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David Brooks' Parallel Universe

Tuesday, 08 May 2012 04:07

Just in case you thought that the failure of austerity in the United Kingdom and across the euro zone, and its rejection by voters in France and Greece, might be cause for changing course, David Brooks has a column to tell us otherwise. He says that there are two different arguments going on over economic policy which unfortunately don't intersect.

First, we have the cyclicalists who worry about silly things like 25 million people who are unemployed, underemployed or out of the workforce altogether. These people are also likely to worry about the millions of people who are losing their homes and probably also the children of the unemployed, underemployed and displaced homeowners.

Then we have the far-sighted structuralists like Brooks who worry about the long-term. They worry about fixing government deficits and getting us the labor force that we will need in the future.

This is a great division that has considerably less to do with reality than Middle Earth and the Munchkins. What could Brooks possibly be drinking when he thinks that he has identified a group of economists/policy wonks who are only concerned about the cyclical problem of high unemployment and not the structural problems that created them?

For my part, I have been yelling about the structural problems for more than a decade. I have written books on the structural problems of the economy, like Plunder and Blunder: The Rise and Fall of the Bubble Economy and The End of Loser Liberalism: Making Markets Progressive (free download available). I made the argument (unlike Brooks and his structuralists) that the underlying structural problems in the economy would create the sort of cyclical problems that we are now seeing as a result of the collapse of the housing bubble.

I don't know anyone who looks like cyclicalists that Brooks writes about. It would be good if he could toss out a few names for readers so that we know such people actually exist in the world and are not just Brooks' hallucinations.Since the views Brooks attributes to the cyclicalists are sufficiently bizarre, it is hard to believe that such people exist.

For example, he tells us that the cyclicalists believe:

"the level of government spending is the main factor in determining how fast an economy grows."

I have never come across anyone who had a view anything like this. I do know many economists who argue that in a downturn more stimulus will lead to more economic growth, but this is nothing like the view that Brooks attributes to the cyclicalists. Does Brooks really think it is the same thing to say that more stimulus leads to more growth in a downturn and saying that government spending is the main factor determining growth in general? This is scary.

Brooks also tells us that unlike the cyclicalists, the structuralists:

"believe that the creativity, skill and productivity of the work force matter most, and the openness of the system they inhabit."

Again, I know of no one involved in economic debates who does not believe that the productivity of the workforce is the main factor determining the wealth of an economy in the long-term. Of course there are sharp divergences from this long-term path. Our workforce did not suddenly get a lot less productive in 2008 than it had been in 2007, nor did it become less productive in 1930 than it had been in 1929.

The real amazing part of Brooks' column is that after ridiculing the cyclicalists for "railing" about the unnecessary suffering in the United States and Europe, he repeats trite cliches that have no basis in reality to tell us about the economy's real problems.

He begins with the problems:

"surrounding globalization and technological change. Hyperefficient globalized companies need fewer workers. As a result, unemployment rises, superstar salaries surge while lower-skilled wages stagnate, the middle gets hollowed out and inequality grows."

Apparently Brooks doesn't know that productivity growth is the norm for an economy. It was actually more rapid in the three decades following World War II than it is now with Brooks' "hypefficient globalized companies." We do see superstar salaries at the expense of the middle, but these are more typically the result of the ability of the superstars to manipulate the political process to their advantage than any obvious superstar skills.

For example, the multi-millionaire traders at Wall Street's too-big-to-fail banks profit primarily by their ability to get an implicit subsidy in the form of bailout insurance from the government. The CEOs who pocket tens of millions as their companies are run into the ground benefit primarily from being able to appoint the directors who decide their salaries. The fact that doctors can often get paychecks well into the hundreds of thousands is attributable primarily to their ability to limit the number of foreign doctors who can enter the country.

There may be some exceptions, but it's generally easy to find the government policy that creates the basis for the superstar salaries that Brooks touts. Of course, it's quite advantageous to the beneficiaries of these superstar salaries to have people like Brooks saying that it's all "globalization and technological change," but those of who don't get paid to say this stuff need not take such arguments seriously.

Then Brooks gives us the line freshly drawn from the 1935 Washington Post:

"Then there are the structural issues surrounding the decline in human capital. The United States, once the world’s educational leader, is falling back in the pack. Unemployment is high, but companies still have trouble finding skilled workers."

If you think you have seen this one before, that's because you've seen it before, and heard it repeated endlessly in all sorts of contexts. Here's the Washington Post in 1935:

"unemployment may run into the millions, but as the iron, steel, and metal-working industries improve, a scarcity of skilled workmen is developing, states the magazine Steel this week."

There are clear market signals of the sort of mismatch of jobs and skills that Brooks describes. We should see sectors of the economy where there are large numbers of job openings relative to the number of unemployed workers. We should see sectors where the average workweek is increasing rapidly. The logic is that firms who cannot find additional workers make the existing workforce work longer. And most of all, we should sectors of the economy where wages are rising rapidly.

