Jamie Galbraith on the US escaping "from the deadweight of mainstream economic thought" (hopefully!)

In the previous post, I quoted economist James Galbraith on how much China is embedded in the world economy. Since I don't quote him nearly enough on this blog, I thought I would add another reference here.

This is from an article of a year and a half ago, a few weeks before the world weren't yet terribly worried about the news reports of a new strain of coronavirus causing deaths in Wuhan, China: The Dismal Forecasts of the Dismal Scientists The American Prospect 01/10/2021. The economic expansion in the US and Europe was becoming old and feeble by historical standards. And Galbraith was reporting on how mainstream economist were making dreary predictions at a conference he mentions here. One of the main motivations of their predictions, he wrote, was "the natural human desire not to be embarrassed—yet again—by failing to have warned that things may go bad."

The COVID-19 shutdowns obviously depressed economic activity all over the world. Although it's important to note that the official dating of the current recession from the National Bureau of Economic Research (NBER) dates the start of it to February 2020. The mass lockdowns in the US didn't begin until mid-March.

One of the fretting economists Galbraith mentions is "an obscure young Finn, Tuomas Malinen, should however be considered for a prizewinning doomsday scenario." The latter characterization is an ironic one, as he proceeds to explain:

Malinen has a free-market streak, and his main scenario leans toward an Andrew Mellon–style mass liquidation, followed by recovery of the survivors. He would prefer this, for all the carnage, including physical death and destruction, to a “Green-Left fascism, suppressing both individual rights and unpopular economic activities.” Even if it were true that “Nature could be saved ... but at the expense of humanity reverting to slavery and oppression.”

To which Galbraith remarks drily, "This seems a bit over the top."

But he continues in a comment that includes an important observation about China's economic system:

Europe may well be at extreme risk as Malinen fears; the experience of Greece in the financial crisis shows that the financial and political leadership of the European Union is ruthlessly self-protective and predatory; there is no accountability for the suffering caused or recourse for the victims. China is, however, different. The government may be authoritarian but it responds quickly—and massively—to crisis because otherwise it would not survive. Financial analysts have a bit of a blind spot with respect to China; many see that country’s banking sector through Western eyes. In reality, China’s banks are backed by the government and protected by capital controls, making them essentially inseparable from the Chinese state. (my emphasis)

And he expresses a hope that the Biden-Harris Administration has intially fulfilled, in part, if still in relatively small part:

And in the next crisis, the United States may finally be moved to free itself from the deadweight of mainstream economic thought, to retire a worn-out generation of policy advisers, and to move on with the great social, economic, and environmental project known as the Green New Deal. There is a history of radical experiment and popular mobilization in this country, from which democracy emerged stronger, not weaker, than it ever was before. And for many Americans, to escape from the debt trap and from domination by bankers and billionaires into a world of work and public purpose would be the very opposite of slavery and oppression. A better word would be liberation, along with a new freedom, and a new hope. (my emphasis)