Fred Block settles for fairy tales

Unfortunate.

Krugman effectively demolishes this right-wing version of structuralism. But people naturally gravitate to explanations of great events that invoke some kind of big and powerful causal mechanism. By treating the initial crisis as an anomaly caused by irresponsible financial behavior, Krugman fails to deliver such an explanation and leaves the Right’s story untouched. Without an alternative narrative about what went wrong, their “too-much-borrowing” fairytale will remain hegemonic.

But we do have an alternative big story—and we need Krugman’s megaphone to help get it out. One piece is the argument that Occupy Wall Street has made: when the 1 percent grabs most of the gains from economic growth, as they have over recent years, bad things happen. The 99 percent have to either limit their consumption or increase their borrowing and go further into debt. Either way, effective demand in the economy will ultimately be restricted. At the same time, multi-millionaires think nothing of putting big sums into extremely risky investments that promise high returns because they already have more dollars than they or their children will ever need. But unlike polo or auto racing, this dangerous hobby of the rich can actually blow up the global economy. Thanks to JPMorgan Chase’s huge losses last week, we know that the biggest banks still can’t resist playing this treacherous game, especially when they’re trying to keep up with the richest kids (the hedge funds).

This runaway speculation is a sign of how our financial system has failed to direct capital in productive directions. As environmentalists have been arguing for forty years, an economic growth path based on cheap oil and coal and urban sprawl is no longer sustainable. But entrenched interests and a dysfunctional financial system have blocked the huge public and private investments in resource-conserving technologies—renewable energy, mass-transit systems, and less wasteful patterns of land use—that would generate durable and sustainable growth.

Comments:

1. The resilience of right-wing descriptions and prescriptions for the crisis is just that people "naturally" like a "big and powerful" story? So we need an "alternative big story"--or fairy tale, as it were?
2. To wit: underconsumptionism plus idle wealth => financial speculation => instability. In other words, financialization is like "polo and auto racing." Every step of that story is dubious.
3. And how do you get to that from environmentalism? What basis is there for assuming that resource conversation "generate durable and sustainable growth"? It would certainly produce a more sustainable economy, in an environmental sense, which is probably a good in itself. To promise that this would yield the kind growth that's been lacking in recent history is just too much.