Lefty Resource Library

Posting articles as I go

Tag: economics

Philosophy and economics serving status quo power

Utilitarianism challenged the aristocracy. Philosophy conveniently intervened to devalue this challenge, and enabled the development of modern econ, including justifications for the common thinking that redistribution to the poor is wrong but redistributing to the rich is right:

“what really upset the applecart was the specification, “each one to count for one.”  The problem, you see, was that the principle gave the same weight to the pains and pleasures of peasants as it gave to those of aristocrats … there were so many peasants and so few aristocrats!

“seemed ineluctably to lead us to an endorsement of a far-reaching redistribution of income

“Philosophy came to the rescue, this time by discovering the problem of Other Minds … Capitalism was saved, and economists could go back to elaborating elegant mathematical structures confident that in so doing they would not be burning the house down

“Apologists for capitalism, which is to say professional economists, showing a positive genius for propaganda, call this state of affairs “efficient.”  I mean, who on earth could be against efficiency, especially in America?  So the present distribution of wealth and income is efficient, so long as taking a dollar away from a billionaire and giving it to a poor man makes the billionaire even the slightest bit less happy.  Unless, of course, the transfer has the all-round happy effect of somehow increasing the total output of the society so that the billionaire can be given his dollar back [or, more likely, a million dollars back] while also leaving enough to give the poor man an extra crust of bread, which will, ex hypothesi, move him a tad up his indifference curve.  [They give Nobel Prizes for this stuff.  I think astrologers should complain.]”

Implications for other ways in which theory is used to distance the privileged from oppression.


The impossibility of growth

Monbiot article.

‘To succeed is to destroy ourselves. To fail is to destroy ourselves. That is the bind we have created. Ignore if you must climate change, biodiversity collapse, the depletion of water, soil, minerals, oil; even if all these issues were miraculously to vanish, the mathematics of compound growth make continuity impossible.

As the philosopher Michael Rowan points out, the inevitabilities of compound growth mean that if last year’s predicted global growth rate for 2014 (3.1%) is sustained, even if we were miraculously to reduce the consumption of raw materials by 90% we delay the inevitable by just 75 years(15). Efficiency solves nothing while growth continues.’


Intro to illegitimate public debt (as neoliberal ploy)

‘The crucial point is to demonstrate, as the French audit did, that debt is a political construction, that it doesn’t just happen to societies when they supposedly live above their means. This is what justifies calling it illegitimate, and may lead to cancellation procedures.

‘while the living conditions of the majority are worsening, a small group of individuals and financial institutions has consistently taken advantage of high levels of public indebtedness…the political nature of debt’


Refuting a major study used to say high government debt is bad for the economy

It appears there is in fact no problem with debt, and no argument for austerity (esp. not with Australia’s tiny debt).


A bit on the World Bank and neoliberalism

‘On a macro scale, international organizations such as the World Bank and the IMF have historically deferred to a similar list of policy prescriptions known as the Washington Consensus, a one-size-fits-all policy package of fiscal austerity, privatization of public institutions/industries, and market liberalization.

‘During his tenure at the World Bank in the late 1990s, Joseph Stiglitz saw the macro side firsthand; in his 2002 book, Globalization and Its Discontents, he observed that the institutions dictating measures to developing states “tended to ignore the problems” underlying their condition and — in every case where the state was not permitted to implement reforms itself — actually exacerbated that condition. In East Asia especially, states went from having practical economic management that encouraged saving, exports, and safety nets for the poor to a regional crisis where “the IMF itself had become a part of the countries’ problem rather than part of the solution.” Elsewhere around the globe, “[t]he transition from communism to a market economy [had] been so badly managed that, with the exception of China, Vietnam, and a few Eastern European countries, poverty has soared as incomes have plummeted.”

‘At its core, the Washington Consensus approach, as the policy manifestation of market fundamentalism, is about disruption. Its self-selection of jargon like “shock therapy” makes that clear. It makes available new markets, labor, and raw materials for the benefit of the world’s largest corporations, without assuming any responsibility when things go awry. In The White Man’s Burden, another well-known foreign aid and development treatise, former World Bank economist William Easterly’s own appellation for the type of change agent now engaging in disruption is “Planner,” one who “thinks he already knows the answers; he thinks of poverty as a technical engineering problem that his answers will solve.” Planners, according to Easterly, are “why dying poor children don’t get twelve-cent medicines, while healthy rich children do get Harry Potter.”’

