Prime Minister George Papandreou Survives Confidence Vote

At Telegraph UK, "Greek prime minister survives confidence vote."

And at New York Times, "Greek Leader Survives Vote, Bolstering Deal on Europe Debt." And at Business Week, "Papandreou Seeks to Form Unity Government to Avert Default":

Prime Minister George Papandreou is seeking to form a government of national unity that will enable Greece to convince international leaders to resume aid before the nation runs out of funds next month.

Papandreou met with President Karolos Papoulias today as pressure mounts on the 59-year-old to step aside after he was forced to cancel a referendum that may have led to Greece being ejected from the euro. The premier won a confidence motion early this morning after pledging to disaffected members of his ruling Pasok party that he would not stay on.

Papandreou proposed “contributing definitively to creating a government of wider cooperation with the main goal of guiding legislation and anything else related to the historic Oct. 26” agreement with international lenders, the premier told reporters after meeting the president in Athens today. Last month’s accord “is a prerequisite for our remaining in the euro.”

Can We Credibly Compare the Current Economic Crisis to the Great Depression?

It's long been cliché to remark that our current recession is the worst economic downturn since the Great Depression. Indeed, President Obama, while a candidate and once in office, incessantly harped about how today's economy is the worst since the 1930s. While I think most people realize the magnitude of the current crisis --- my best comparison is to 1990-91, when I can literally recall people fleeing California's recession by the truckload --- it strains reason to endlessly hammer away at the Great Depression analogy. And that's why, as sympathetic as I am to the historical scale of our dislocation, I'm still not convinced by arguments like Joe Nocera's, at New York Times, "The 1930s Sure Sound Familiar." Nocera discusses Since Yesterday, a history of the 1930s by Frederick Lewis Allen. After a bunch of nostalgic whimpering, Nocera gets down to what's really bugging him:

What dominates “Since Yesterday” — as it must dominate any history of the Great Depression — is the government’s responses to the crisis. Herbert Hoover was “leery of any direct governmental offensive against the Depression,” writes Allen. “So he stood aside and waited for the healing process to assert itself, as according to the hallowed principles of laissez-faire economics it should.” Sticking to his convictions, Hoover allowed the country to sink deeper and deeper into Depression, becoming in the process one of its victims — “along with the traditional economic theories of which he was the obstinate and tragic spokesman.”

Then came Roosevelt, untethered to any economic theory and willing to try anything to get people back to work. Allen describes the alphabet soup of agencies he created, the deficits he generated, the regulations he enacted. The economy, which bottomed out in 1932, steadied and then began to grow until, by 1937, it appeared that the Great Depression had ended.

Allen then takes us through the terrible days of late 1937, when the economy collapsed again. “Roosevelt’s Depression,” businessmen called it, blaming it on a business tax they particularly loathed. In fact, Allen makes the convincing case that the real problem was that Roosevelt had tried to do something business wanted: balance the budget. Shrinking government spending dried up demand. And not until the following spring, when he reversed course and decided to “go in for heavy spending again,” did conditions begin to improve.

The tragedy of Washington today, as the supercommittee begins its task of finding $1.2 trillion in cuts, is that nobody seems to remember the lessons of “Since Yesterday” — and most other books about the Great Depression.

When I think back to the 1930s, I don't necessarily pine for the return of Franklin Roosevelt. Economists differ on the downturn of 1937, and from my recollection it wasn't until the economic mobilization of World War II that the American economy really recovered --- and hence it was war mobilization, and not Democrat industrial policies, that finally brought an end to the era. That said, I'm not an economist. But there was a good piece from Bradley Schiller back shortly after Obama took office, "Obama's Rhetoric Is the Real 'Catastrophe'." What's interesting is the incomparability between the scale of crisis then to today:

President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression...

This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.

It goes on like that (here). And Schiller argues that the administration's economic fearmongering is actually dangerous, in how it perverts economic expectations and consumer confidence.

But then again, things are bad, right? Just not as bad as the 1930s? Well, I'm interested in a different comparison being made, that the U.S. might be entering into a long period of sustained high unemployment, and that the American economy could be resembling the European economies after the oil shocks of the 1970s. The major industrial states like France and Germany became accustomed to long-term (secular) unemployment rates of often 10 percent or more. Thinking about that, David Leonhardt, at New York Times, gives us another reason not to compare the current era to the 1930. The economy of the Great Depression was in fact one of the most technologically productive ever, "The Depression: If Only Things Were That Good." The counter-intuitive economic innovation of the day, combined with the drastic shedding of dead weight bloat and over-appreciation in the economy, laid the basis for the sustained recovery by the 1940s:

UNDERNEATH the misery of the Great Depression, the United States economy was quietly making enormous strides during the 1930s. Television and nylon stockings were invented. Refrigerators and washing machines turned into mass-market products. Railroads became faster and roads smoother and wider. As the economic historian Alexander J. Field has said, the 1930s constituted “the most technologically progressive decade of the century.”

