Wednesday, May 2, 2012

Galbraith on Summers and deficit spending

Letter to the Financial Times published today as 'Dr Summers performs a medical miracle.'
From Prof James K. Galbraith

Sir, Whence comes Lawrence Summers’ medical knowledge? He writes of palliatives, of misdiagnosis, and states that “treating symptoms rather than causes is usually a good way to make a patient worse” (“Growth not austerity is the best remedy for Europe”, April 30).

As to cures, Prof Summers writes of “a need to raise retirement ages, reform sclerosis-inducing regulations and restructure benefit programmes”. Yet he presents no evidence that these matters caused our troubles, and of course they didn’t – unsupervised bankers and ambitious economists did. Blaming the elderly and poor is just a prejudice, common to people who have easy jobs and private means. Bleeding them (gradually, of course) is a medieval practice.

And yet, on the main point, Prof Summers gets it right. He does this by mistaking a symptom (recession) for a cause, and then prescribing a palliative (deficit spending). A minor medical miracle, perhaps!

The irony is that a real doctor would likely approve. After all, fever-reducers and pain relievers, from aspirin to morphine, are in widespread medical use and have been for many years.

So “Dr” Summers is on the right track for now, but as his methods show, he is still very dangerous to the sick.
Originally published here.

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