Of Arthur, Kenneth & Carmen, Colltalers
Proponents of austerity measures, the Draconian slashing of government spending and social programs as the only, unarguable, solution to all problems affecting the global economy, have suffered many setbacks lately, including from one of the bastions of global capitalism, the International Monetary Fund.
But beyond any heartwarming socialist speech about the fallacy and inherent cruelty of capitalism, there’s at least one study in contrasts that illustrate with great clarity the bizarro world behind our current woes: the case of the fraudster that was honestly right, and the cheating elite economists who got it all wrong.
More on that in a moment, but let’s drive the first point until the nail crushes the vampire’s heart. Or the zombie’s brain, for those who belieber it. Regardless.
One may be able, albeit ill-advised, to dismiss the hundreds of thousands of people, who on Labor Day this past week, took the streets around the world to protest austerity policies their governments have been shoving down their throats, with no visible benefits, but mounting nefarious consequences.
But even those controlling the strings can’t ignore that there’s no longer a consensus, if there was ever one, about the efficacy of spending an obscene amount of capital, political and otherwise, on a proposition that alienates the majority of the world population, whose sweat and labor supports the very wealth at the top.
Neither the Reagan-era ‘greed is good’ bumper-sticker capitalism of the 1980s, and its phony tales of Cadillac-driving welfare queens, could’ve envisioned economic growth led by a skyrocketing stock market, huge CEO compensations, and a global network of tax havens for billionaires, standing on the backs of starving laborers and millions of unemployed roaming the streets.
And yes, it has happened before, but there’s no need to go there. After all, despite all historic examples and the books to prove it, many in charge of making economic policy decisions show a disturbing obliviousness about the lessons they were supposed to have mastered with the expensive degrees they’ve earned.
Or as we see it, one must be at least suspicious about being among the few still paying attention to evidence and ‘reality-based’ cause-effect (even for using quotation marks, which would be absurd if we were in fact living in a rational world), while those holding the cards seem to overlook it all so easily.
That’s what made us think about Arthur Batista da Silva, who got it right about what was happening to Portugal, even though he was not who his countrymen thought he was, and Kenneth Rogoff and Carmen Reinhart, the Harvard economists who everyone thought should know better, but as it turned out, did not.
Last year, when Portugal was negotiating a $100 billion bailout with European banks, in exchange for cutting government spending, i.e., welfare programs to near zero, Silva became a fixture of Portuguese talk shows, exactly for going against the grain and issuing dire warnings against the whole package.
Billed as a ‘U.N. economist,’ he displayed a rare sense of prescience and forwardness as almost the sole voice among experts to advice his country to ‘renegotiate its bailout package or risk social problems spinning out of control,’ as reported by Reuters in December.
Less than six months later, his words have a ring of truth no other European forecaster can claim, as leaked EU-IMF documents attest now that Portugal may need yet another injection of fresh money just to keep afloat keep afloat amid the stiff interest payments of the first loan.
Not mentioned with enough emphasis, of course, or rather, still with no paternity claims on sight, are the social costs, widespread recession, and unemployment that have only got worse with the austerity measures imposed in exchange for the initial cash.
It’s too bad that Silva won’t be claiming his correct foresight any time soon, so busy he’s been with threats of persecution and lawsuits for having ‘deceived’ everyone about his real ex-con identity. In other words, they’re throwing the book at him, but leaving off the hook all who profit from the country’s bankruptcy.
As for the distinguished Harvard economists, they’ve authored ‘Growth in a Time of Debt,’ a paper celebrated by conservative governments and pundits around the world. Roughly summarizing it, it all but blamed government debt on diminishing rates of economic growth. Well done, they were almost universally cherished.
According to seemingly complicated graphs, the paper’s most excerpted snippet was deemed an instant classic: it supposedly proved that whenever a country would reach a debt exceeding 90 percent of its annual GDP, it would necessarily experience slower growth than its more social stringent peers.
Proponents of austerity as a way to purge the sins of government spending (mostly on poor people) were exultant. Except that it was all a fraud, even if apparently unintentional. Not that huge amounts of reality-based evidence would be enough to the undoing of such a baseless theory.
No, what did it in was simple math. All it took was a Thomas Herdon, an economics graduate at Amherst College in MA, to crunch the numbers, and bingo, they wouldn’t add up. Again, not that the discovery of such an astronomical flaw derailed any austerity policy already in place.
Neither Rogoff nor Reinhart have apologized for anything yet. On the contrary, they not just have since taken to Op-Ed pages of major newspapers (you know who you are) to somehow justify their blunder, but they’re also taking the world famous ‘janitorial defense,’ or in their particular case, the ‘Excel excuse.’
You’re probably familiar with some version of it: blame the fire that razed a whole city block on the janitor. Or the nuclear facility malfunction on a intruding rat, as they did (twice) in Japan. Such save face works wonders for the perpetrators, and changes nothing to those they’ve hurt with their mistake.
While the two cases exposed both the fallibility of pundits and experts in accessing a multifaceted economic crisis, and our own gullibility in accepting their analysis at face value, the connotations go beyond that.
For hidden behind the paper’s wrong numbers and biased calculations, are livelihoods lost and the despair of an entire generation. At the same time, what the deception helped bury in Portugal was the courage of the fraudster, as the media called him. He was right, though, and the media, wrong again.
Perhaps it’d be preaching to say that as the talking heads exhaust airtime, literally sucking the oxygen out of our ability of thinking for ourselves, the fate of professions and occupations may be decided by an ill-conceived algorithm, or a complete fabrication.
The value of such currency, though, is tender only by taking it straight to the bank, instead of refusing to trade in dignity in order to get it. Or something like that, you know, preaching. Which, by the way, is something Colltales won’t endorse. Have a your (good) way in May. WC