Sachs is wrong on Krugman and the recovery
Washed out, has-been pop icon and Bono
Now in a recent op-ed he criticizes Krugman (and essentially anybody that believes that the current recovery in the US is not that good) on his predictions about the recovery. The argument is basically that, in spite all fears of lack of fiscal expansion, the economy has done pretty well. In his words:
For several years, and often several times a month, the Nobel laureate economist and New York Times columnist and blogger Paul Krugman has delivered one main message to his loyal readers: deficit-cutting “austerians” (as he calls advocates of fiscal austerity) are deluded. Fiscal retrenchment amid weak private demand would lead to chronically high unemployment... Yet, rather than a new recession, or an ongoing depression, the US unemployment rate has fallen from 8.6% in November 2011 to 5.8% in November 2014. Real economic growth in 2011 stood at 1.6%, and the IMF expects it to be 2.2% for 2014 as a whole. GDP in the third quarter of 2014 grew at a vigorous 5% annual rate, suggesting that aggregate growth for all of 2015 will be above 3%. So much for Krugman’s predictions.This is not very different than the message the White House has been pushing on, he only forgot to say that the Dow Jones has hit new records. And yes GDP is recovering (and the fiscal package of 2009 was important, as well as fiscal transfers to states, which reduce the contractionary stance of local and state governments), but when you look the figure below (real GDP growth) it is clear that this recovery does not compare well with the Clinton or even Bush-II boom, which were not particularly good recoveries historically.
Larry Summers, now are talking about secular stagnation. The ghost of Alvin Hansen is haunting mainstream economics.
* USAID gave the HIID a huge grant to advise the Russian government on privatization. The head of the team, Andrei Shleifer (and his hedge-fund wife), attempted to steal from better-qualified competitors Russia’s license to sell mutual funds, and was later sued and found guilty by the courts of conspiring to defraud the US government. Shleifer had to pay back millions and was stripped of his Whipple V.N. Jones Professor of Economic chair due to ethics violations, but it has been argued that he managed to preserve his position at the university due to cronyism, i.e. basically his close relation to Larry Summers, who was by then Harvard's President. David Warsh has told the details of the story.