military budget is being cut due to the fact that several weapons systems have been eliminated and we are leaving Iraq and Afghanistan. Obama is giving it the old college try, but with out a progressive Congress, it's very tough.

0 # dorianb@fuse.net 2012-02-20 22:37

Todd: "Obama is giving it the old college try"...You really believe that?

+24 # ABen 2012-02-20 11:58

It is high time for another session of the "guns vs butter" debate. One part of that debate must involve looking at who and what have benefited the most from the US economy since the end of WWII. The debate over specific programs and spending priorities will heat up, as it should, but we should have this debate in serious terms using factual data rather than knee-jerk slogans such as threadbare quip by Friedman. Here is one such data point; US military expenditure is roughly equal to that of the next 22 largest military budgets combined.

+7 # WFO 2012-02-20 12:29

At least European countries a facing the debt crisis, unlike the US and States within the US that are worse off economically than European States within the EU. US is kicking the can down the road. Iceland is the model to follow, not Greece.

+8 # reiverpacific 2012-02-20 17:32

Quoting

At least European countries a facing the debt crisis, unlike the US and States within the US that are worse off economically than European States within the EU. US is kicking the can down the road. Iceland is the model to follow, not Greece.

Excellent point!
Iceland, after the pundits had consigned the nation to the garbage can of economic history, took the path of true independence by actually carrying through the people's will instead of caving to the well-oiled and scripted Milton Freidman style policies of the WTO and World bank which has held so many countries back for too long.
And at least the European bloc (except Cameron's UK Tories) are determined not to break up their long-standing and hard-won social safety nets.
The US is still practicing "winner-take-all", the government and supreme judiciary being almost wholly-owned by and indistinguishab le from the Military, CIA and Corporate dictates.

-5 # Martintfre 2012-02-21 05:50

//instead of caving to the well-oiled and scripted Milton Freidman style policies of the WTO and World bank which has held so many countries back for too long.//

and what makes you think any of that rant was correct?

In capitalism failing banks face Larry the liquidator - not smiling politicians Bail out Billy with the peoples check book back filling the losses.

In real capitalism the government does not promise to insure any bad loan the banks make - which is exactly what they did and why the banks were correct in seeing no risk - the government promised and did back fill trillions in bad loans.

0 # reiverpacific 2012-02-21 21:30

Quoting

//instead of caving to the well-oiled and scripted Milton Freidman style policies of the WTO and World bank which has held so many countries back for too long.//

and what makes you think any of that rant was correct?

In capitalism failing banks face Larry the liquidator - not smiling politicians Bail out Billy with the peoples check book back filling the losses.

In real capitalism the government does not promise to insure any bad loan the banks make - which is exactly what they did and why the banks were correct in seeing no risk - the government promised and did back fill trillions in bad loans.

Eh, and -sorry but eh again??
What in the name of Will Shakespeare's spitrit are you yapping about? This is either too deep or too badly expressed for my simple mind!
We have a nice, expressive language; try to show it some respect.

+4 # C. Winslow 2012-02-20 17:58

For Jove's sake, Martin, don't pit Marx against Friedman, two single-solution nineteenth century mentalities who, though brilliant, made a number of crucial mistakes. Certainly, the welfare state cannot pay the costs of a welfare state, but a country with reasonable homeostasis within its free political and economic markets, can sustain itself. We are gradually learning how to do so. There are four markets (as reductions), the political, economic (ecologic), social, and educational (psyche), and if FREE, they can both promote and restrain one another to bring about what Mill hoped would be a reasonably stable economy. I agree with Krugman, but the problem is compounded by the political dilemmas that Euro leaders must confront. The Germans must explain why their workers who work until age 65 must subsidize Greek workers who can quit at age 50? And while austerity will do great harm in the short run, individuals are scared of losing their shirts in the long run. I do agree with Paul Krugman, but those who argue for difficult choices need to make sure others understand that they recognize all of the problems, many of which are not primarily economic but political. Liberals must be able to provide an acceptable restatement of conservative views, and conservatives need to be able to do the same for liberal views if we are going to move the conversation toward more provident possibilities--GOING FORWARD--as people say today.

