Robert Reich: It’s Not Great, But It Is Now a Depression
And the only way out is massive spending–not for Wall Street (which we should now ignore), but for job creating on main street. Wow.
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Michael L. Westmoreland-White, Ph.D. I live in Louisville, KY USA with my wife, Kate, and our two wonderful daughters. My wife, Kate, is a Baptist minister who works at a Catholic charity (the Society of St. Vincent de Paul) to provide assisted housing to homeless people. Our daughters are Molly (‘95) and Miriam (‘99). I am a former soldier converted to gospel nonviolence and a once (and future?) academic theologian turned peace activist, author, and peace educator. Contact me at mlw-w@insightbb.com
The Levellers were a 17th C. movement during the English Civil War. They were a religiously-inspired political movement for democracy, human rights, justice for the poor, and peace. Their strongest leader was Richard Overton, a pacifist General Baptist influenced by Dutch Mennonites. Although I write on a wide range of topics, most often this blog deals with the intersection of faith, especially Christian faith, and work for social justice and peace. So, I have named the blog and dedicated it to the spirit of Richard Overton and the 17th C. Levellers.
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I agree. Of course I’m not an economist and usually refrain from even commenting on economic issues. I believe this country has been in a depression for some time. I also believe that government spending is the only way out. I like his comment about using GM and the other car companies’ manufacturing capacities to build other necessary machinery such as wind turbines, etc. Heck, Singer Sewing Machine Company made .45 semi-automatics during WW II. It puts people back to work.
Hi Michael. How do you (or other Keynesians) believe that massive government spending will stimulate the economy? The reason I think private sector jobs are better than public sector ones is that they put money into the tax system rather than taking it out. Do you think that the public sector jobs will lead to the creation of more private sector ones–since public sector workers can still spend money, or creating clean energy will require buying things from the private sector, or another reason? I remember you saying a while back that having a rail makes certain jobs more accessible–but I wonder how much of a large-scale effect that would have.
James, private sector jobs ARE better. Look, a recession is too much supply and not enough demand, coupled by a lack of liquidity. So, no one has money to spend, which leads to layoffs, etc. in a vicious cycle. In such a situation, the government must become the spender of last resort in order to CREATE DEMAND. If, say, the government orders all new cars for the FBI, the DEA, ATF, local police, etc. this moves cars off lots, and helps restart the auto industry. If govt. builds infrastructure (roads, bridges, levees, trains, etc.) they employ private companies who hire people, etc. They also have to order supplies, employing other people. The people with jobs buy groceries, pay rent, etc. This creates a virtuous circle which, since they all include taxpayers, also puts money back into the tax system–though not as fast. We know that private corporations never create infrastructure, but free enterprise needs infrastructure to work well. It’s a ripple effect.
We’ve seen this before, during the Great Depression. So, we know this works. When the govt. stopped spending in 1937, the nation slipped back again. WWII finished the route out of Depression because it created a full employment economy. Factories that had been shut down, but with massive government need for tanks, planes, submarines, etc., these private corporations had a customer and employed thousands. Because most of the men were in the military, it employed the women. (This could have led to a massive post-War recession if the Marshall Plan and the Cold War had not intervened.)
In NORMAL times, you want the government to balance its budget. The private sector, especially small business, is the engine of wealth. But not in a recession–or the recession wouldn’t exist.