“It has become known as the ‘Great Recession’, the year in which the global economy suffered its deepest slump since the second world war. But an equally apt name would be the ‘Great Stabilisation’. For 2009 was extraordinary not just for how output fell, but for how a catastrophe was averted.”
The Economist December 19th 2009
The definition of words is fundamentally important in a single-sentence media world where many individuals confront serious problems of attention deficit. The word catastrophe deserves close scrutiny. For The Economist the term is viewed in a macroeconomic perspective, as rising aggregate unemployment, falling aggregate real income, and price deflation. Indeed, these are symptoms of serious economic problems. But when we are passing judgments on ‘catastrophe’ it is to the underlying causes, not the symptoms, that we must direct attention.
For the United States, as I have argued before in these columns, the underlying causes of the financial crisis and economic contraction lie deeply in the immediate gratification psyche of too many US citizens and in the political-economic institutions that feed this psyche. Until individual Americans return to time-honored traditions of thrift, wherein they balance their household budgets and limit debt to dealing with unforeseeable downturns, until US citizens become aware of the ongoing drift away from laissez-faire capitalism towards state capitalism, until they become aware of the sacrifices in liberty that they make in responding to the short-term temptation of liberal fascism, there is no prospect of true long-term stabilization and economic recovery.
The US government and US citizens are afflicted at this time with the same institutional incentives to run up unsustainable debt that drove the 2008-9 crisis. Indeed the situation is now worse because the government has indicated that poor economic behavior will always be bailed out by coerced transfers from those taxpayers who play by the rules and accumulate the wealth that can be taxed. Until the taxpayers revolt, until Atlas shrugs, the US economy will lurch from one crisis to another until, ultimately, it will pass the point of no return, and descend to second world status.
The extent to which The Economist, the once highly respected classical liberal thunderer, has now become an unthinking mouthpiece for state capitalism demonstrates just how far Western Europe and North America have drifted from the nineteenth century economic principles that grew their wealth and promoted their economic freedoms.