Rentiers, plutocracy, solutions...

Krugman wrote an editorial claiming the "rule by rentiers". I guess that is less controversial than "rule by Pluto". However, Krugman describes "rule by wealth", the usual, non philosophical, meaning of "plutocracy":

"America’s job drought... has already gone on so long that the average unemployed American has been out of work for almost 40 weeks. Yet there is no political will to do anything about the situation. Far from being ready to spend more on job creation, both parties agree that it’s time to slash spending — destroying jobs in the process — with the only difference being one of degree.


Nor is the Federal Reserve riding to the rescue. On Tuesday, Ben Bernanke, the Fed chairman, acknowledged the grimness of the economic picture but indicated that he will do nothing about it.
... similar in Europe, but arguably even worse: European Central Bank’s hard-money, anti-debt-relief rhetoric... What lies behind this trans-Atlantic policy paralysis? I’m increasingly convinced that it’s a response to interest-group pressure. Consciously or not, policy makers are catering almost exclusively to the interests of rentiers — those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense.

Of course, that’s not the way what I call the Pain Caucus makes its case. Instead, the argument against helping the unemployed is framed in terms of economic risks: Do anything to create jobs and interest rates will soar, runaway inflation will break out, and so on. But these risks keep not materializing... The reality is that both small businesses and workers are hurt far more by the weak economy than they would be by, say, modest inflation that helps promote recovery.

No, the only real beneficiaries of Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios.

And that explains why creditor interests bulk so large in policy; not only is this the class that makes big campaign contributions, it’s the class that has personal access to policy makers — many of whom go to work for these people when they exit government through the revolving door. The process of influence doesn’t have to involve raw corruption (although that happens, too). All it requires is the tendency to assume that what’s good for the people you hang out with, the people who seem so impressive in meetings — hey, they’re rich, they’re smart, and they have great tailors — must be good for the economy as a whole.

But the reality is just the opposite: creditor-friendly policies are crippling the economy. This is a negative-sum game, in which the attempt to protect the rentiers from any losses is inflicting much larger losses on everyone else. And the only way to get a real recovery is to stop playing that game. "

I have been saying this, for quite a while. So I will not disagree in first order. However, Krugman's semantics is conflating small rentiers, who typically live off interest from savings, and enormous plutocrats, who he metions, in so many words.

Moreover, as usual, Krugman is short on solutions. I commented the following, and the NYT published it:


4% inflation is best, 2% is too low. 2% is so low that there is not enough reserve, in case of recession. (If inflation becomes negative, durably so, lowering interest rates does not help, because they cannot be lowered below zero.)

Germany has led the pain caucus in Europe, and it has worked pretty well. So now the Germans (and the hard Franc architect Trichet, head of ECB) have the upper hand morally, intellectually, economically.

In any case none of this will not solve the globalization crisis. Which is the emigration of jobs to emerging countries. This is the underlying problem, and plutocracy has a direct hand in it, and it's hard to resist when equivalent jobs cost 5% overseas. What is the plan to invert that globalization, that flight of jobs, overseas, far away?

Well, let me answer it myself: no more speculation on finance by financiers, and massive investments in high tech, accompanied by tough IP protection, and a carbon trade tax, plus tough anti-slavery codes, worldwide.
http://patriceayme.wordpress.com/