Steamboat Springs An Independence Day column in the Steamboat Today by Nobel Prize-winning economist Paul Krugman implied that President Barack Obama's trillion-dollar stimulus has failed. What was Krugman's advice? "President Barack Obama and his officials need to ramp up their efforts starting with a plan to make the stimulus bigger." Isn't that akin to advising alcoholics to get well by drinking twice their daily intake of alcohol?
In 1956, I studied the required course in macro economics at Colorado State University. This was based on the theories of the English philosopher John Maynard Keynes from his book "The General Theory of Employment, Interest and Money." In a nutshell, Keynes called for deficit spending and infusion of money into the economy by the federal government. This 73-year-old theory is the same and apparently only economic answer now embraced by Obama. If medicine had advanced at this rate, we still would be treating infections by sulpha drugs and amputation. If other technologies had advanced at this speed, we would be using crank telephone and crystal set radios.
Aren't there other economists and economic answers worth hearing? Of course there are.
It should be noted, however, that a common dependency of other economists, including Keynes, is the willing cooperation of private investors, managers of existing companies, and entrepreneurs to invest new capital into the system for purposes of conducting research, expanding operations, replacing obsolete facilities and equipment and in starting different and potentially exciting new enterprises.
This requires confidence in the market and one's government. Unfortunately, there is little confidence today because of the threats and anti-private industry words and actions currently emanating from Washington. One cannot simultaneously be uplifted - encouraged and threatened. FDR, a role model of our current president, told the nation, "There is nothing to fear but fear itself." Fortunately, we have been spared a repeat of these words, for indeed today there is much to fear.
The economist Joseph Schumpter told us that the very success of capitalism leads to a form of corporatism with values that are at odds with capitalism. Thus, he believed that we need a safety valve called creative destruction, in which companies such as General Motors and Chrysler would be allowed to die - not to live on as government/labor union-owned companies ruled by czars. He also believed that a second safety valve existed in entrepreneurship but that the creation of a welfare state would not permit flourishing entrepreneurship.
A government monetary stimulus of even $1 trillion will not work if the famed multiplier effect does not occur. Money is not created by government printing presses but rather by the actions of commercial banks lending funds to credit-worthy borrowers. But banks will not lend money if they are frightened, and credit-worthy borrowers will not take risks and borrow funds if they believe the federal government will take from them the fruits of their labor.
Another Nobel-winning economist, Friedrick Hayek, warned us not to travel "The Road to Serfdom." Hayek was against centrally controlled/planned economies. To be fair, some famous economists surely would find favor in the policies and philosophy of the current administration. Foremost among them would be Karl Heinrich Marx.
James C. Makens