In his new book, Keynes: The Return of the Master, British economist Robert Skidelsky offers this assessment of New Classical economics, which has driven economic policy for the past thirty-five years:
I therefore believe that the root cause of the present crisis lies in the intellectual failure of economics. It was the wrong ideas of economists which legitimized the deregulation of finance which led to the credit explosion which led to the credit crunch. It is hard to convey the harm done by the recently dominant school of New Classical economics. Rarely in history can such powerful minds have devoted themselves to such strange ideas.
Stephen Harper, who is a graduate of the New Classical School, chose to skip the United Nations Climate Conference last week. It's not that he wasn't in the neighbourhood. He spent the day conferring with the mayor of New York, Michael Bloomberg. But his absence sent a clear message. It was the same message he sent when he refused to show up at the unveiling of Joe Clark's portrait in Ottawa, or when he neglected to show up at the 25th anniversary of Brian Mulroney's first election victory. Harper has expressed contempt for both men in the past. His defenders will simply claim that the Prime Minister is no hypocrite.
But it's not that simple. Given Harper's claim, during the last election campaign, that Stephane Dion's proposed carbon tax would destroy the Canadian economy; and, given his shameful neglect of environmental policy, it seems clear that Harper viewed the conference as a non-event. However, there are better economists than he who understood the significance of that one day meeting.
Last Thursday, in The New York Times, Nobel Laureate Paul Krugman wrote: "It's important, then, to understand that claims of immense economic damage from climate legislation are as bogus, in their own way, as climate-change denial. Saving the planet won't come free (although the early stages of conservation might). But it won't cost that much either." Krugman then went on to cite a Congressional Budget Office estimate that the legislation recently passed by the U.S. House of Representatives "would cost the average family only $160 a year or 0.2 percent of income."
Some commentators, such as Henry Giroux, of McMaster University, would say that those who claim that saving the planet will destroy the economy are lying -- in the Orwellian sense that what they say is the exact opposite of what they mean. A somewhat more charitable interpretation might be that they are simply fools -- like the fools at the beginning of the last century who claimed that The Titanic was unsinkable, or that the Maginot Line was impenetrable. They believe they are invulnerable.
For Skidelsky, New Classical economists and their disciples have been arrogant fools, marching in their own parade. It is time to show them the door.