‘Like a virus, neoliberalism has rapidly infected many aspects of civil society. It spreads by capitalizing on spheres of inequality, by redirecting capital flows from one side to the other with no regulation or regard for the consequences. Thus, instead of a public health care option subsidized by public funds for the public good, millions of Americans are being shunted into privatized insurance plans in one of the grandest moves to privatize civil society in a generation; public funds for public schools are being redirected to private charter schools and corporate curriculum- and test-makers, with many thanks to the great change agent of our day: Barack Obama.

‘Such acts of privatization have led to an unprecedented amassing of wealth by select individuals, turning some billionaires and corporate leaders into modern-day Phoebuses with the will, means, and lack of accountability to insinuate themselves into whatever circle of society they like, just because they can. As Oppenheimer notes, a primary cause behind public education’s ongoing tryst with privatization is chronic underfunding — especially in times of austerity such as now — that leaves school administrators beleaguered and open to exploring easy solutions pitched their way. The same can be argued for development efforts that backfire and reinforce the status quo of gross inequality abroad — the needy are left even needier and dependent on the wealthy.’


Modern Monetary Theory (MMT) – some philosophical implications and historical oppressive applications

Article could be questionable in its understand of econ. Nevertheless interesting, especially for implications and applications to power and oppression. Very interesting anyway, particularly as it may apply to history, class, colonialism and revolution or at least deep reform. Tempting to quote the entire article, but will try to restrain myself.

(Interview with one of the founders of MMT, in which he is sceptical of the kind of philosophical thinking MMT inspires: http://hir.harvard.edu/debt-deficits-and-modern-monetary-theory Outlines some of the basics of MMT).

Provides a caveat for its own position: ‘For those seeking a grand, unifying sociopolitical economic theory, MMT will disappoint. But as an analytic tool, MMT clarifies who holds genuine power—sovereignty—within society, and how they organize the money system to serve their interests. Unsurprisingly, this is often a story of tremendous cruelty and exploitation.’

‘the revelation that the rules of money are not immutable laws of nature but are instead created and constantly modified by people opens up possibilities beyond the scope of our current political imagination. The questions become: What sort of society do we want? Do we have the physical resources to support that society? And finally, how the hell do we muster the political will to get there?

‘First, we must understand the source of modern ­money’s value—and contend with the violence of its origins. Imagine you have just invaded an island. The populace leads a leisurely life of hunting and subsistence farming, and natural abundance ensures nobody needs to work too hard. But beneath the fertile soil are precious minerals that will make you very rich—provided you can get the people of the island to do the backbreaking work of mining for you.

‘Guns will work for this purpose, but slavery has fallen out of social acceptability. What if, instead of each day forcing workers into your mines at gunpoint, you created your own money system? You could print your face on a bunch of plastic tokens and pay miners with them, while imposing a mandatory token tax at the end of each month. To avoid imprisonment or death, they will have to make sure they work enough to have tokens at the end of the month. Now you need to take out your gun only once a month, when you go door to door demanding your token. The natives remain ostensibly “free.” But the mining still gets done.

‘A sovereign (you, in this scenario) becomes a money creator not by figuring out how to carve their faces into a coin, but by having the strength to enforce taxes denominated in their own coins. As the economist Hyman Minksy famously said, “Anyone can create money—the problem is getting it accepted.”

‘Your tokens would be totally worthless without your threat of violence, but with it, they become an overriding factor in your subjects’ lives. Subjects must refocus their society around earning and holding tokens. Some people will work in your mines; others will perhaps sell goods and services to those with jobs. You, in the meantime, will have transformed an entire economy for your profit, with only the periodic use of force.

‘Forcing people to pay their taxes in a money that is otherwise worthless creates demand for money and gives it its value. This idea, called chartalism, is one of the core building blocks of Modern Monetary Theory. “Modern money” is fiat money, state-issued currency not backed by precious metals or any other commodity.

