Brian Walsh vs. Reality

Kingdom Economics. I don’t get it. So I reread Brian Walsh’s response to Naomi Klein’s Shock Doctrine and have come away bemused. Walsh spends the first part of the presentation outlining Klein’s work with her narrative of shock capitalism. Walsh’s problem with Klein is that her shock capitalism narrative is only grounded in the larger thin liberal economic vision of Keynesianism.

Walsh’s problem with the Keynesian vision is not mixed economies. Walsh says, “indeed I believe in a mixed economy, especially if it focuses on local economic sustainability.” Walsh goes on to suggest that the Keynesian vision lacks the “weight, substance and moral vision that we need in our times.”

Walsh asks “why did the liberal worldview that brought us the New Deal, together with state intervention to alleviate things like poverty and homelessness by means of a social safety net collapse”  The reason for Walsh is that the liberal narrative was rooted in a faith in economic growth. With this narrative a countries first priority is to seek economic growth in an increase in Gross National Product.

Citing Bob Goudzwaard, Walsh identifies the welfare state as a post-care society. This is apparently bad because ‘care’ in this vision only comes after economic growth. This is the weakness of the liberal vision for Walsh for when the economy slows down and recession hits, “responsibility evaporates, liberalism dies, and neo-conservatism takes its place.”

Walsh asks the question, if “an economic downturn that made the whole culture lose its ethical nerve and gave entry to neo-conservatism, then why doesn’t an economic upturn result in a return to the ethical principles that for a while seemed too expensive?” He points out that we’re no longer in a recession (at least in 2007, when this paper was presented) so why didn’t we take our budgetary surpluses and reinstate dismantled programs? The answer is, once again, a thin vision that has “proven itself too shallow to sustain any kind of a renewed civic sense of responsibility.”

So, that’s it. This is part of what Walsh will later go on to call “the economy of Jesus” (whatever the heck that means). So the vision is Keynesian economics + a biblical vision of care which will entail caring for the marginalized even when there is no money to pay for it.

This is ludicrous.

If Walsh’s view was actually implemented it would lead to disastrous economic results. Let’s consider the US for a moment. According to Walsh’s assumptions the US is clearly not a pre-care society. And yet  as of 2003, pre-recession, it was clearly on the road to bankruptcy. Why? Not because of Iraq and Afghanistan but because of Medicare and Social Security.

By the time the 77 million American baby boomers retire the US will have doubled the size of its elderly population but increased by less than 15% the number of taxpaying workers able to pay for their benefits. The government’s commitment to pay these health and retirement benefits are known as implicit liabilities. What is terrifying about this is that the government’s implicit liabilities dwarf their explicit ones.

In Colossus, Niall Ferguson cites a 2003 paper by Jagadeesh Gokhale, a senior economist at the Federal Reserve Bank of Cleveland, and Kent Smetters, the former deputy assistant secretary of economic policy at the US Treasury. Ferguson writes,

“They asked the following question: Suppose that today the government could get its hands on all the revenue it can expect to collect in the future, but had to use it, also today, to pay of all its future expenditure commitments, including debt service. Would the discounted present value of all its future revenues suffice to cover the discounted present value of all its future expenditures? The answer is a decided no. According to their calculations, the shortfall amounts to $45 trillion. To put that figure into perspective, it is twelve times larger than the current official debt held by the public and roughly four times the country’s annual output.”

Ferguson continues,

“There is however, one serious problem with these figures, not with the calculations that underlie them but with their acceptance. To put it bluntly, this news is so bad that scarcely anyone believes it. It is not that people are completely oblivious of the problem. It is common knowledge that Americans are living longer and that paying for the rising proportion of elderly people in the population is going to be expensive. What people do not yet realize is how expensive.”

Two things to note – 1) the figures cited by Gokhale and Smetters are actually optimistic; 2) Colossuswas published pre-recession, bailout and possible Obamacare.

Walsh’s vision of a pre-care economy would lead to economic destruction. The US is already teetering on the brink of bankruptcy and it isn’t remotely close to being a pre-care society. God help us if she heeds Walsh’s advice.

Lord please protect us from your “prophets.”