A recent book by Martin Wolf, an esteemed commentator published in the London (England) Times, reviewed policy makers’ handling of the current economic recession as well as prescriptions for reviving the economy.
This columnist begs to differ with the remedies he has proposed.
First of all we should consider St. Luke’s admonishment in a different context “to heal yourself”. Rather than letting things go on, it should be noted that excessive intervention too frequently is misplaced and does more harm than good.
Review the 1930s. The United States under President Roosevelt implemented major changes aside from the much needed relief measures. The U.S. government became very interventionist in the economy. Some of these were beneficial but many were counter-productive.
Certainly the Social Security System providing a retirement scheme was very worthwhile. Too, greater supervision of the investment industry was long overdue.
Other programs, like The Rural Electrification Plan of the Tennessee Valley Authority, provided for the development of that state’s entire irrigation and electricity for the region, retarded economic growth, delayed private generation of electric power and adversely affected other general initiatives.
The wild spending, budget deficits and the confiscatory taxation on undistributed corporate taxes was detrimental to business confidence and its future plans.
In the middle 1930s Roosevelt boasted that the business recovery was “because we planned it that way.” Yet, in the latter half of this decade the economy nose-dived. So much for Roosevelt’s meddling!
On the other hand the British government pretty well maintained a hands-off policy, without incurring the huge budget deficits that took place in the United States. The pace of Britain’s recovery surpassed that of the United States. The U.K. government generally believed, correctly so, in the “heal yourself” maxim.
Wolf acknowledges that dangerous bubbles have been created and the economy is not on a sustained basis. Instead the author recommends distributing money wildly, replacing the traditional reserve banking system by one where deposits are backed by government bonds, and that interest rates should be kept low, with more spending to prevent “secular stagnation”.
This columnist disagrees but admits there should be measures to redress income inequality.
Well funded infrastructure speeding, less manipulation and sound money should be our program. A more conservative agenda should be our plan.
History shows that responsibility works and we need to make hard choices to implement that.