‘Variations of the modern-money narrative are found repeatedly throughout history. The levying of monetary ­taxes to create waged labor was “a nearly universal experience throughout Africa” in the colonial era, explains economist Randall Wray. Hut taxes, coupled with extreme violence and racial segregation, forced unwilling migrant laborers into the gold and diamond mines of South Africa. Bernard Magubane, an anthropologist, described the purpose of these taxes as being to “increase the economic pressure on the African peasants” to force them into waged work.

‘Christine Desan, whose research overturns the mythical “barter” story of introductory economics textbooks that claims money was invented only after trading became complex. According to Desan, “money is created when a stakeholder uses his or her singular location at the hub of a community to mark the disparate contributions of individuals in a common way”

‘Desan’s explanation of money’s origins reminds me of the points system used in the student co-ops I lived in during college. We enjoyed a home-cooked meal each night, and the houses only rarely succumbed to squalor—­despite their inhabitants’ tendency for heavy loads of ­c­ourses and drugs—because the points system imposed work on us. Points could be earned by doing household chores (the more time-consuming the task, the more points you earned), and every member of our co-op owed the house 30 points per week. Point balances were kept on a paper chart or online spreadsheet (no one’s face was minted on any point tokens), and if your point deficit exceeded a certain threshold, you risked getting kicked out.

‘It’s not a huge leap to imagine a co-op choosing to run a deficit by issuing more points than it collects and permitting them to be traded. This would allow individuals to save points to exchange on private markets for tutoring, homegrown, or whatever else co-opers have the means and inclination to produce. A local farm might even be willing to sell food for points, provided they could use the points to employ co-opers during the harvest. Like colonially imposed money, points would have value as long as co-opers needed them to fulfill their obligation to the house, and the house had punitive means at its disposal to enforce it.

‘The point, like the token, is an arbitrary unit that has value because of an imposed debt burden. But the resemblance suggests that the logic of modern money can also be put in the service of collective, as opposed to exploitative, political aims.

‘Sovereigns create money as a tool to obtain the labor and other resources they need to fulfill their political goals. The sovereign steers the ship, at least initially, not some money god. If sovereignty lies with the people, money can be used to serve the common good. If people lack formal political power, more democratic layers of sovereignty may be possible in the shadow of the official sovereign, provided the means of production exists within a community.

‘Money scarcity is basically a political decision, as with Congress’s imposition of an arbitrary limit, the “debt ceiling,” on the amount of money that the federal government “borrows.” It’s largely motivated by those who would like to keep wealth concentrated in the hands of a few (who can personally benefit from the metaphorical printing press via government spending or direct access to the Fed).

‘This is not to say there are no other constraints on public spending. Inflation is a real constraint. If the government spends dollars into existence faster than the private demand for holding money, prices will rise. Savings will lose value, while debt burdens become less onerous. If workers wages fail to keep pace with other prices, they will suffer.

‘Luckily, the sovereign has tools other than arbitrary debt limits for managing demand for money: taxes. Raising taxes makes money more scarce and in demand. But if the private sector loses too much spending power because the government taxes too much (or spends too little), commerce freezes up.

‘How do we know when to tax, who to tax, and how? This is as much a question of political values as macroeconomics, but MMT helps us weigh our choices. The prescriptive side of MMT typically focuses on achieving the dual goals of maintaining full employment and price stability (incidentally the same two goals the Fed is supposed to uphold). Rather than focusing on economic “growth” as a good in and of itself, MMT directly seeks the promised outcome of such growth: that everyone who wants a job can find one, and that goods and services remain affordable in relationship to income.

‘Conventional economics considers full employment to be inflationary, because when labor markets are tight, workers can demand a bigger share of the wealth they create. A “reserve army of the unemployed” keeps labor cheap. The unemployed serve as a “buffer stock” to anchor prices, or as Randall Wray puts it, to “fight inflation through their desperation as they try to bid jobs away from the employed by offering to work at miserable wages.”

‘MMT, however, argues that prices can be anchored not through the misery of the unemployed but through  the government offering a job to anyone unemployed who wants to work. 

‘Many MMT advocates see the job guarantee as a transitional program to keep workers productive and skilled until the private sector finds a place for them. But a job that serves the public good, provides ample leisure time, and supports a low-consumption lifestyle is itself appealing. For those that value strong community and a healthy environment, the job guarantee could be a chance to opt out of the “work hard, consume hard” lifestyle to do much needed public service, while keeping the private sector open for those with heavier ambitions and appetites.

