July 22, 2013
I’m not kidding, but of course he gives us the economic equivalent telling readers:
“For most Americans, the economy is performing adequately, though obviously not spectacularly. Despite a woeful 7.6 percent unemployment rate, it remains true that 92.4 percent of workers have jobs (counting discouraged workers who’ve left the workforce would reduce this to about 90 percent). We have two distinct economies: one that inflicts acute pain on a minority of Americans but inspires mass political and media criticism; and another that creates huge wealth for the majority but is virtually ignored. Though distress is concentrated, unhappiness is widespread.”
Apart from the fact that the share of the population that is involuntary unemployed or underemployed would be at least 14 percent, this argument ignores the influence of unemployment on the wages of those who are working. High unemployment undercuts the bargaining power of workers, especially in the bottom half of the wage distribution. As a result, workers have gotten none of the benefits of productivity growth in the last five years. This might explain part of their unhappiness.
Samuelson does note growing insecurity, but seems to think it is a psychological problem rather than a rational response to the circumstances faced by most workers;
“Our Martian visitors would discover that America’s mass abundance is mixed with mass anxiety. There’s a broadly shared sense of vulnerability, which helps explain why discontent is not confined to the distressed. It also accounts for the view that the Great Recession and its aftershocks, unlike previous post-World War II slumps, constitute ‘an assault on the middle class.’ Perhaps continued recovery and more jobs will erase present doubts, though I suspect that any reversal will, at best, be partial because the recession’s psychological effects are pervasive.”
He then warns that we shouldn’t want the government to do anything about either growth (because he has decided it can’t despite all the evidence to the contrary) or insecurity, because that would only make things worse. He makes this point by warning about Europe:
“The experience in Europe, with more public protections and a darker economic outlook, teaches a similar lesson.”
Actually most of the countries in Europe with more public protections than the United States are doing just fine. The employment rate in Denmark, Sweden, Germany, Austria, and the Netherlands are all higher than in the United States. In fact, both Germany and Austria have higher employment rates today than they did before the downturn. The European countries that are in especially bad shape, Greece, Spain. Portugal and Ireland, had the least developed welfare states among the original 15 European Union countries.
Many EU countries did severely damage their economies by turning over the running of their central banks to the loon tunes at the European Central Bank, but that does not speak to the merits of their underlying system. This would be like saying a person had made a poor financial decision in becoming a doctor because she allowed Bernie Madoff to manage her money. The problem in both cases was who is managing the money.
Note: Typos corrected, thanks to Robert Salzberg.
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