The job numbers are out and they’re not good. We’re in a depression. That’s why Paul Krugman has written a book titled End This Depression Now! The basic premise of the book is that we’re in a depression, not as bad as the Great Depression, we know how to get out of it, and we’re not applying the known fix.
Via an interview in May with Joshua Holland at Alternet, Paul Krugman: We Could End This Depression Right Now.
First the difference between a recession and a depression:
Joshua Holland: Let me ask you first about a somewhat provocative word in your title, the D-word. What makes this a depression rather than a so-called “Great Recession” that we’ve heard so much about?
Paul Krugman: A recession is when things are going down, when the economy is heading down. A depression is when the economy is down, and stays down for a long time. We have the Great Depression, which was more than a decade. There were two recessions in there and there were two periods that were recoveries in the sense that things were getting better, but not much better. The whole period was a period that was really terrible for America and for the world. We’re in a period like that right now. Not as bad as the Great Depression, but that’s not much to recommend it. It’s a sustained thing. We’re now in year five of very high unemployment with terrible prospects for young people. It’s a depression.
And next how to get out of a depression:
JH: I want to encourage people to read the book, but can you just give readers a sense of what you think is the most important thing policy makers should be thinking about doing right now?
PK: The moral of the book is: this doesn’t have to be happening. This is essentially a technical process; it’s a small thing. It’s like having a dead battery in a car, and while there may be a lot wrong with the car, you can get the car going remarkably easily, if you’re willing to accept that’s what the problem really is.
First and foremost, what we have is an economy that just doesn’t have enough spending. Consumers are hobbled by debt, corporations don’t want to spend if they don’t see consumer demand. Somebody has to step in and spend, and that somebody is the government. The government could – and by all means let’s talk about forward-looking, big projects — right away get a big boost in the economy just by reversing the big cutbacks that have taken place in state and local governments these past three years. Get the schoolteachers rehired and get the policemen and firefighters back on the beat. Fill those potholes that have been developing in New Jersey and I believe all over America. We’d then be most of the way back to a decent economy again.
A simpler way to say it is that when consumers can’t spend money (because they don’t have any), and business won’t (because of low, or no demand), then the government must. And if the government won’t spend money, because of politics, then we will languish in a depression until our government does.
The solution is out there and neither the Democrats or the Republicans appear willing to do what is needed to lower unemployment and fix our economy. Anyone worried about the debt should read this, My Father and Alan Greenspan.
When I was a small boy at the start of the 1950s, my father gave me my first economics lesson. “Bobby,” he said with obvious concern, “you and your children and your children’s children will be repaying the national debt created by Franklin D. Roosevelt.”
I didn’t know what a national debt was, but I remember being scared out of my wits.
Dad was wrong, of course. Even though the national debt then was a much higher percentage of the national economy than it is today, it shrank as the economy boomed. My children have never mentioned FDR’s debt. My granddaughter (almost 2) will never pay a penny of it.
Dad, now 96 and still in good health, recognizes how wrong he was then. He admits FDR’s deficit spending not only won World War II but it also got America out of the Great Depression.
For more on what to do watch this:
Also read Stop the Austerity Train Wreck!
The overriding theme of Krugman’s book is we’re in a depression, we were in one before, we know how to get out of one, and we’re not doing it. We have a demand problem that won’t be fixed until jobs return, and wages begin to rise. In times of trouble the government is supposed to act to help the people, it is not, and until it does the depression will continue. All that’s left is to wonder, what is it going to take for our elected representatives to figure this out?