The Jeremiahs are abroad once more, lamenting the state of affairs in the world and warning that dark days lie ahead. Whenever the economy hits a bump in the road these mental pygmies emerge from the underbrush to tell us the sky is falling.
We are in a recession because the people who hold our purse strings must have wanted it that way. I don’t know exactly what their motives were. They might simply have tired of the good times we had when Clinton was in the White House and America led the world in information technology. Or there may be some group of insiders that will stand to gain from a recession. (Perhaps it was a device to pry that trillion-dollar package out of Congress and skim a few billions off the top?)
All we have to do to end the recession is decide that we’ve had enough. “We,” of course does not mean you and I, it means the people who represent us. They have the power to end the recession – if only they knew. I won’t insult you by quoting John Maynard Keynes (photo at left). Everybody in the world must know by now what Keynes theorized, and how right his theories have proven. The answer to the recession is not to bail out the financial barons at Goldman Sachs and AIG but to pour a torrent of cash into the mainstream of the American economy. Oh, but what about the trillion-dollar deficit and 10-trillion national debt, you say, your eyes widening in alarm. And I say forget about it. The deficit and debt will take care of themselves – after we shoo this bad old recession away.
The key to success in this kind of rescue operation is not timid frugality but care in directing an infusion of capital. If you spend ten dollars to plant a tree, you can reasonably expect to get fruit or lumber from that tree in a few years. If all goes well, you might even make a profit on your investment. If you spend ten dollars on doughnuts you will get nothing but fat.
If our leaders have the guts to spend the money that’s needed to jump start American consumption, the recession will soon end… as long as they direct the paper they print into the right hands. If I were in charge, one of my priorities would be research and development. We desperately need to come up with the Next Big Thing. That might come from the area of alternative energy or transportation – or even medicine. But we need something like that to create and sustain a base for a new economy. We also need to invest in retooling obsolete plants, building specialty manufacturing facilities… high-tech stuff to make us competitive in the 21st Century. Another long-term priority would be education. There’s no point in creating new technologies and producing new jobs if our population isn’t smart enough to fill those jobs or use that technology.
Sure, we need to build roads and bridges and airports and schools … IN THE SHORT TERM. These FDR-style projects create jobs quickly and give the impression of activity, which inspires confidence and loosens consumer pocket books. Once the American consumer starts shopping again, the world will perk up because it is American consumption that drives the global economy. But without long-term solutions, another collapse would be inevitable later on. To sustain a recovery we need an economic base, and we lost our heavy manufacturing to other countries long ago (we have also exported much of our dot-com technology).
Back in 1965, I was working for a Toronto newspaper called The Telegram (which is long gone), and I was assigned to interview the first chairman of the Economic Council of Canada, the late John Deutsch. I asked him what Canada could do to cope with the fact that manufacturers were taking advantage of cheaper labor in emerging countries. In my lead I quoted him as saying: Canadians can no longer afford to depend on their hands for a living; they must depend on their brains.
Did that date register with you – 1965? That’s two-score-and-three years ago, mes enfants! How long will it take us to realize that Americans cannot survive as a nation of hewers of wood and drawers of water? When will all the people of these United States recognize the value of scientific and technological progress? How can supposedly intelligent adults still subscribe to the kind of superstition that blocked federal support of stem cell research? How can anyone fall for the kind of chicanery represented by televangelists and Sarah Palin? Why don’t we tax those politically active churches, for one thing? There’s a source of revenue for you! Tell that to the finger waggers who are warning Barack Obama against deficit spending.
The deficit, after all, is just a promise to pay. As long as someone will accept U.S. dollar bills as money, what difference does it make if the deficit is a trillion or two trillion? Yes, it will cause inflation – in the long term. But by the time the inflationary reaction kicks in, I bet American ingenuity will have found the Next Big Thing, and we will be on our way to another Golden Economic Age, That would be the time to start cutting back government spending, to whittle away at the national debt, and to attack that deficit.
In the meantime, tell the bankers and financiers to declare Chapter 11 or employ whatever other free-market tactic they prefer. They wanted deregulation; they got deregulation. They made money; they lost money. Tell them to give us back our bail-out billions. If the banking system collapses, so what? The government created the Central Bank by an act of Congress. The government can create some other mechanism to manipulate our money supply – something less cockeyed and unfair. It’s time we gave our money to our inventors, scientists and teachers – instead of bankers.
In the meantime, let’s print that money and build those roads. And print scads more to fund the most massive research-and-development – and retooling – initiative in history. And fund a decent education system – let us not forget that! Trust me (and John Maynard Keynes), everything will turn out all right.