Wednesday, February 18, 2009

The Anti-Keynesians

Many on the right are arguing for a "do nothing and let the economy fix itself" approach to the current situation. Ignoring for a moment the Bear Stearns rescue, the AIG bailout, the Fannie and Freddie bailouts, and the $750 billion bank bailout we could examine this argument solely on it's merits, without considering the fairness of helping Wall Street but not helping people who have lost their jobs. We could put aside thoughts of the political and social consequences of that unfairness.

Martin Hutchinson makes this case better than most

When he says, "the Mellon approach would have given us a pretty terrifying fourth quarter of 2008, but in the long run it would have been worth it," I probably agree, although I think it would have been more terrifying than what he is imagining. Henry Paulson and Ben Bernanke also saw a greater danger or they never would have acted so against their free-market principles. They wanted to avoid the destruction of the global economy, while I welcome this, at least in principle. We need to figure out how to live closer to reality and to the natural world, with much simpler lifestyles. Of course the chaos involved in such a calamity might bring great suffering, and so it would be better to figure out an orderly way to make this transition.

I don't think people who make the "do nothing" argument really know what sort of world they are asking for. They see this crisis as just another downturn in the business cycle.

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