The Paradox of Thrift and the way out of this mess - if you can handle it [JOHANN HARI]

There is a way out: the government needs to spend large sums of money, financed by borrowing, to get all the workers waiting idle back into action.

NVDL: The proviso is ON WHAT the government spends this money. On banks, on automakers, on prolonging our current unsustainable consumption, or on a NEW DEAL? If Government Around The World [GATW]spends trillions on high-labour-intensive organic farming, on public transport, on investment in alternative energies [solar, wind, nuclear] and on retrofitting suburbia and retooling and re-engineering our living arrangements we can mitigate some of the chronic losses we're about to face. None of these changes are underway because Obama and the ROW [rest of the world] sublimely believe that our way of life is non-negotiable. Er...it's bankrupt. There's nothing to negotiate with.

This government spending brings consumer demand back - and reverses the downward trend. Then, once you've recovered, you pay off the debt.

Keynes stressed you can spend this money on anything: at one point he proposed burying wads of cash and paying people to dig them up. But today, we face an incredible coincidence. At the same moment, we need to spend lots of money on something, anything - and we need an immediate transition to a low-carbon economy.

And it gets better: it turns out a green stimulus is best for the economy. A major study by the University of Massachusetts compared the effects of an old-style stimulus that simply gives people more cash to a green stimulus. They found that a green stimulus creates four times more jobs, and three times more "good jobs", defined as those that pay more than $16 per hour. Why? Because a green stimulus is labour-intensive: you spend more money on people and less on machines. And the money you spend stays at home, making it easier to sell: you can only insulate a loft in Hull in Hull; you can only build a wind farms in the Mid-West in the Mid-West.

But it's not happening. A study by HSBC has found that only 6 percent of Britain's stimulus so far has gone to green projects. In the US, it is just 16 percent. It's nonsense to claim there aren't enough green projects "shovel-ready": during World War Two, the industrial capacities of our countries was transformed from making consumer goods to making tanks and weaponry in less than sixty days. We could do the same.

But this alacrity shouldn't surprise us. The weight of conventional wisdoms and the sway of powerful corporations with vested interests in the old sickening world holds back even the better leaders.

NVDL: 'Vested interests' is code for the few who hold the masses to ransom because they stand to get a few truckloads of gold in their vaults. An example that comes to mind is Robert Mugabe.

Below Hari discusses that what is rational for an individual consumer is irrational for the society as a whole.In other words, we are about to face a war between the individual self interest and the collective self interest. Consumer society needs to abruptly emerge out of the current rut, of voracious, self centred consumption to something more altruistic, something that includes honesty, consciousness and caring about the environment (and all its issues and concerns) accountability and responsibility for one's actions, service and sacrifice to others. Observing the people I meet and work with each and every day, I know a great many people who still maintain that global warming is a myth (today, now, in 2009, which everything that is going on)...individuals will continue to do well to ruin civilisation to the rue of all.

clipped from www.johannhari.com It's a strange debate to have now, because the opponents of any stimulus seem to be mired in a row that was resolved back in the 1930s. John Maynard Keynes transformed the way that we think about recessions. Before him, everybody believed the Merkel-Cameron-McCain line that recessions are like bad weather: you just need to wrap up and sit it out, even though it hurts. But Keynes transformed all that. He showed that recessions are actually caused by a failure of consumer demand. When people sense that they might lose their job, they - perfectly sensibly - cut back on their spending. They buy fewer DVDs or restaurant meals or holidays. But this causes a fall in demand for services - and more people lose their jobs, causing demand to fall further in turn, and on and on, in a spiral. He called it "the paradox of thrift": what is rational for an individual consumer is irrational for the society as a whole.