Obama is proposing public works projects to stimulate the economy, much like FDR did in the ’30s. Will that work in this era?
What you don’t want is to employ a whole bunch of people digging holes in the ground because that’s going to do nothing to raise the productivity of the economy. Economic growth in the long run is about technological advancement and gains in productivity. It’s not about simply getting people to go to the shopping malls to buy more Chinese goods.
How many times in the last few months has the Depression been invoked when trying to describe the dire economic circumstances of present?
Well if anyone was listening, Niall Ferguson was ready to give us that history lesson about three years ago when production for his PBS series “The Ascent of Money” was just beginning.
“[The Ascent of Money] was predicated on the idea that there was going to be a crisis,” says Ferguson, a revered commentator and professor of finance at Harvard University, who began this project in 2006. “I thought that when the crisis came, people would be desperately in need of explanation. I thought historical explanation would be the best ones.”
For those of us unfamiliar to the world of finance, some of the actions taken by the government these days can seem baffling. Through “The Ascent of Money,” Ferguson presents the philosophical history of the relationship between government and private sector finance some of which serves to explain why bailouts — which are seemingly driving the country into further debt — may actually be the most sensible course of action.
“What we’re trying to do here [with the bailouts] is something that John Maynard Keynes advised in the ’30s which was to use the government to substitute for private sector demand,” says Ferguson. “[But] we can’t bail out every company that’s struggling because practically every company in the country is struggling right now.”
As to why we got into the mess in the first place, Ferguson cites a lack of understanding of history. “The naiveté that was abounding in 2006, the notion of a great moderation, the idea that somehow this time it was different, that volatility had died,” Ferguson says. “All of that was based on ignorance and anyone who knew about financial history could see that something serious was coming around the corner. It wasn’t a totally unexpected bolt from the blue from where I was sitting. It was eminently predictable.”