Economists often distinguish between cyclical trends and secular trends — which is to say, between short-term fluctuations and long-term changes in the basic structure of the economy. No decade points to the difference quite like the 1930s: cyclically, the worst decade of the 20th century, and yet, secularly, one of the best.

It would clearly be nice if we could take some comfort from this bit of history. If anything, though, the lesson of the 1930s may be the opposite one. The most worrisome aspect about our current slump is that it combines obvious short-term problems — from the financial crisis — with less obvious long-term problems. Those long-term problems include a decade-long slowdown in new-business formation, the stagnation of educational gains and the rapid growth of industries with mixed blessings, including finance and health care.

Together, these problems raise the possibility that the United States is not merely suffering through a normal, if severe, downturn. Instead, it may have entered a phase in which high unemployment is the norm.

On Friday, the Labor Department reported that job growth was mediocre in September and that unemployment remained at 9.1 percent. In a recent survey by the Federal Reserve Bank of Philadelphia, forecasters said the rate was not likely to fall below 7 percent until at least 2015. After that, they predicted, it would rarely fall below 6 percent, even in good times.

Not so long ago, 6 percent was considered a disappointingly high unemployment rate. From 1995 to 2007, the jobless rate exceeded 6 percent for only a single five-month period in 2003 — and it never topped 7 percent.

“We’ve got a double-whammy effect,” says John C. Haltiwanger, an economics professor at the University of Maryland. The cyclical crisis has come on top of the secular one, and the two are now feeding off each other.

In the most likely case, the United States has fallen into a period somewhat similar to the one that Europe has endured for parts of the last generation; it is rich but struggling. A high unemployment rate will feed fears of national decline. The political scene may be tumultuous, as it already is. Many people will find themselves shut out of the work force.

And if this is so, the solution is not to become more like the European Union nations. That is, the Obama administration's massive debt and deficit policies are more likely to turn the U.S. into France, or heaven forbid, Greece. And thus, back to Joseph Nocera pining for the governmental activism of the 1930s. He's wrong in his comparisons, and he's wrong in his proposals. We need to invigorate the private sector and productive individualism and innovation. We need to see 1000s of Steve Jobs bloom. I'm not so pessimistic that we won't see that happen. I expect the U.S. to have another decade of booming growth similar to the 1990s. We just need to let markets work and get the hell out of the way.

RELATED: At The Hill, "Obama wants $35 billion for teachers, first-responders first" (via Memeorandum). Sounds laudable, but more of the same, unfortunately.

Steve Jobs and the Beauty of Capitalism

From Kevin Williamson, at National Review, "A Jobs Agenda" (via Serr8d's Cutting Edge).

There's no takeaway block quote. Just go read it all.

Steven Crowder on the Free Enterprise System

Via Theo Spark:

The Other America: Mountain View Workers Struggle as High Tech Booms

Fascinating piece at New York Times, "In Mountain View, 2 Contrasting Economic Worlds Intersect":

At the Google campus on the outskirts of Mountain View, employees sip lattes under brightly colored umbrellas as others pass on company bicycles, laptops secured in the front baskets. This year the company will add substantially to its work force of more than 5,000 in that Silicon Valley city, and it has just leased nine acres to expand its campus.

But closer to downtown, Carolina Rivera finds herself in a decidedly less attractive environment — the crowded office of the Community Services Agency, where she is looking for a job. She has three children to support and has not found anything since her hours at an organic-food factory were reduced. Those like Mrs. Rivera find life difficult in Mountain View: the competition for work is fierce, housing is expensive and cuts in government services are pending as the city tries to balance its budget.

Mountain View, home to technology kingpins like Google, LinkedIn and Symantec, illustrates the disconnect between the current technology boom and the daily economic realities of many in Silicon Valley. The five biggest tech companies with headquarters in town are valued at more than $200 billion, but Mountain View, with a population of 74,000, faces a $2.6 million budget gap and has an unemployment rate of 7.7 percent.