‘MMT encourages us to conceive of money as a claim on the resources of society, a promise that entitles one to a bit of whatever resources are for sale. The money system is then an imperfect sort of scoreboard for keeping track of claims on resources. Money only matters to the extent that it can be redeemed for “real” wealth.

‘Government deficits, the money supply, and GDP are abstractions that obscure the issues of power and distribution of wealth that are the consequence of a given political system. These abstractions make no sense as ends in themselves. A public deficit just means that a sovereign has spent money into the economy that it hasn’t taxed back. It doesn’t say whether that money was spent on bombs or schools or pure graft. A country can have a high GDP because a small subset of the population sells tons of luxury goods and financial instruments to each other while everyone else starves. Ultimately, what matters is the quality and distribution of resources.

‘Those at the very tip of our economic pyramid understand that fiat money is unlimited, but most everyone below believes it to be scarce. We live under austerity and debt. But it doesn’t have to be this way. The idea that we don’t have the “money” to supply essential public goods to everyone is a pernicious myth that can only be maintained so long as we remain ignorant of how money actually functions. But this myth is merely justification for power structures that are ultimately backed by guns and the vastly unequal distribution of our finite planet’s resources. Knowledge is no substitute for political power. It is merely somewhere to start.’



Edit 7/7/14: Quite accessible summary via interview with Piketty in The Guardian.

‘”we will all be poorer in the future in every way and that creates crisis. I have proved that under the present circumstances capitalism simply cannot work.”

‘”There is a fundamentalist belief by capitalists that capital will save the world, and it just isn’t so. Not because of what Marx said about the contradictions of capitalism, because, as I discovered, capital is an end in itself and no more



‘income generated from capital normally grows faster than the economy or income from wages. This means that the private owners of capital benefit disproportionately from growth, which makes it easier for them to increase their asset holdings and by extension future income. And, since wealth and income translate into political power, we face a self-reinforcing dynamic leading to ever growing inequality.’



‘His most startling news is that the belief that inequality will eventually stabilize and subside on its own, a long-held tenet of free market capitalism, is wrong. Rather, the economic forces concentrating more and more wealth into the hands of the fortunate few are almost sure to prevail for a very long time.

‘It is possible to slow, or even reverse, the trend, if political leaders like President Obama, who proposed that income inequality was the “defining challenge of our time,” really push.

‘“Political action can make this go in the other direction,” Professor Piketty told me. But he also adds that history does not offer much hope that political action will, in fact, turn the tide: “Universal suffrage and democratic institutions have not been enough to make the system react.”’

‘the income from wealth usually grows faster than wages. As returns from capital are reinvested, inherited wealth will grow faster than the economy, concentrating more and more into the hands of few. This will go on until capital owners decide to consume most of their income and stop reinvesting as much.’



‘Anybody who reads the newspaper will be aware that, in the United States, the “one per cent” is taking an ever-larger slice of the economic pie. But did you know that the share of the top income percentile is bigger than it was in South Africa in the nineteen-sixties and about the same as it is in Colombia, another deeply divided society, today? In terms of income generated by work, the level of inequality in the United States is “probably higher than in any other society at any time in the past, anywhere in the world,” Piketty writes.’



‘At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.’

‘Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, are actually the big story in rising inequality. And this discovery came with a second revelation: talk of a second Gilded Age, which might have seemed like hyperbole, was nothing of the kind. In America in particular the share of national income going to the top one percent has followed a great U-shaped arc. Before World War I the one percent received around a fifth of total income in both Britain and the United States. By 1950 that share had been cut by more than half. But since 1980 the one percent has seen its income share surge again—and in the United States it’s back to what it was a century ago.

‘The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

‘we now know both that the United States has a much more unequal distribution of income than other advanced countries and that much of this difference in outcomes can be attributed directly to government action. European nations in general have highly unequal incomes from market activity, just like the United States, although possibly not to the same extent. But they do far more redistribution through taxes and transfers than America does, leading to much less inequality in disposable incomes.

