Secular stagnation is the idea that that the bad times are here by default — the only times we will get full employment is when we have bubbles like those in the housing and high tech markets. The idea is not new, but it has become quite popular for the past year are so since Larry Summers started pushing it. I don’t think there is any real doubt about it, but I haven’t heard anyone discuss what we are going to do about it. And on the right, most people don’t even accept that it is happening.
It’s interesting that Summers should become the man most associated with the concept. He was, after all, one the people in the Clinton administration who pushed the “strong dollar” policy. And a big part of the story of our economic troubles comes from the fact that we continue to pursue this policy. A strong dollar means that we are going to have a trade deficit. As Dean Baker explained, there are only three ways to offset this: business investment, consumer spending, or government spending. Nothing will make businesses invest when there isn’t demand. What we’ve depended on for the last three decades is giving consumers more credit to spend rather than increasing wages; this is morally wrong and unsustainable. And as for government spending, well, Baker put it well, “Unfortunately, our politicians are religiously opposed to budget deficits in the same way that many question evolution.”
What annoys me is that people automatically think that a strong dollar is a good thing. It sounds great, right? But we don’t want a strong dollar; we want a strong economy. A strong dollar allows us to buy a bunch of stuff from outside the country. That’s great if you already have all the money you need. But if, like 99.9% of all Americans, you need a job, then the strong dollar is a very bad thing. A strong dollar creates jobs outside America. Let me just say it: a strong dollar policy is unpatriotic.
Then why is it that all administrations are in favor of a strong dollar? Why was Larry Summers, the new Chicken Little of secular stagnation, so keen on a strong dollar? I don’t know. But I think the cinematic Deep Throat gives us a clue, “Follow the money.” Or as The Dude put it, “It’s like what Lenin said, you look for the person who will benefit, and…” The Dude never completes the thought, but, “You know what I’m trying to say…” So who benefits from the strong dollar policy? That’s pretty obvious: the rich.
What’s annoying about the phrase “strong dollar policy” is that it isn’t Orwellian. It isn’t like the “clear skies initiative,” which was a proposal to pollute more. The strong dollar policy really is what it claims to be. We would all like the dollars we have to be worth as much as possible. The problem is that along with that strong dollar goes a weak economy. It’s an opportunity cost. The people are asked, “Do you want a strong dollar?” And of course they say yes. But it would be different if they were asked, “Do you want a strong dollar and be unable to find a job?”
If you want the details of this, go read Dean Baker’s article or mine from last year, Larry Summers’ Last Chance. But the main thing is that as long as we continue to vote in small numbers, we will continue to be ruled by people like Clinton and Obama who don’t think twice about pushing a strong dollar policy. That’s because they fear the rich a lot more than they fear the people.