Paul Krugman is right: we’re getting mugged by economic moralizing.
The tone differs from place to place — listening to a German official denounce deficits, my wife whispered, “We’ll all be handed whips as we leave, so we can flagellate ourselves.” But the message is the same: debt is evil, debtors must pay for their sins, and from now on we all must live within our means.
And that kind of moralizing is the reason we’re mired in a seemingly endless slump.
The point he misses is how hypocritical the economic moralizing is. Just like the moralizing concerning women’s vanity in Hans Memling’s Vanity (1485). As John Berger observed,
The mirror was often used as a symbol of the vanity of woman. The moralizing, however, was mostly hypocritical. You painted a naked woman because you enjoyed looking at her, you put a mirror in her hand and you called the painting Vanity, thus morally condemning the woman whose nakedness you had depicted for your own pleasure.
And so it is with the current economic moralizers: they put low-interest debt into people’s hands, when it suited their interests to fuel the real-estate boom, thereby attempting to stave off the effects of underconsumption created by high productivity and low wages. Now, they want to shift the burden of deleveraging onto the same people who are losing their homes and jobs by condemning the vanity of living beyond one’s means.
The moralizing of the elites will, indeed, make the current situation worse. However, it also exposes their hypocrisy in morally condemning the same debt they had created for their own pleasure.