Gerard Henderson attacked Keen in the SMH this morning and Keen has promptly responded on his blog this morning (and carried in Crikey).
I worked with Steve Keen in the Commonwealth Public Service many years ago, in a unit that produced Australia Reconstructed. Keen has always been serious, iconoclastic and a devotee of Maynard Keynes.
I have to admit, though, that I found Steve’s recent media appearances disappointingly alarmist. The responsibility for this alarmist tone, genuine on Keen’s part, is not his alone. The media seems to lap up this kind of ‘frighten the horses’ stuff and some like, Kerry O’Brien and George Negus, share the old leftie (’capitalism finally gets its just desserts’) tone in it all.
So to that extent, I share Henderson’s criticisms. In particular, Henderson is right in suggesting that the many outlets that have covered Keen’s views should have balanced them against the views of others who do not think debt will lead to depression. In fact, for instance, a big part of the current problem is that the credit system has seized up – that’s what the bailouts are mostly about.
On the other hand, Henderson does not convey the reality that Keen is far from being a latecomer to the idea that debt will lead to doom. In fact, much of Keen’s long career as an economist has been focused on this idea that escalating debt would eventually lead to an awful bust. For instance, Keen says in his rebuttal:
I made a submission to the Wallis Committee in July 1996, in which I warned that securitisation of loans could lead to a crisis exactly like the Subprime crisis that has now unfolded—and of course my comments were ignored.
I wrote to the RBA in June 1998 offering to hold a seminar on the “Financial Instability Hypothesis”, which is the foundation of my argument that we are likely to experience a Great Depression. The offer was declined.
Henderson was remiss in not pointing out the longevity, consistency and genuineness of Keen’s views.
In addition, Henderson’s glancing dig at the University of Western Sydney as a ’suburban’ university was a revealing insight into his own elitism:
It’s not often that a middle-aged academic from a suburban university receives such coverage in the popular press.
Indeed, perhaps Henderson could offer some guidance to journalists on which universities are suitable places to find academics for future commentary.
4 Comments
Keen is of course right in his assertions but it requires the first domino to get pushed before the crisis will unfold. And everyone is trying to stop anymore domino’s getting knocked over. Keen’s problem is not talking in possibilities and probabilities.
Henderson on the other hand doesn’t want little Johny Howard’s disappearing reputation to cop another nose breaker.
Thanks for drawing attention to Hendersons sly ’suburban university’ remark. Always amusing to see ‘anti elites’ behave thus.
I’d also venture that UWS is more representative of modern Australia then many/all of the sandstone set, as long as Henderson remains dismissive he’ll remain illinformed.
Normally I would follow-up the links, but this time your writeup of henderson makes me just not bother with the sad old whinger. Life’s too short.
Dan, I’m often surprised at how little research Henderson seems to do for his columns or how little that research seems to be reflected in his work. If you were going to do a piece highly critical of someone and their professional work you’d think you would familarise yourself with that work and give your readers a short overview of it as in something like “For twenty years Prof Keen has been pointing to evidence about debt which he has consistently argued will lead to a major economic crash”…Henderson could still go on to legitimately criticise Keen but at least the reader would have a better sense of the person being pilloried, Trevor