“We really are seeing two very different economies emerging,” said Emmett Carson, chief executive of the Silicon Valley Community Foundation. “We have the Google campus; they’re expanding, they’re adding employees, they’re doing very well financially. But the nonprofit sector and local government have been stretched to the maximum.”

But these people are supposed to be progressive:

Part of the problem is that corporate campuses, with their own cafeterias, day care centers and other employee perks, are not always very integrated into the surrounding community.

“The industry doesn’t create a lot of demand for services,” said Terry Christensen, a professor at San Jose State University who specializes in Silicon Valley politics. “The Google campus, they pay their taxes, but their workers don’t necessarily use parks, police and other traditional services, so you get a disconnect between the businesses themselves and the people who work in them.”

Just as important, many local residents are simply not in the talent pool for high-tech jobs. The people looking for work at the Community Services Agency have skills in other areas, like housecleaning, gardening and washing dishes, and those jobs are scarce.

Actually, Google acts exactly as it should. It's an extremely successful business that creates a self-sustaining social support system. The trick is to create more Googles, that is, to expand the employment sector to include more companies providing goods and services to an expanding marketplace, which will increase the demand for labor and take the strain off local governments, which don't have the money to care for the sick and unskilled. The rub is that Googe and other progressive tech firms are left-leaning business organizations that operate according to a vision more like Milton Friedman's than Paul Krugman's. It's all in the messaging. New York Times is going off the reservation on this one.

Kevin Williamson's Guide to Socialism

Have you read his book? I've read some longer snippets, but held off going further for now, mainly because I think he's taken a public goods approach and applied it broadly to any economic situation where states supplant markets. Socialism in this sense isn't necessarily Marxism, but that's all I can say until I finish it. You get the gist of it at the clip, in any case:

How Long Will it Take for Jobs to Come Back?

I used to read chapters from Greg Mankiw's introductory economics textbooks in grad school, when I took seminars in international political economy. Mankiw blogs, but he's quite the opposite of Paul Krugman: more conservative and, especially, humble. We can see that in his essay yesterday at the New York Times, "Three Questions for America's Financial Future." On the jobs picture:

Looking ahead, an open issue is whether the recession will leave scars that prevent a return to jobless rates that were considered normal just a few years ago. A striking feature of today’s labor market is the rise of long-term joblessness. The average duration of unemployment is now almost 40 weeks, about twice what it reached in previous recessions. The long-term unemployed may well lose job skills and find their future prospects permanently impaired. But because we are in uncharted waters, it is hard for anyone to be sure.

Actually, one of my favorite writers of all is Victor Davis Hanson. A classicist and military historian, he's also unmatched on political and social commentary on issues ranging from culture to farming to immigration. See his essay from Saturday, "Thoughts on a Surreal Depression":

Here in Fresno County, in the heart of California’s San Joaquin Valley, the official unemployment rate in February to March ranged between 18.1 and 18.8 percent. I suspect it is higher in the poorer southwestern portions, especially near my hometown of Selma, about two miles from my farm.

Since 2000 we have both lost jobs and gained people, and the per capita household income is about 65% of California’s average, the average home price about half the state norm.

In some sense, all the ideas that are born on the Berkeley or Stanford campus, in the CSU and UC education, political science, and sociology departments, and among the bureaus in Sacramento are reified in places like Selma — open borders, therapeutic education curricula, massive government transfers and subsidies, big government, and intrusive regulation. Together that has created the sort of utopia that a Bay Area consultant, politico, or professor dreams of, but would never live near. Again, we in California have become the most and least free of peoples — the law-biding stifled by red tape, the non-law-biding considered exempt from accountability on the basis of simple cost-to-benefit logic. A speeder on the freeway will pay a $300 ticket for going 75mph and justifies the legions of highway patrol officers now on the road; going after an unlicensed peddler or rural dumper is a money-losing proposition for government.

The subtext, however, of most of our manifold challenges here in the other California are twofold: we have had a massive increase in population, largely driven by illegal immigration from Latin America, mostly from Oaxaca province in Mexico, and we have not created a commensurate number of jobs to facilitate the influx.

I often ask business people on the coast why there are not more industries in places like Selma other than agricultural related work that is locale specific. I would sum up their responses as something like the following: Our workforce does not have the educational and linguistic skills to justify, in global terms, the amount of wages and benefits necessary to employ them, hence jobs are mostly in service and government. Software engineering, computers, or Silicon Valley-like industry are out the question. But apparently so are large manufacturing jobs, despite an abundant workforce. As I understand employers, they seem to suggest that steel pipe, electrical wire, or radios would not be better manufactured or fabricated here, and yet still cost two to three times more than a counterpart assembled abroad.

