My friend Bill Greider died on Christmas day. Greider, who was eighty-three, was an old-time journalist who believed that the job meant exposing the corruption of the rich and powerful, rather than becoming their friends in order to get inside stories. This meant that he was never very popular with elite types, as perhaps best evidenced by his minimal obituary at the Washington Post, where he had worked for a decade as a reporter and an editor.
Greider’s writing had a large impact on my thinking about the economy and the world. When I was still in graduate school, I read his great study of the Federal Reserve Board, Secrets of the Temple. While there were many things in that book that were not exactly right, it did much to highlight the power of this fundamentally undemocratic institution. I, and many others, have worked with considerable success in recent years to make the Fed more open to public input, and for it to take its legal mandate for maintaining full employment more seriously.
Greider also wrote the book Who Will Tell the People? The Betrayal of American Democracy, about the corruption of politics in Washington. The book became the basis for a PBS documentary with the same name. I remember well a segment from this documentary.
It was an interview with a reporter. (Sorry, can’t remember who it was.) The reporter was discussing how he came to fully appreciate the corruption of Washington. The reporter explained that someone asked him, “Why do you think members of Congress sit on the banking committee?” The reporter gave the textbook answer about sitting on the committee to oversee the regulations and laws on banking. His questioner responded, “They sit on the banking committee to get money from bankers.”
I grew up in Chicago, when the machine politics of the first Mayor Daley was the only game in town, so I was not naive about politics and corruption, but this still stunned me. Folks who have been around Washington know it is obviously true, but I think the level of corruption is probably news to most people in the country. This was an education for me.
Back in 1997, Greider wrote a book, One World, Ready or Not: The Manic Logic of Global Capitalism, which warned that competition from the developing world would put downward pressure on the wages of manufacturing workers and that large trade deficits could lead to serious shortfalls in aggregate demand, meaning weak growth and high unemployment. The book was widely trashed by economists, including the leading liberals of the day. In particular, they ridiculed the idea that trade deficits could lead to unemployment — after all, the Fed could just lower interest rates to make up any shortfall in demand.
Two decades later, most of the mainstream of the profession accepts the idea of “secular stagnation,” meaning a sustained shortfall in demand that leaves the economy operating well below its potential level of output. With interest rates having bottomed out at zero following the Great Recession, most economists would concede that the Fed does not have the ability to boost the economy back to full employment, at least not with its traditional tool of lowering the federal funds rate.
While economists generally do not like to talk about the trade deficit as a cause of secular stagnation, fans of logic and arithmetic point out that if we had balanced trade rather than a deficit of 3 percent of GDP, it would provide the same boost to the economy as an increase in government spending of 3 percent of GDP, or roughly $650 billion a year in today’s economy. There is little doubt that would be a huge boost to demand and would have gone far toward ending the problem of secular stagnation. (There is no magic to balanced trade. I only use it as a point of reference.)
There were certainly things that Greider got wrong in One World, Ready or Not, as he did in his other economic writings. He was a journalist, not an economist. Still, as one great economist commented, it is better to be approximately right than exactly wrong, a position that described many of his economist critics.
The response to Greider’s death, as well as his life, calls to mind another great saying: in Washington, the only thing worse than being wrong is being right. And Greider was often guilty of that.