This article cited the great depression in the 1930s as an example to learn lessons from. It also talked about whether the current recession will lead to a doubt of the value of liberal capitalism.
http://www.economist.com/node/21541388
"On the present course, conditions in developed economies look like getting worse before they get better. Growth in America and Britain will probably be less than 2% in 2012 on current policy, and in both recession is quite possible. A euro-zone recession is likely. The ECB could improve the euro zone’s economic outlook by loosening its monetary policy, but widespread austerity and uncertainty will be difficult to overcome. As in 1931 and 2008, a grave financial crisis may cause a large drop in output. That, in turn, would place more pressure on euro-zone economies struggling to avoid default."
"Even so, prolonged economic weakness is contributing to a broad rethinking of the value of liberal capitalism. Countries scrapping for scarce demand are now intervening in currency markets—the Swiss are fed up with their franc appreciating against the euro. America’s Senate has sought to punish China for currency manipulation with tariffs. Within Europe the turmoil of the euro crisis is encouraging ugly nationalists, some of them racist. Their extremism is mild when compared with the continent-wrecking horrors of Nazism, but that hardly makes it welcome.
The situation is not yet beyond repair. But the task of repairing it grows harder the longer it is delayed. The lessons of the 1930s spared the world a lot of economic pain after the shock of the 2008 financial crisis. It is not too late to recall other critical lessons of the Depression. Ignore them, and history may well repeat itself."
1 comment:
The article does make interesting comparisons, but also shows how different the global economy is today and how many learned from the Depression. I do agree that action should be taken, but the experts themselves are divided on the issue, which makes it hard for any one side to be seen as the right way.
The problem of austerity also relates to the Depression. Germany, leading the austerity charge, does so out of fear of inflation that comes from the 1930s, where trillions of marks were needed to buy breed and the currency was basically worthless.
Though it is always important to remember that no one really cared about the similarities between the the 2000s and the 1920s. The article does make a slight comparison with German growth through foreign investment then turning to austerity after the crash to the rise and fall in peripheral European countries like Greece, Ireland, Spain, and Portugal.
Post a Comment