People who believe in markets would look for this evidence before making bold assertions about employers being unable to find qualified workers. By contrast, Brooks just makes this assertion with no evidence whatsoever.

Finally Brooks concludes by telling us:

"make no mistake, the old economic and welfare state model is unsustainable."

This should prompt a really big, "huh?" Brooks had just been touting the German model. Germany certainly has a much more generous welfare state than the United States, even if it has been rolled back somewhat in the last decade. We could also look to Netherlands and the Nordic countries, all of whom have much more generous welfare states than the United States, yet don't in any obvious way appear to be on an unsustainable growth path. It's not clear what point Brooks thinks he is making.

The United States does have an unsustainable health care system. If health care costs follow the course projected by the Congressional Budget Office, then we will face serious budget problems, but it will also have a devastating impact on the private sector, as few people will be able to afford health care.

The main problem here is that the special interests (including many of Brooks' superstars) have been able to manipulate the rules so that they can gain huge rents. A simple fix would be more globalization so that people in the United States could take advantage of more efficient health care systems elsewhere in the world. But this would require overcoming the opposition of protectionists like Brooks.

Comments (18)Add Comment
written by Ron Alley, May 08, 2012 6:39
Once again, David Brooks writes about his years as an undergrad and reminds us that he majored in Sociology and slept through Economics 101.

He mints a label, "political sclerosis" to describe the condition we know as crony capitalism. That must be the new PC in GOP intellectual circles.

Mr. Brooks deletes financial crisis from history
written by Robert Salzberg, May 08, 2012 6:41
  The world experienced a financial crisis not a cyclical downturn.  There were very specific structural reasons for the financial crisis that have yet to be fully addressed, which include the mostly unregulated nature of derivative contracts and the bloated obscenely powerful financial sector, none of which is mentioned by Mr. Brooks.

   Mr. Brooks assertion that globalization is somehow the root cause of growing inequality, the hallowing of the middle class and stagnant wages is just wrong.  Unfair trade agreements, systematic dismantling of workers rights and a tax code heavily tilted towards favoring income from investment over wages from work are among the real structural problems unmentioned by Mr. Brooks.

   If we do have a structural problem, it's the fact that wage growth has largely been decoupled from productivity growth since around 1980. 

    Mr. Brooks fails to mention that America's biggest structural problem is that we spend around twice as much as we should on healthcare.  America spends about 8% of GDP more on healthcare than any other country in the world.  Until America embraces universal healthcare and the price controls that entails, our biggest structural problem will be unsolved. 
written by Bob Nelson, May 08, 2012 7:20
Mr Brooks presents no data whatsoever.

He simply states whatever he believes, and feels no need to support that belief with data. "Common sense" and "gut feeling" are all he needs. Mr Brooks is exemplary of conservative "thinking".

Bumper-sticker thinking
Fact-free decision-making

Welcome to Tea Party America!
Brooks vs SNL
written by azimir, May 08, 2012 8:58
Is NYT trying to compete with SNL? I always get a good lough listening to Brooks.
written by skeptonomist, May 08, 2012 9:23
There are people who think that government spending (investment) determines how fast the economy grows, but the real formal advocates of this idea are socialists, who have essentially zero influence in the US.

Actually many people in Congress, belonging to both parties, take this position when it comes to federal spending on the military and other things in their states and districts. They invariably claim that this spending will boost the local economy.
written by Eric 377, May 08, 2012 11:05
Despite any of these critiques of the rigor of his thinking or using factual evidence, Brooks remains a reasonably effective influence on public perception on this topic. We are facing an election this fall in which the underlying demographics have been moving strongly in favor of Democrats for 20 years or more (or so we've been told), and Republicans have not been shy at all in pushing for policies which are inimicable to the non-wealthy majority of the country. Yet there is a good deal of doubt that Democrats will retake the House, may lose the Senate (and if not, have a majority too small and fragmented at the margins to be very effective) and while the President looks like a decent bet to win, it could be pretty close. Who are the dummies, really?
Bobo's follies
written by Peter K., May 08, 2012 11:17
"Then there are the structural issues surrounding the decline in human capital. The United States, once the world’s educational leader, is falling back in the pack."

The austerity policies pursued by Bobo's clique - cutting public employment combined with insufficiently expansionary monetary policy - is actively degrading America's human capital. It's unnecessarily turning cyclical unemployment into long term unemployment. Mostly Bobo has been ignoring (or mischaracterizing) what his fellow columnist Krugman has been writing about. To not even understand what your opponent is arguing is a bad sign in a debate.
That's what he does
written by TimeXoned, May 08, 2012 12:30
David Brooks doesn't mean those kind of structural problems. He means whatever the ones are that make it pointless for the government to act in any way about unemployment because it's all just useless and the poor ye shall always have and so on, from something he read somewhere by a right wing propagandist in the academic world.

