Ghosts From The Past

"History doesn't repeat itself," Mark Twain wrote, "but it rhymes." This week, in the House of Commons and in Quebec, politicians were replaying golden oldies. Susan Delacourt writes:

Here was interim Conservative Leader Rona Ambrose, for example, telling reporters on Monday why people in the West were getting fired up about Energy East.

“I’m hearing from Albertans, and from people in Saskatchewan, that this is just like the (National Energy Program),” Ambrose said at the Monday news conference. “That’s what they say. That this is just like back in the 80s when the last government … put strict measures in place that deflated the Alberta and Saskatchewan and British Columbia economy, that affected the resources sector.”

And Denis Cordere, the Mayor of Montreal and a former Liberal MP, was channelling separatist ghosts from the past:

Though Coderre is a federalist, on this issue he’s on-side with Quebec separatists, who have cast the Energy East pipeline as an unwanted intrusion by the rest of Canada into the province — kind of like the 1981 Constitution.

“Independence is also being able to say no to a pipeline,” a spokesman for Parti Québecois leader Pierre-Karl Péladeau said last year about Energy East. “Like all the other bad decisions taken by the government in Ottawa.”

The reason one studies history is to avoid the mistakes of the past, not to repeat them. But, when we exorcize ghosts we may well repeat those mistakes.

Permanently Unemployed

Paul Krugman writes in The New York Times that America is creating a new social class -- the permanently unemployed:

Now, some unemployment is inevitable in an ever-changing economy. Modern America tends to have an unemployment rate of 5 percent or more even in good times. In these good times, however, spells of unemployment are typically brief. Back in 2007 there were about seven million unemployed Americans — but only a small fraction of this total, around 1.2 million, had been out of work more than six months.

Then financial crisis struck, leading to a terrifying economic plunge followed by a weak recovery. Five years after the crisis, unemployment remains elevated, with almost 12 million Americans out of work. But what’s really striking is the huge number of long-term unemployed, with 4.6 million unemployed more than six months and more than three million who have been jobless for a year or more. Oh, and these numbers don’t count those who have given up looking for work because there are no jobs to be found. 

Unfortunately, when companies hire, they assume that long term unemployment is caused by moral turpitude, not a flawed system. The unemployed become "tainted goods that nobody will buy." Krugman pulls no punches:

And let’s be clear: this is a policy decision. The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy.

It’s hard to overstate how self-destructive this policy is. Indeed, the shadow of long-term unemployment means that austerity policies are counterproductive even in purely fiscal terms. Workers, after all, are taxpayers too; if our debt obsession exiles millions of Americans from productive employment, it will cut into future revenues and raise future deficits. 

There is nothing new in Krugman's thesis. History supports it. Unfortunately, as Santayana said, "Those who refuse to learn from history are condemned to repeat it."

This entry is cross posted at The Moderate Voice.