By Amitabh Pal on April 07, 2014

Dean Baker is one of the smartest and most prophetic economists in the country, and so it was a treat to hear him recently.

Baker, the co-director of the Center for Economic Policy and Research, spoke at the University of Wisconsin campus Friday on the economic crisis and the way out. He was invited by the Madison Institute and had an appreciative audience of roughly 100 people.

Baker, who was astonishingly prescient about the Great Recession, had several insightful nuggets to offer about our current economic muddle.

“The only mystery is why this is a mystery,” Baker quipped. “The economy is too simple for economists to understand.”

The weak recovery is not surprising, Baker explained, when you take into account that a good portion of the economy was tied to the housing market, which hasn’t yet fully recovered.

Before the recession, “the construction boom was at a record rate,” Baker said. “And there was a bubble-generated equity loan binge. You can’t take out equity if you don’t have equity in your home.”

The span from 1947-1979 was a golden age for workers, Baker asserted, when wage earners at the bottom and middle had the ability to put sustained upward pressure on salaries. That has vanished in the past three decades, apart from the late 1990s, he said.

“The late 1990s were an exception because Alan Greenspan, no matter what you think of him, was a non-orthodox economist,” Baker said. “Fed Reserve board members were yelling at him to raise interest rates to stop inflation. He responded, ‘I don’t see inflation.’ ”

Baker recalled an informal debate he had during that time period with two Fed Reserve board members: Janet Yellen, now Fed Reserve chair, and Alan Blinder. Both, he said, were dismissive of the idea that unemployment could dip below 6 percent without igniting inflation. Both, of course, were proven wrong.

Now we live in very different circumstances.

“This recession is the opposite of other recessions,” Baker said. “Consumers are spending a lot, but the wealth is gone. The investment share of the GDP is almost back to the pre-recession levels. It’s housing that is still depressed, and it won't get back to normal levels till 2016.”

Baker focused at length on the giant U.S. trade deficit.

“Economists don’t like to talk about it, but money spent that goes abroad doesn’t generate demand in the United States,” he said. “The $500 billion gap, which is 3 percent of the GDP, translates into 6 million American jobs.”

So how does the United States emerge from this morass? Baker had a number of ideas.

First, he said, we need a big stimulus package, not the inadequate one that the Obama Administration put together at the start of his presidency.

“There’s no argument among economists of the need of a stimulus in times of slack demand,” he said. “The evidence is overwhelming.”

Secondly, we can go to a higher rate of inflation—say 3 to 4 percent—instead of being obsessive about it and harming employment.

Third, he said, we have to make the dollar cheaper vis-à-vis other currencies in order to make exports competitive.

Baker added that we also need a work-sharing program on a national level, such as the one in Germany, where firms generally cut the hours of all workers in hard times instead of laying off some. The government then makes up for much of the reduction in wage to the affected workers.

“Germany hasn’t been a booming economy—they’ve had the same growth as the United States,” he said. “But they have a 5.1 unemployment rate, as compared to our 6.7 percent.”

Twenty-six states have work-share programs, Baker revealed, but these programs are so little known that only 30,000 workers are currently taking advantage of it nationwide. The concept has strong bipartisan support, he said.

Baker ended on an upbeat note, citing state and local drives for minimum wage increases and paid parental leave.

“There is a long way to go," he said, “but there are grounds for optimism.”

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By Wendell Berry

Manifesto: The Mad Farmer Liberation Front

Love the quick profit, the annual raise,
vacation with pay. Want more 
of everything ready made. Be afraid 
to know your neighbors and to die.
And you will have a window in your head.
Not even your future will be a mystery 
any more. Your mind will be punched in a card 
and shut away in a little drawer.
When they want you to buy something 
they will call you. When they want you
to die for profit they will let you know. 
So, friends, every day do something
that won’t compute. Love the Lord. 
Love the world. Work for nothing. 
Take all that you have and be poor.
Love someone who does not deserve it. 
Denounce the government and embrace 
the flag. Hope to live in that free 
republic for which it stands. 
Give your approval to all you cannot
understand. Praise ignorance, for what man 
has not encountered he has not destroyed.
Ask the questions that have no answers. 
Invest in the millennium. Plant sequoias.
Say that your main crop is the forest
that you did not plant,
that you will not live to harvest.


Say that the leaves are harvested 
when they have rotted into the mold.
Call that profit. Prophesy such returns.
Put your faith in the two inches of humus 
that will build under the trees
every thousand years.
Listen to carrion—put your ear
close, and hear the faint chattering
of the songs that are to come. 
Expect the end of the world. Laugh. 
Laughter is immeasurable. Be joyful
though you have considered all the facts. 
So long as women do not go cheap 
for power, please women more than men.
Ask yourself: Will this satisfy 
a woman satisfied to bear a child?
Will this disturb the sleep 
of a woman near to giving birth? 
Go with your love to the fields.
Lie easy in the shade. Rest your head 
in her lap. Swear allegiance 
to what is nighest your thoughts.
As soon as the generals and the politicos 
can predict the motions of your mind, 
lose it. Leave it as a sign 
to mark the false trail, the way 
you didn’t go. Be like the fox 
who makes more tracks than necessary, 
some in the wrong direction.
Practice resurrection.

Wendell Berry is a poet, farmer, and environmentalist in Kentucky. This poem, first published in 1973, is reprinted by permission of the author and appears in his “New Collected Poems” (Counterpoint).

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