David Brooks always does this. He reads some claim that was questionable to begin with, doesn't really understand it, and then spins it into a column as some grand unified theory about why there are "two camps" on something and thoroughly embarrasses himself making up reasons why, by extrapolating the things he didn't understand into things he just made up.

written by sconosciuto, May 08, 2012 1:37
Brooks is what happens when you get a generalist who used to write opinion pieces for a local newspaper - where he might have actually understood something of which he was writing about - who fails upward to the NYT and now is tasked with writing opinion-leader sorts of columns about very specific topics about which he has little to no practical nor academic knowledge.

Paul Krugman - whatever you think of his economic theories and politics - is certainly qualified to occupy the space he holds on those pages.

David Brooks - NOT. I'm actually more than a little embarrassed for him.

Don't get me going on Tom Friedman...
Why do the "superstars" wind up with all the $ from globalization?
written by MarkJ, May 08, 2012 2:56
That's one question no one seems willing to broach. Yes, the CEO makes out like a bandit when he moves production to a cheap country, but why him and not the workers displaced? It's not like it takes a super genius to figure out that you can make more money selling T-shirts if you pay people $5 a day rather than $10 per hour to make them. If that's all the value added then I don't see what makes the superstars so super that they deserve what they're getting paid.
why the ceos make so much
written by mel in oregon, May 08, 2012 5:09
actually mark, dr baker & other columnists have explained this repeatedly. the board of directors have a unique link with the ceo. a typical member of the board might be on 10 other "boards". he (not to be sexist, but they're mostly men) flies around the country spending a week or 2 at each board meeting, & picks up a check at each one for say $200,000. so he will do nothing to ruin his wonderful way of making money. so he votes with the other members unanimously for the ceo to receive say $50 million as a bonus. at the same time, the workers get a new contract for $5 less per hour, a reduction in their work week down to 30 hours, & all benefits are eliminated. the question is, what to do about it? well the brilliant prof. noam chomsky believes the occupy movement may be able to effect change much as mahatma gandi, martin luther king, & nelson mandela have done in the past. one thing for sure, there will be a lot of blood spilled before the established power at wallstreet & their enforcers the police departments & homeland security ever relinquish anything to we the people. wish i could say otherwise but the united states has always been a very cruel & brutal nation easily surpassing ancient rome. 300 million black slaves, the genocide of native americans & the theft of half of mexico prove my point.
written by Ember, May 08, 2012 6:32
Brooks believe globalized companies are "hyperefficient." Well sure. Efficiency relates to lowering labor costs, so manufacturing in countries where almost slave labor is available is efficient. But is that really the best free enterprise in the USA can do? Put us into a race to the bottom for wages? I thought free enterprise was supposed to make everyone better off, not just the titans of industry.
You have to understand...
written by Carl Weetabix, May 08, 2012 6:32
What kind of sickness has made it common for people to believe said "superstars" exist? What "cult of the personality" makes anyone believe that these guys are not just simply talented (and perhaps mostly at self-promotion) rather than some lesser deities from the capitalist plane?

Seriously, have any of these people worked for a big business? Have they actually paid attention the last 4 years as these scathingly brilliant people crashed and burned our economy?

Where is the credulity? There are not gods, there are just, well bigger assholes. Is that what we want to worship as a society?

Certainly there are very talented hard working people in the upper reaches of some companies, but this sophomoric implication that they are somehow beyond the thousands of smart and hard working people "below" them is truly an act of self-delusion.

It's like high school with the likes of Brooks worshiping the "popular kids". He represents their sycophantic court, self-deluding in the hope that they will love him, actually love him.

Grow up David. They are people, just people like you and me. You show yourself to be a man-child through your comments.
Lack to the future
written by David, May 08, 2012 6:33
I had to laugh, a maniacal laugh of madness, to hear Brooks give his oh so quaint concern for what happens in the long run, when he suggests to allow the engine of the economy to suffer permanent (or only nearly so, if we got lucky under his plan).

In this short a space, I can only describe my view via imperfect metaphor. When the car engine is running low on oil and you're low on money, you (the person who is truly thinking about the future) put oil in the car, even if you have to borrow. Because if you don't, your penny-wise $5 in savings will not be able to pay for the $1000-2000 replacement engine.

So, yeah, it's laughable that Brooks says he's concerned about the future when it is most obvious that he is not at all concerned about the future or the present, for whatever reason that may be.
Poor Bobo!
written by MaryinChicago, May 08, 2012 11:35
David Brooks: the triumph of anecdote over evidence....
written by theod, May 09, 2012 12:52
Its best quote definitively applies to Mr. Brooks:

“He is an errand boy for grocery clerks.”
written by John Q, May 09, 2012 2:34
"This is scary." you say.

If you're only now scared by the possibility that people may take Brooks seriously, you're coming late to the party.
written by dick c, May 09, 2012 7:00
Who, at the Times, thinks Brooks is an asset? Guy's like this really can't float to the top, can they? I have to think they're being held up by someone else.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.