In addition, they believe that the state government would look upon any employer of a large industry not as a partner that would alleviate unemployment and lessen county expenditures, but more or less a sort of target to regulate, advise, lecture, and chastise, both to justify the expanding government regulatory work force and to achieve a fuzzy sort of social justice. There are, of course, large plants and businesses here, but hardly enough to absorb the thousands entering the work force.

The result is about one in five adults is not working in the traditional and formal sense. A morning drive through these valley towns confirms anecdotally what statistics suggest: hundreds, no, thousands, are not employed. Construction is almost nonexistent. Agriculture is recovering, but environmentally driven water cut-offs on the West Side (250,000 acres), increasing mechanization, and past poor prices have combined to reduce by tens of thousands once plentiful farm jobs.

My dad moved to Fresno in the mid-70s and I graduated from Fresno State in 1992. If you ever want to get the feel of what it must have been like during the Great Depression, take some country drives around the Central Valley --- in towns even more remote than Selma --- and you'll be taken back into your own Grapes of Wrath experience. The Democrats make this bad enough, but it's a statist anti-entrepreneurial regulatory stranglehold that's killing employment and the quality of life for large segments of society. I'm noticing it even in parts of the O.C., where unemployment was less than 2 percent in 2000. Hope for the best, I guess, but prepare for the worst.

Melanie Phillips on Michael Coren

Via Blazing Cat Fur:

Markets Respond to Federal Reserve's $600 Billion Economic Recovery Plan

Elections have consequences.



It's not just the Fed that's driving this, "Dow Hits Pre-Crisis Level: Central Bank's Spending Binge Stokes Global Rally; 'Don't Fight the Fed'."

Global financial markets cheered the Federal Reserve's plans to spur the U.S. economy Thursday, driving commodity and bond prices higher and propelling the Dow Jones Industrial Average to levels last seen before Lehman Brothers collapsed two years ago.



Interest rates and the dollar tumbled in response to the Fed's decision Wednesday to buy $600 billion of U.S. Treasury bonds, helping fan fresh rallies in oil, gold and Asian stock markets. Major U.S. companies including Coca-Cola Co. and Dow Chemical Co. raced to take advantage of the low rates, selling at least $12 billion of new debt.



But the Fed's buying binge raised alarms, too: Officials in Brazil and South Korea criticized the move, saying it could spark inflation in their economies.



The Dow industrials leapt 219.71 points, or 2%, to 11434.84, its highest close since Sept. 8, 2008, just before the Lehman bankruptcy filing triggered the most intense phase of the financial crisis.



The blue-chip index is now up 75% from its March 2009 low. But the Dow needs a 24% gain to get back to its all-time high, set in October 2007, a stark illustration of the damage caused by the crisis and the long road the economy still must travel.



The Fed's "quantitative easing" policy, unveiled Wednesday, is designed to bolster the economy by keeping credit easy. The Fed is trying to keep rates on relatively safe Treasurys and cash so puny that investors will be enticed into riskier assets such as stocks, commodities and corporate bonds, helping inflate their prices.

The background, with the political angle, at NYT, "Fed to Spend $600 Billion to Speed Up Recovery":

The Federal Reserve, getting ahead of the battles that will dominate national politics over the next two years, moved Wednesday to jolt the economy into recovery with a bold but risky plan to pump $600 billion into the banking system.



A day earlier, Republicans swept to a majority in the House on an antideficit platform, virtually guaranteeing that they would clash with the Obama administration over the best way to nurture a fragile recovery.



The action was the second time in a year that the Fed had ventured into new territory as it struggles to push down long-term interest rates to encourage borrowing and economic growth. In a statement, the Fed said it was acting because the recovery was “disappointingly slow,” and it left the door open to even more purchases of government securities next year.



The Fed is an independent body, its policy decisions separated from the political pressures of the day. But it acted with a clear understanding that the United States, like many other Western countries, seems to have taken off the table many of the options governments traditionally use to give their economies a kick, particularly deficit spending.



The Republicans regained control of the House for the first time in four years in part by attacking the stimulus plan — begun by the Bush administration and accelerated by President Obama — as a symbol of government spinning out of control, contributing to a dangerously escalating national debt.



This political reality has left Washington increasingly reliant on the Fed to take action, though its chairman, Ben S. Bernanke, has said the Fed cannot fix the problem alone.

Mike Pence is not happy.

Arthur C. Brooks on Reason.TV

Via Theo Spark: