STOCK MARKET WATCH -- Friday, 29 June 2012

[Demeter]

14. Paul Krugman: To End This Depression, What Do We Do Now?

http://truth-out.org/progressivepicks/item/10035-to-end-this-depression-what-do-we-do-now

The Preface to Paul Krugman's "End This Depression Now!"

This is a book about the economic slump now afflicting the United States and many other countries - a slump that has now entered its fifth year and that shows no signs of ending anytime soon. Needless to say, many books about the financial crisis of 2008, which marked the beginning of the slump, have already been published, and many more are no doubt in the pipeline. But this book is, I believe, different from most of those other books, because it tries to answer a different question. For the most part, the mushrooming literature on our economic disaster asks, "How did this happen?" My question, instead, is "What do we do now?"

Obviously these are somewhat related questions, but they are by no means identical. Knowing what causes heart attacks is not at all the same thing as knowing how to treat them; the same is true of economic crises. And right now the question of treatment should be what concerns us most. Every time I read some academic or opinion article discussing what we should be doing to prevent future financial crises - and I read many such articles - I get a bit impatient. Yes, it's a worthy question, but since we have yet to recover from the last crisis, shouldn't achieving recovery be our first priority?

For we are still very much living in the shadow of the economic catastrophe that struck both Europe and the United States four years ago. Gross domestic product, which normally grows a couple of percent a year, is barely above its precrisis peak even in countries that have seen a relatively strong recovery, and it is down by double digits in several Euro- pean nations. Meanwhile, unemployment on both sides of the Atlantic remains at levels that would have seemed inconceivable before the crisis.

The best way to think about this continued slump, I'd argue, is to accept the fact that we're in a depression. No, it's not the Great Depression, at least not for most of us (but talk to the Greeks, the Irish, or even the Spaniards, who have 23 percent unemployment - and almost 50 percent unemployment among the young). But it's nonetheless essentially the same kind of situation that John Maynard Keynes described in the 1930s: "a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse."...And that's not an acceptable condition. There are some economists and policy officials who seem satisfied with avoiding "complete collapse"; but the reality is that this "chronic condition of subnormal activity," reflected above all in a lack of jobs, is inflicting enormous, cumulative human damage. So it's extremely important that we take action to promote a real, full recovery. And here's the thing: we know how to do that, or at least we should know how to do that... MORE