Professor Paul Krugman is Wrong
On 23 March 2011 an article written by Henry Blodget discussed the economic situation in the United Kingdom. ” Not only is the economy back in recession, inflation is heating up.” Yahoo’s economics editor, Daniel Gross, believes that the situation is due to the UK government plunging the economy back into recession by sharply cutting its spending and raising taxes.
The author compared the economic strategy the UK and US have been using. The US “kept its foot on the gas, racking up massive deficits and debts but also stimulating solid growth.” The US economy therefore continues to grow and inflation is under control. The subtitle of his article is “Were Paul Krugman and Keynes Right?”
Paul Krugman always believes that government’s stimulus can help the economy out of recession. Actually his theory is nothing new. Have government spending and money market’s order of course are increased. Reducing government consumption no doubt will hurt the economy. Paul Krugman’s predition is right anytime at this point. However his theory is wrong on the whole because he encourages consumption when the government has a serious deficit. Creating debt to stimulate consumption is just like switching troubles from the left hand to right hand. No problems were actually solved.
In 2011, America has a national debt of 1.43 trillion dollars, has a states and local government debt of 3 trillion dollars and has state pension deficit of 1.26 trillion dollars. Meanwhile all our Federal and States governments are continually running a deficit in their budgets. Any of those bond defaults will cause an economic recession just like the financial crisis did in 2009. Under this kind of debt situation Paul Krugman still advocates vast government consumption.
He has ignored some basic principles. 1) When there are economic reductions it is productions based on demands in the market, should the government, to maintain GDP and jobs, make the spending? 2) What should be our economic goal?
Capitalism is supposed to let the market adjust itself such as reducing production when demand is low. The concept of stimulating obviously is against the principle of capitalism. When a consumption level is too high to be sustained we should let it collapse. The consequence is painful but unavoidable because no government can support unnecessary consumption in the long term.
Why does the U.S government wants to maintain consumption at a high level? Because people need jobs that give them a salary to pay their bills. If we can help people to cut down their bills and live a happy life we don’t need to maintain that high consumption, high GDP and high employment rate. Paul Krugman’s mistake is: he is considering things in a traditional way: he hopes consumption creates orders for the manufactures and factories create jobs and provide wages.
Our economic goal is to help mankind survive. Here let me introduce the opinion of RA Material recorded in the book Law of One. Its authors included Don Elkins, an America metaphysician and the chair of the University of Alaska’s Department of Mechanical Engineering asked RA material about” the root of thought that created the possibility of disease on Earth”. RA Material gave them an interesting answer.
RA Material said:” The root cause in this particular society was not so much being bellicose, but rather the formation of a money system and a very active trading and development of those tendencies towards greed and power, thus, the enslaving of entities by other entities and the misapprehension of the creator. RA Material also reminds us that “the beginning entity is one in all innocence oriented” who just had “The need for survival”. Today we need money, prettiness, power and companies need more and more.
Paul Krugman is wrong because he hopes to save our economy by encouraging unnecessary consumption. Actually things we need for surviving are just food, shelter and entertainment. If we are not greedy we don’t need wages but just get what we need for surviving from our lands. Private business sectors provide jobs for the society only when they have enough profit. Relying on them to solve people’s living problem is not wise. Protests in the Middle East and Africa in the world remind us that people in our globe desperately need jobs and food. What Governments should do is to set up farms, assign labors and arrange entertainment there. Government should solve people’s living problems directly. Paul Krugman’s consumption model is wrong because it is slow and indirect. Beside that the consumption level he promotes is not what resources in our globe can sustain.
