Monday, March 23, 2009

How about we just do nothing?

So if the stimulus is a bad idea because there is no sound economy to return to, what happens if we just do nothing? Well a Keynesian infusion of government spending was proposed because the economy is no longer functioning; if we do nothing then we must expect the economy to continue in a disfunctional state and for this to get worse. Obviously this is also bad. The only other alternative that I've heard proposed is some sort of tax cuts, which I view as a much weaker version of the stimulus since they don't have nearly the same money multiplying effect. So tax cuts are pretty much the same as doing nothing. If we do nothing then at best case we're looking at 10 years or more of Great-Depression-like conditions, and at worst case a Soviet Union-style collapse. But I don't think the stimulus will save us because we do not have a sound economy to revive. At best case the stimulus may give us a couple of years of recovery until the price of oil goes back up again and then we'll be right back where we are now, at worst the stimulus may have no or little effect and will hasten the likelihood of the U.S. defaulting on its national debt. To be fair to President Obama, at least he's trying to do something to change the situation, and he's using an approach that would have worked in the past, but won't work now. We need a much more radical solution, and even if he comes to this conclusion he will have his work cut out for him convincing the american public.

What we need is an orderly transition into a new economy, one that takes into account the reality of steadily more expensive oil and the fact that we have maxed out the carrying capacity of the planet. This is not some utopian dream; if we can't make ourselves think like this then we will pay the price very soon as our environment continues to degrade and provides for less and less of our needs.

The sort of new economy we need will have a very large place for the small farmer, and will use a lot less energy. This is all very possible and could be a very good life for all of us, just different than what we're used to.

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