‘The general presumption of most inequality researchers has been that earned income, usually salaries, is where all the action is, and that income from capital is neither important nor interesting. Piketty shows, however, that even today income from capital, not earnings, predominates at the top of the income distribution. He also shows that in the past—during Europe’s Belle Époque and, to a lesser extent, America’s Gilded Age—unequal ownership of assets, not unequal pay, was the prime driver of income disparities. And he argues that we’re on our way back to that kind of society.

‘this accumulation of capital, says Piketty, will eventually recreate Belle Époque–style inequality unless opposed by progressive taxation.

‘Why? It’s all about r versus g—the rate of return on capital versus the rate of economic growth.

‘If he’s right, one immediate consequence will be a redistribution of income away from labor and toward holders of capital. The conventional wisdom has long been that we needn’t worry about that happening, that the shares of capital and labor respectively in total income are highly stable over time. Over the very long run, however, this hasn’t been true. In Britain, for example, capital’s share of income—whether in the form of corporate profits, dividends, rents, or sales of property, for example—fell from around 40 percent before World War I to barely 20 percent circa 1970, and has since bounced roughly halfway back. The historical arc is less clear-cut in the United States, but here, too, there is a redistribution in favor of capital underway. Notably, corporate profits have soared since the financial crisis began, while wages—including the wages of the highly educated—have stagnated.

‘A rising share of capital, in turn, directly increases inequality, because ownership of capital is always much more unequally distributed than labor income. But the effects don’t stop there, because when the rate of return on capital greatly exceeds the rate of economic growth, “the past tends to devour the future”: society inexorably tends toward dominance by inherited wealth.

‘Consider how this worked in Belle Époque Europe. At the time, owners of capital could expect to earn 4–5 percent on their investments, with minimal taxation; meanwhile economic growth was only around one percent. So wealthy individuals could easily reinvest enough of their income to ensure that their wealth and hence their incomes were growing faster than the economy, reinforcing their economic dominance, even while skimming enough off to live lives of great luxury.

‘And what happened when these wealthy individuals died? They passed their wealth on—again, with minimal taxation—to their heirs. Money passed on to the next generation accounted for 20 to 25 percent of annual income; the great bulk of wealth, around 90 percent, was inherited rather than saved out of earned income. And this inherited wealth was concentrated in the hands of a very small minority: in 1910 the richest one percent controlled 60 percent of the wealth in France; in Britain, 70 percent.

‘Given this picture, why does inherited wealth play as small a part in today’s public discourse as it does? Piketty suggests that the very size of inherited fortunes in a way makes them invisible: “Wealth is so concentrated that a large segment of society is virtually unaware of its existence, so that some people imagine that it belongs to surreal or mysterious entities.” This is a very good point. But it’s surely not the whole explanation. For the fact is that the most conspicuous example of soaring inequality in today’s world—the rise of the very rich one percent in the Anglo-Saxon world, especially the United States—doesn’t have all that much to do with capital accumulation, at least so far. It has more to do with remarkably high compensation and incomes.’

Note that: ‘And yet there is one thing that slightly detracts from the achievement—a sort of intellectual sleight of hand, albeit one that doesn’t actually involve any deception or malfeasance on Piketty’s part. Still, here it is: the main reason there has been a hankering for a book like this is the rise, not just of the one percent, but specifically of the American one percent. Yet that rise, it turns out, has happened for reasons that lie beyond the scope of Piketty’s grand thesis.

‘Piketty is, of course, too good and too honest an economist to try to gloss over inconvenient facts. “US inequality in 2010,” he declares, “is quantitatively as extreme as in old Europe in the first decade of the twentieth century, but the structure of that inequality is rather clearly different.” Indeed, what we have seen in America and are starting to see elsewhere is something “radically new”—the rise of “supersalaries.”

‘Who determines what a corporate CEO is worth? Well, there’s normally a compensation committee, appointed by the CEO himself. In effect, Piketty argues, high-level executives set their own pay, constrained by social norms rather than any sort of market discipline. And he attributes skyrocketing pay at the top to an erosion of these norms. In effect, he attributes soaring wage incomes at the top to social and political rather than strictly economic forces.

‘Capital in the Twenty-First Century makes it clear that public policy can make an enormous difference, that even if the underlying economic conditions point toward extreme inequality, what Piketty calls “a drift toward oligarchy” can be halted and even reversed if the body politic so chooses.

