Nouriel Roubini, the economist known as Dr. Doom, has lived up to his name in “Is Capitalism Doomed?,” a commentary decrying the world’s broken economic models.
Roubini chronicles the economic problems that have brought the world to the brink of a double-dip recession in his article published Monday on Project Syndicate, where he notes that the advanced economies are idling as the fast-growing emerging markets are experiencing sharp slowdowns. And he laments that monetary authorities lack the tools to bring about recovery while fiscal policies are acting as a drag on economic growth.
Citing global demonstrations fueled by “growing inequality, poverty, unemployment and hopelessness,” Roubini writes: “So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong).”
Meanwhile, apart from his article, the NYU economist remained in the news through his defense of Federal Reserve Chairman Ben Bernanke in the face of a threat, rhetorically at least, from Texas Governor Rick Perry.
On the campaign trail for the Republican presidential nomination, Perry was videotaped saying: “If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.”
Roubini, who launched a series of Tweets assailing Perry’s remarks, showed himself capable of pretty strong rhetoric himself:
“Perry’s remarks on Bernanke are criminal. This Texan thug is making murder threats on the Fed Chairman bit.ly/oavIA1”
And in his subsequent tweet:
“The mind of Rick Perry (his sick words on Bernanke) is not much different from that of the Norway mass murdered. Loaded words cause violence.”
Amid all the gloom, Roubini point by point in his article suggests that we are running out of options. Further bailouts, whether of banks or countries, are unaffordable both politically and economically, he says.
Europe lacks the resources to bail out Italy and Spain should they be shut out of credit markets, so that “coercive restructuring” of countries and banks as has begun to happen with Greece may soon be the order of the day, Roubini warns. He also foresees currency wars as countries fruitlessly seek the same advantage through weaker exchange rates, as Japan and Switzerland have already begun to do.
Condemning both “the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states,” the New York University economist calls for further fiscal stimulus in the short term combined with longer-term fiscal discipline. He adds to that list more progressive taxation, more monetary support to forestall bank runs and tighter financial regulation.
Roubini’s remarks amplified his comments in the The Wall Street Journal on Friday, in which he affirmed Marx’s prediction about capitalist self-destruction. “We thought the markets work. They’re not working,” Roubini said. “We’re creating zombie households, zombie banks and zombie governments, and you can have a depression.”