I’ve been in Poland and England on a very successful speaking tour — all SRO crowds. In Poland, thanks for Jan Fijor, many of my books have been translated….In London I spoke at the Adam Smith Institute on “Austrian economics for Investors” and the Institute for Economic Affairs on “Hayek vs. Keynes: Who’s On Top?” Needless to say, in today’s crisis mode, Keynes and Keynesian economics are clearly on top.
Speaking of which……
This evening after my wife and I went to “Top Hat,” a fantastic new musical based on Irving Berlin’s film of the same name, we ran into Paul Krugman, the Nobel Prize economist and foremost advocate of “crude” Keynesian deficit spending, who is here in London on a book tour. I asked him a series of questions:
What did he think of the Canadian success story, how Canada faced a similar fiscal crisis in 1995, and cut federal spending and employment? All the Keynesian economists opposed it, but it turned out to be a big success — they balanced the budget in two years and the economy boomed. Then they went on a 11-year supply-side tax cut policy, and reduced capital gains, national sales, and corporate income (rate is now 12%!). They had no financial crisis in 2008, and no bank failures.
Krugman quickly dismissed the argument and downplayed its anti-Keynesian implications, arguing that a weak Canadian dollar helped exports and got them out of trouble. (In fact, the Canadian dollar has been up sharply since 1995, and today is on par with the US dollar.) You can’t win with this guy! He never admits it when he’s wrong.
He said he his new book “End This Depression NOW!” is selling the best in countries with the most trouble like Spain. He favors doubling or tripling the high deficits!
I asked, “Isn’t Spain’s problem of 25% unemployment all about inflexible labor markets, the fact that Spanish firms are discouraged from hiring new workers because of government regulations?”
“That’s minimal compared to the macroeconomic collapse,” he said. “They need to run even bigger deficits!”
Meanwhile, billions are flowing out of Spain for fear of a collapse.
“What about austerity?” I asked. He said he opposed it now, but once we are over the recession, austerity would be required. Unfortunately, we may never get there if we follow his “crude” Keynesian big spending plans.
He seemed to be completely confident of his big spending strategy. (He reminds me of Mao, who was determined in the 1970s to double up on socializing the Chinese economy — it only made things worse.) I asked him if he could name an economist who would be his equal in debate. He couldn’t name anyone! I suggested Milton Friedman if he were alive, and he nodded but then added, “Friedman would be considered a radical leftist in today’s Republican Party because he would undoubtedly favor today’s easy money policies to get us out of this depression.”
“But Friedman would not support fiscal stimulus!” I retorted. He sheepishly agreed. Friedman was famous for arguing that monetary policy was far more effective in fighting recession than fiscal policy. He would not be surprised that the deficits haven’t gotten us out of this crisis.
What about Mitt Romney? He accused him of being an “empty shell” and even “amoral” — with no principles — and will lose the election. “The November elections won’t be determined entirely by economic issues,” he said. “Admittedly the job growth numbers are awfully slow, and that’s not good for Obama.” But he thinks Obama will pull it off. I think he’s wrong, but we will see.
Finally, we talked about FreedomFest. He agreed to debate Steve Moore of the Wall Street Journal in our big mock trial this year, “Wall Street on Trial,” but wanted a ridiculous six-figure fee that would make a Goldman Sachs partner blush. Instead, we have Robert Frank, NYTimes columnist. The Times vs. the Journal. The sparks will fly at www.freedomfest.com. See you there!
“The World’s Largest Gathering of Free Minds”
July 11-14, 2012, Las Vegas