Saturday, February 14, 2009

Bloomberg AWOL on NYC Economy

There is one point on which Michael Bloomberg can campaign with a claim that no likely contender can make — economic expertise. This amounts to little more than a rehash of an old American Article of Faith: "Success in Business Denotes Economic Wisdom". Michael Bloomberg has been unambiguously successful in business; therefore, he knows how to manage an economy.

False. We are confronted now with a test of all the Dogmas of the past forty or fifty years, the dogmas of the Chicago School, now the default educational dogma at every major business school and economic department — the orthodoxy, from which an academic strays at risk of his or her academic life. The mere fact that so many Harvard and Chicago and MIT people populate Obama's economic team should set off alarm bells. It isn't because the reporters at The New York Times or NPR or CNN are just indoctrinated in the scheme of intellectual obedience.

There is little if any evidence that Bloomberg is any different. To date he has offered only the mildest departures from the orthodoxy (for example, when he question Governor Paterson's ignorant assertion that imposing a millionaires' tax would drive the rich out of the state).

In the science (if it is a science) of economics, we are approaching a point of punctuation. The equilibrium of orthodoxy is being shaken. All efforts currently are bent towards protecting that orthodoxy. So the same, tired old 'experts' are rallied to protect the private fortunes of their old buddies from Harvard or Chicago or MIT. And the facts are contorted to fit the orthodoxy.

One of the central facts is among the most important to a massive city like New York — unemployment. Since the Reagan years, the calculus of unemployment figures has undergone repeated reconstruction to reduce the numbers of officially unemployed. But the older calculus is still available to us. If we use it to gauge current unemployment numbers, the results are sobering — a real unemployment rate in the neighborhood of 18%, according to statistician John Williams:

Chart of U.S. Unemployment

How will Bloomberg address this? If the nation is still delusional about the depths of the current decline, New York City is psychotic.

The workforce of New York City numbers about 4 million. A real unemployment rate of 14%, a figure currently widely accepted if under-reported, means well over half a million people out of work in the five boroughs. Twenty percent unemployment would mean 1 million people out of work. And we today live in the post-Reagan, post-Clinton welfare-is-evil society. How are 1 million people with little or no income going to manage?

Likewise, a quick review of New York City's largest businesses show this city is headed for trouble likely to far exceed that of the rest of the country. The city is painfully overdependent on exactly those businesses most hammered by the collapse.

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