Monday, March 23, 2009

Economic miracles

Dean Baker:

Suppose Timothy Geithner announced a new program that would tax every family $10,000 dollars and give the money to Wall Street banks and hedge funds. (Any resemblance between this hypothetical program and real world programs is purely coincidental.)

We would expect the stock of Wall Street banks and other financial sector firms to rally based on the anticipation of higher profits. Is this good for the economy? It's not in any obvious way. After all, we can always tax people more to raise profits for Wall Street, but that doesn't help the economy.

It's always worth remembering that losses and gains are distributed throughout societies. What is "good for America" depends on who is defining the terms, and what their interests are.

Similarly, "the economy" or "the market" are often just terms used to describe the dominant players within them. When the "economy is doing great," the rich are doing great, and so on.

Or as the Brazilian dictator once observed of his country's privatization reforms: "The economy is doing great, it's just the people who aren't."

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