The Psychological Roots of the Recession
David Brooks nails the essence of the problem plaguing the national and global economies — it isn’t a run-of-the-mill failure of economic performance, but rather a failure of our collective imaginations (including both consumers and policymakers) to adjust to the economic situation we are in.
A big part of the problem is the bipartisan retreat to standardized talking points that don’t respond to the real causes of economic decline:
Yet the ideologues who dominate the political conversation are unable to think in holistic, emergent ways. They pick out the one factor that best conforms to their preformed prejudices and, like blind men grabbing a piece of the elephant, they persuade themselves they understand the whole thing.
Many Democrats are predisposed to want more government spending. So they pick up on the one current they think can be cured with more government spending: low consumer demand. Increase government spending and that will pump up consumer spending.
When President Obama’s stimulus package produced insufficient results, they didn’t concede that maybe there are other factors at play, which mitigated the effects. They just called for more government spending. To a man in love with his hammer, every problem requires a nail.
Many Republicans, meanwhile, are predisposed to want lower taxes and less regulation. So they pick up on the one current they think can be solved with tax and regulatory cuts: low business investment. Cut taxes. Reduce regulation. All will be well.
Both orthodoxies take a constricted, mechanistic view of the situation. If we’re stuck with these two mentalities, we will be forever presented with proposals that are incommensurate with the problem at hand. Look at the recent Obama stimulus proposal. You may like it or not, but it’s trivial. It’s simply not significant enough to make a difference, given the size of the global mess.
Best line bears repeating: “To a man in love with his hammer, every problem requires a nail.” That’s the real problem here — both party’s leaders are like stuck records, unable to do anything except repeat the same vapid slogans that they have been spewing for nearly 30 years. A similar dysfunction infests their cheerleaders in the commentariat — simply ignore the problem on one’s own side and focus on demonizing the other side.
Our economic problems are real, but the root is psychological. Too many of us stick with and even crave the political contests of an earlier age, where time and prejudice have allowed us to dehumanize the opposition to the point that all problems can be rhetorically laid at their feet. That relieves us of the need to do any real thinking about actual solutions, since those evil, awful Other People will just refuse to do the right thing anyway. You know, they really like suffering and they want to kill puppies and strangle kittens too!
Meanwhile, the jobless rate stays stubbornly high and the political system remains deadlocked. No one has any incentive or inclination to change the dynamic, since that would be, like, you know, work. Ick.
Let the flame wars continue while the economy burns. We are all Nero.
19 Responses to “The Psychological Roots of the Recession”
Sorry Logan, this is just more psycho babel from Brooks. Kevin Drum sums it up:
So both sides are to blame equally and asking for more stimulus is as stupid as demanding more austerity. Ok. Let’s go with that. NOW WHAT, oh most hectoring and haughty sage of all things mature?!
Logan takes the easiest, least effort-demanding and null position on the general US dysfunction. Must be a day that ends in ‘y’, ‘y’ or ‘WHYYYYY’.
@Ron
The VAT isn’t tax reform, it’s simply a good way to hide the amount of taxes that people are paying. OF COURSE they’d be against that. “New revenues” for Medicare: what happened to the call for real reform? You know as well as I that one can never satisfy exponential growth, and that both the program and medical system have a lot of room for reform.
I have yet to see the Democrats propose any real tax reform either, unless you call simply raising certain rates “reform”.
Even on his one usable point about breaking up the banks, the Democrats are equally silent.
You’re backing up Logan’s “talking points” point. Kevin’s shooting blanks.
Maybe to Brooks every politician is a screwdriver waiting to screw the other side and get reelected. The ploy/strategy by the Reps of NO revenue enhancements is overused and abused, and the Dems love it because it is unreasonable. Dems cling to the idea that government and spending is the way to a solution along with regulating, just short of trips to the bathroom at night, is also unreasonable when our credit card is maxed out. Brooks is just stating the obvious and IMHO, it is a moderate position (without specific tax plans like the consumption tax, at this point). Kill the messenger, by all means, but our government is screwing and nailing us.
“I have yet to see the Democrats propose any real tax reform”
When voters reward democrats for trying, democrats will respond to market logic.
Voters do not respond well to nuance, complication or strong stances, partially thanks to people like Logan.
I guess that is why Obama created the Bowles-Simpson committee so he could ignore strong stances, market logic and ideas without nuance.