-13 # Martintfre 2012-02-20 19:39

//The Germans must explain why their workers who work until age 65 must subsidize Greek workers who can quit at age 50? //

a) because they are amazingly generous.
B) Because their fearless leader said so.
C) either A or B combined with a heavy does of suicidal stupidity.

+2 # Onterryo 2012-02-21 06:23

Meanwhile Germans benefit from the problems of the rest of the European Common Market. Had they still been using the DM their currency would be rising and exports falling along with unemployment. Greece, Spain, Ireland, Portugal and Italy, on the other hand, could have seen a devaluation of their respective currencies, which would have most likely increased exports and led to higher tourism, etc. In addition, German workers are also highly protected against downturns while their products are well made. German corporate executives, despite the problems of the past decade, have continued to invest in R & D, and have managed to improve productivity AND keep jobs through novel programs which most American companies are loath to touch.

+2 # Onterryo 2012-02-21 06:35

One more point...it seems many are dumping on Greeks (as in their citizens) but I would also add that the majority of the blame should go to the party leaders - all of whom were afraid to tell the truth - and why should they, since lenders continued to lend easy money to a nation who was already at high levels of debt in 2001 (unlike the USA).

+2 # Onterryo 2012-02-21 11:32

Last point..from CBC News...."There's a widespread image of Greeks as lazy people who were living off the state, which was in turn living off the foreign lenders. But, in actual fact, Greeks work nearly 50 per cent more hours per year than Germans. And while the official retirement age was 58 and certain groups were even allowed to retire earlier, the average retirement age for Greek workers is higher than the average retirement age for German workers.

It's true that certain groups benefited disproportionat ely, but you can't generalize and say on average the Greek people were benefiting from this kind of spendthrift policies".

"Ordinary Greeks are understandably outraged that they're being forced to pay for the imprudence of their government and international banks and financial institutions. Most of them didn't benefit from the excessive government deficits of the past 10 or 20 years. Certain privileged groups certainly did — and some of them are out there in the streets as well — but the majority of those demonstrating are youth who have less and less prospect of getting a job, pensioners who've seen their pensions cut, workers in the state sector who've seen their salaries cut".

Sound familiar?!

+4 # IndigoE 2012-02-20 20:24

"...two single-solution nineteenth century mentalities"... We are in the not-so-early stages of a major organizational shift in the way we humans organize our existence. If we are to avoid collapse on a massive scale we must stop using worn out paradigms! Growth as a measure of success is unsustainable. Fertile minds (if there are any) need to invent systems of dynamic equilibrium capable of providing near equal distribution of wealth.

+2 # dorianb@fuse.net 2012-02-20 22:45

IndigoE: This is a comment worth reading and reflecting on. It's brilliant!

"Growth as a measure of success is unsustainable. Fertile minds (if there are any) need to invent systems of dynamic equilibrium"...

+2 # C. Winslow 2012-02-20 18:09

Generally, I must concur with Todd Williams point. The political barriers to Obama being able to play the keyboard accurately are immense. Remember, that, in political economy, when one plays a B-flat, the sound that come from the piano is a tri-tone, F and B played together.

-3 # Martintfre 2012-02-21 05:52

Quoting

Generally, I must concur with Todd Williams point. The political barriers to Obama being able to play the keyboard accurately are immense. Remember, that, in political economy, when one plays a B-flat, the sound that come from the piano is a tri-tone, F and B played together.

Remember Senator Obama voted with the majority of his party to proceed with the bank bail outs, and as president he hastened fascist policies of government picking winners and losers all at tax payer expense.

+3 # carioca 2012-02-20 23:27

One day, when we realize unlimited growth is no longer possible, we will learn to accept the concept of no growth, or sustainable growth.

+1 # Martintfre 2012-02-21 19:49

Quoting

One day, when we realize unlimited growth is no longer possible, we will learn to accept the concept of no growth, or sustainable growth.

Boy Oh Boy I don't want people like those who thought that the patent office should be closed in the 1850's cause 'everything had already been invented' deciding for any one else what growth is accepted or not.

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