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Where Does the Pain Caucus Come From?

Paul Krugman meditates on the Pain Caucus:

http://krugman.blogs.nytimes.com/2010/06/02/interests-and-ideas/: Lambert has a righteous rant about my Monday column.... Fair enough.... Now, none of those people [leading the Pain Caucus] are... likely to find themselves... among the long-term unemployed. So class is certainly a factor. But I find myself in conversations with people I don’t think have a deep urge to inflict pain and/or safeguard the rentier class who nonetheless ask, “But how long can we keep interest rates low? Won’t bad things happen?” Which is not to say that this position makes any sense. What it does reflect, instead, is the pervasive bias toward believing that imposing suffering is good policy.... Keynes... similarly noted the strange collection of motives behind the punishment mentality; yes, one motive was this:

That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority.

But it’s not just simple class interest — which is why arguing with the ideas can make a difference.

Let me differ. In general, the argument that social injustice and cruelty must be tolerated rather than opposed because it is an "inevitable incident in the scheme of progress" (Rand Paul and company on the 1964 Civil Rights Act, anyone?) does commend itself to authority because those in authority may well lose from change. But not in this case. Those in. Authority (unless they are coupon-clippers with their portfolios 100% in government bonds) lose big from depressions--both in lost wealth and in undermined authority as well. Attachment by authority to the Macroeconomic Pain Caucus is a form of false consciousness: a failure to understand where there true material interests lie.

As I am finding so very very very very often these days, Keynes said it first in the interwar period:

While some part of the investment which was going on in the world at large [in the late 1920s] was doubtless ill judged and unfruitful, there can, I think, be no doubt that the world was enormously enriched by the constructions of the quinquennium from 1925 to 1929; its wealth increased in these five years by as much as in any other ten or twenty years of its history.... Doubtless, as was inevitable in a period of such rapid changes, the rate of growth of some individual commodities [over 1924-1929] could not always be in just the appropriate relation to that of others. But, on the whole, I see little sign of any serious want of balance such as is alleged by some authorities. The rates of growth [of different sectors]seem to me, looking back, to have been in as good a balance as one could have expected them to be. A few more quinquennia of equal activity might, indeed, have brought us near to the economic Eldorado where all our reasonable economic needs would be satisfied....

It seems an extraordinary imbecility that this wonderful outburst of productive energy [over 1924-1929] should be the prelude to impoverishment and depression. Some austere and puritanical souls regard it both as an inevitable and a desirable nemesis on so much overexpansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory for the mammon of unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy. We need, they say, what they politely call a 'prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again.

I do not take this view. I find the explanation of the current business losses, of the reduction in output, and of the unemployment which necessarily ensues on this not in the high level of investment which was proceeding up to the spring of 1929, but in the subsequent cessation of this investment. I see no hope of a recovery except in a revival of the high level of investment. And I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity...

It is indeed too bad that those who do not remember the history of the 1920s and 1930s appear doomed to repeat it. But the real tragedy is that the rest of us are doomed to repeat it with them.