“We are all Nero.”
Speak for yourself, Republican.
In the meantime, let us listen to the deafening silence about Tea Party instransigence to any and all plans, including Bowles-Simpson.
One side believes that spending will stimulate the economy and the other that lowering taxes will. Both claim they will bring in enough new revenue to pay for the stimulus, with basically similar lines of reasoning, while attacking the same claims on the other side.
Stimulus has worked, and not worked, in the past, but Logan is right the both sides are pushing policies that are ideological in origin and then spun as addressing the economy. If economy were good, they would find the same spending and tax cuts to be the policy answers, just with different spin.
“both sides are pushing policies that are ideological in origin and then spun as addressing the economy”
Actually, the Laffer curve and trickle down has never worked (they originate in metaphysics) while stimulus is based on macroeconomics and the latest one added about 3 million jobs+ (but since austerity was tried at the same time, this effect was hampered).
When you fail at something as easy as Brooks/Penza equivocating, then you need to stop reading what you are curently reading.
Your point belongs in a hamper and spending as close to one’s income as feasible is not lafferable, it is common sense. Austerity, WTF, read into that.
Brooks is right on here, although I don’t think the roots of the recession are psychological so much as the solutions are hampered by the psychological devotion of each side to its theories.
DG, I agree except it is now bordering on pathological devotion.
DaGoat says:
September 27, 2011 at 3:31 pm
Brooks is right on here
To the extent he feels it requires totally out of the box thinking, I agree. To the extent that skillset requires a POTUS that is someone who has not yet known in the current political person universe, I also agree.
To the extent, “conservatives” like me are holding out for tax and regulation DECREASES, not at all. What I require to expand my businesses substantially is a good sense regulatory risk will remain substantially static for my forecast period. Then again, who says I’m in business to solve the unemployment problem? I will contribute to the solution when it makes business sense to me. And just for the record, payroll tax holidays don’t do it for me either.
Regarding the article, I partly agree.
Both parties are retreating to standard talking points. Carpenter-nail-hammer applies. National leadership is missing the big picture and the root causes.
I disagree vehemently, however, that this recession is a “psychological” problem. This is a very real (and very deep) recession with real causes. As I see it, they are:
1) collapse of the financial market due to risky investments and the collapse of arus asset bubbles, most notably housing but others as well. This was the root cause, the house of cards collapsed.
2) ugly balance sheets by major financial institutions, primarily from bad mortgages and shady government debts mostly in Europe but elsewhere. This is preventing lending and the growth benefits thereof.
3) high costs of labor coupled with the increased productivity per worker means a very weak labor market driving down demand for jobs and therefore a reduction in wages
4) this country is no longer a net producer of goods. Very fundamentally this is not sustainable and is therefore not good for economic growth.
5) uncertainty in the economic and political systems means unwillingness to invest (businesses) and spend (consumers).
6) the difficulties of running a business in the States (i.e. regulatory climate) can’t be discounted.
Only the last one can be seen as “psychological”, however having a Congress full of douchebags is real.
Absalon says:
Whether you try and to feed more purchasing to provide money to cause more investment and produce more jobs (“stimulus”) or whether you try and reduce costs to free up money to cause more investment and produce more jobs, both a fundamentally the same approach. And economics are complex enough that both sides can spin their version of it as working while, in spite of it being mostly the same thing, the other’s side as being folly. Each side throws out numbers pulled out of the ether and spins them.
This comment is amazingly disingenuous and an attempt to hide partisan doubletalk.
Why? Given the amazing length of time that it takes for any regulations to wend their way through the system any new proposals will almost never take effect in any realistic business forecast period. In addition, for that argument to hold water you really have to specify what regulation you fear will harm your business. These false generalities just don’t cut it as realistic arguments, but fit in very well with the current GOP talking points.
Good grief, David Brooks? Even with all the lost love from progressives, Obama is a dynamo of conviction compared to David Brooks. As for that “we are all Nero” line, speak for yourself. Some of us continue to favor reality. It may not be easy, but nothing important ever is.
Nonsense.
The root of our economic problem is a massive, mind blowing over-supply of labor, which is driving down wages and insuring that all the benefits of growth goes to the oligarchy.
The American Labor force hasn’t had a pay hike since the mid-seventies, the Western Europeans & the Japanese haven’t had one since the eighties despite productivity damn near doubling in that time period
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