‘The key point is that when we make the crucial comparison between the rate of return on wealth and the rate of economic growth, what matters is the after-tax return on wealth. So progressive taxation—in particular taxation of wealth and inheritance—can be a powerful force limiting inequality.

‘France’s Third Republic. The Republic’s official ideology was highly egalitarian. Yet wealth and income were nearly as concentrated, economic privilege almost as dominated by inheritance, as they were in the aristocratic constitutional monarchy across the English Channel. And public policy did almost nothing to oppose the economic domination by rentiers: estate taxes, in particular, were almost laughably low.

‘Why didn’t the universally enfranchised citizens of France vote in politicians who would take on the rentier class? Well, then as now great wealth purchased great influence—not just over policies, but over public discourse. Upton Sinclair famously declared that “it is difficult to get a man to understand something when his salary depends on his not understanding it.” Piketty, looking at his own nation’s history, arrives at a similar observation: “The experience of France in the Belle Époque proves, if proof were needed, that no hypocrisy is too great when economic and financial elites are obliged to defend their interest.”

Krugman on Piketty, http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/?src=longreads


‘Piketty is in no doubt, as he indicates in an interview in today’s Observer New Review, that the current level of rising wealth inequality, set to grow still further, now imperils the very future of capitalism. He has proved it.

‘Capital, he argues, is blind. Once its returns – investing in anything from buy-to-let property to a new car factory – exceed the real growth of wages and output, as historically they always have done (excepting a few periods such as 1910 to 1950), then inevitably the stock of capital will rise disproportionately faster within the overall pattern of output. Wealth inequality rises exponentially.

‘The process is made worse by inheritance and, in the US and UK, by the rise of extravagantly paid “super managers”. High executive pay has nothing to do with real merit, writes Piketty – it is much lower, for example, in mainland Europe and Japan. Rather, it has become an Anglo-Saxon social norm permitted by the ideology of “meritocratic extremism”, in essence, self-serving greed to keep up with the other rich. This is an important element in Piketty’s thinking: rising inequality of wealth is not immutable. Societies can indulge it or they can challenge it.

‘As a result, the burden of paying for public goods such as education, health and housing is increasingly shouldered by average taxpayers, who don’t have the wherewithal to sustain them. Wealth inequality thus becomes a recipe for slowing, innovation-averse, rentier economies, tougher working conditions and degraded public services. Meanwhile, the rich get ever richer and more detached from the societies of which they are part: not by merit or hard work, but simply because they are lucky enough to be in command of capital receiving higher returns than wages over time. Our collective sense of justice is outraged.

‘The lesson of the past is that societies try to protect themselves: they close their borders or have revolutions – or end up going to war. Piketty fears a repeat. His critics argue that with higher living standards resentment of the ultra-rich may no longer be as great – and his data is under intense scrutiny for mistakes. So far it has all held up.

‘The solutions – a top income tax rate of up to 80%, effective inheritance tax, proper property taxes and, because the issue is global, a global wealth tax – are currently inconceivable.

‘But as Piketty says, the task of economists is to make them more conceivable.’


Another good article: http://www.newstatesman.com/2014/03/french-revolutionary

The Economist advocating stimulus over austerity

‘Public investment is not a panacea: Japan’s government paved over half the country in failed bids to thwart stagnation with stimulus. But what better time to invest in urgently needed infrastructure than when the cost of borrowing is at record lows? Greater public investment will boost economic potential in the long term and bolster spending in the short term. It should be at the top of today’s bubble-prevention arsenal.’


An argument for national investment

”’these same future generations reap most of the investment benefits of a more productive economy and higher income levels”. Sound unfair to you?’


Economic austerity is misguided

‘ Recent experience around the world suggests that austerity can have devastating consequences, and especially so for fragile economies. Government cuts have helped push Britain, Spain and Greece’s economies deeper into recession and led to widespread public misery.’

‘ Proponents of austerity ignore the fact that national debt is only one side of a country’s balance sheet. We have to look at assets – investments – as well as liabilities. Cutting back on high-return investments just to reduce the deficit is misguided. If we are concerned with long-run prosperity, then focusing on debt alone is particularly foolish because the higher growth resulting from these public investments will generate more tax revenue and help to improve the long-term fiscal position.’