Dean Baker: The Second Great Depression Bogeyman
[Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR's Jobs Byte is published each month upon release of the Bureau of Labor Statistics' employment report.]
Our political leaders continually assert that we should be thanking them that we are not in a second Great Depression rather than complaining about how bad things are. The second Great Depression theme came up repeatedly in the debate over the reappointment of Federal Reserve Board Chairman Ben Bernanke. It also featured prominently in Treasury Secretary Timothy Geithner's defense of his handling of the AIG bailout.
While we should all be thankful that we are not in a second Great Depression, just as we should be thankful that the world has not been destroyed by nuclear war, the "Great Depression" defense is a tool of fools and liars. Exactly what set of events in the world would have given us a second Great Depression, defined as a decade of double-digit unemployment?
It is almost certainly true that if we had let the cascade of bank collapses continue in the fall of 2008, taking down not just Lehman, but also Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, along with many smaller banks, that the current downturn would have been more severe. But what would have prevented the Fed from subsequently flooding the system with liquidity and the government from boosting the economy and employment with large-scale jobs programs? There is certainly nothing obvious that would have interfered with these efforts to boost the economy and restore employment....
It is important to come to grips with this second Great Depression bogeyman since, obviously, anything is better than a second Great Depression. As long as people believe that our leaders saved us from this horror, then they won't be sufficiently outraged about a bailout that left Goldman Sachs and the rest of the Wall Street crew richer than ever. They also won't be nearly as angry as they should be about economic policies that are projected to leave us with excessive rates of unemployment for many years into the future. And the public will not be nearly as mad as it should be about the incredible ineptitude of policymakers and economists that allowed for this collapse in the first place.
The reality is that we got into this mess because of an overwhelming excess of greed and stupidity on the part of the Wall Street bankers and the people deciding economic policy. We continue to face excessive rates of unemployment because of a continuing reluctance to pursue policies that can restore the economy to health....
...[T]he public will be hesitant to demand stronger action if they are convinced that they should be thankful that we have avoided a second Great Depression. So, it is important that the people know that they have nothing to be thankful for: our leaders wrecked the economy, end of story. It's time that they take the measures necessary to set things right, even if it is a bit unsettling to the Wall Street boys and other powerful interests.
Read entire article at Truthout
Our political leaders continually assert that we should be thanking them that we are not in a second Great Depression rather than complaining about how bad things are. The second Great Depression theme came up repeatedly in the debate over the reappointment of Federal Reserve Board Chairman Ben Bernanke. It also featured prominently in Treasury Secretary Timothy Geithner's defense of his handling of the AIG bailout.
While we should all be thankful that we are not in a second Great Depression, just as we should be thankful that the world has not been destroyed by nuclear war, the "Great Depression" defense is a tool of fools and liars. Exactly what set of events in the world would have given us a second Great Depression, defined as a decade of double-digit unemployment?
It is almost certainly true that if we had let the cascade of bank collapses continue in the fall of 2008, taking down not just Lehman, but also Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, along with many smaller banks, that the current downturn would have been more severe. But what would have prevented the Fed from subsequently flooding the system with liquidity and the government from boosting the economy and employment with large-scale jobs programs? There is certainly nothing obvious that would have interfered with these efforts to boost the economy and restore employment....
It is important to come to grips with this second Great Depression bogeyman since, obviously, anything is better than a second Great Depression. As long as people believe that our leaders saved us from this horror, then they won't be sufficiently outraged about a bailout that left Goldman Sachs and the rest of the Wall Street crew richer than ever. They also won't be nearly as angry as they should be about economic policies that are projected to leave us with excessive rates of unemployment for many years into the future. And the public will not be nearly as mad as it should be about the incredible ineptitude of policymakers and economists that allowed for this collapse in the first place.
The reality is that we got into this mess because of an overwhelming excess of greed and stupidity on the part of the Wall Street bankers and the people deciding economic policy. We continue to face excessive rates of unemployment because of a continuing reluctance to pursue policies that can restore the economy to health....
...[T]he public will be hesitant to demand stronger action if they are convinced that they should be thankful that we have avoided a second Great Depression. So, it is important that the people know that they have nothing to be thankful for: our leaders wrecked the economy, end of story. It's time that they take the measures necessary to set things right, even if it is a bit unsettling to the Wall Street boys and other powerful interests.