Paul Krugman, Laureate of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008 at a press conference at the Royal Swedish Academy of Sciences in Stockholm (Photo credit: Wikipedia)
IMF Chief Economist Raghuram Rajan at the World Economic Outlook press conference.WEO Press Conference, Washington DC, IMF Headquarters (Photo credit: Wikipedia)
This is an unbelievable and MUST READ article by Raghuram Rajan, Professor of Finance at the University of Chicago Booth School of Business, and incoming Governor of the Reserve Bank of India.
via The Paranoid Style in Economics by Raghuram Rajan – Project Syndicate.
In the article, Rajan publicly accuses Paul Krugman, the Nobel Prize winning, liberal, economist of “paranoid style” attacks on intellectual guardians of “austerity” Carmen Reinhart and Kenneth Rogoff. Last year, Reinhart and Rogoff’s research underpinning prescriptive austerity for heavily indebted countries was seriously discredited because major spreadsheet errors.
Personally, I have six serious problems with the Rajan article.
Firstly, Rajan does not talk of the enormous economic and social damage done by policy-makers in Washington, London and Berlin following the austerity policies proposed in Reinhart and Rogoff’s research. For example, Oxford economist, Simon Wren-Lewis estimates that the UK economic growth would be three percentage points higher without austerity. Apart from the wealthiest 1% of society who are sponsoring austerity, everybody else, the 99% and the “great-unwashed” have suffered economic hardship because of excessive austerity. Millions of young people across the World have been deprived of work and in some countries there is a direct link between increased suicides and austerity.
Secondly, Rajan does not declare his association with Reinhart and Rogoff’s research, going back to his time when he was Chief Economist at the IMF. The story is much wider and deeper than Rajan decribes. For a brilliant analysis see “Stiglitz and Other Heavyweight Champion Economists in Epic Battle Over Austerity Policies That Devastate Millions”, published by Alternet.
Thirdly, for an incoming Governor of the Reserve Bank of India, Rajan’s public attack on Paul Krugman, probably the most influential economist in the World right now, is inappropriate. It question’s Rajan’s judgement in my opinion. Also if you read Rajan’s argument carefully it is rather rambling, disjointed, lacking in focus and evidence. I wish India well with Rajan as the Governor of the Reserve Bank of India.
Fourthly, I have been a keen follower of Paul Krugman’s op-ed blog in the New York Times and find it balanced and open, with Krugman able to take public criticism. Krugman has over a million followers on Twitter and has done much to widen the appeal of economics.
Fifthly, Krugman has been bitterly attacked personally by the extreme right-wing in the US who have falsely latched on to Reinhart and Rogoff’s austerity research.
Sixthly, Reinhart and Rogoff have not withdrawn their research and publicly apologized, nor have policy-makers and their sponsors in Washington, London and Berlin changed their belief in austerity.
Is there perhaps a global conspiracy at work here, with the ends justifying the means and the IMF the hatchet-man?