As any reputable economist will explain, recessions have only one basic cause: a fall in “aggregate demand,” or, in English, people stop spending money. There are many reasons why people stop spending, like too much debt, not enough income, lost job or belief they will lose a job, etc.
Nearly every advanced government in the world has used stimulus plans to pull its economy out of a dangerously deep economic trough. Does anyone remember the 1980s and the Japanese miracle, and how the future was theirs? Whatever happened to that prophesy? A very bad recession happened—a recession that the Japanese authorities refused to acknowledge until it was too late.
Timing is the essence of stimuli. After all, it’s impossible to stimulate a corpse, which is pretty much what the Japanese miracle became. 2011 marks the third decade of their recession, during which time their national debt has risen until it now stands two and half times greater than ours, and it is getting worse every day.
Which brings me to the point of this letter. When Karl Marx was confronted by a critic who pointed out an obvious flaw in his theory—that by understanding capitalism’s weakness, society could make the proper adjustments and continue to expand without the mother of all economic meltdowns from ever occurring—Marx replied that capitalists would never make those concessions. When asked why they would willfully ignore self-preservation, his answer was, “Because they’re stupid!”
The only reason we’ve been able to survive so many recessions since the Great Depression is simple: We weren’t stupid! At least not until this current gang of Republicans who have managed to elevate idiocy to an art form.
This article appears in Mar 10-17, 2011.
