Economists and the Recession

This article may not be extremely current (September 2009), but when my dad had me read them last week I realized that the insights it provides are still relevant months later, even as the recession appears to be slowly resolving. Columnist Martin Wolf analyzes our new perception of deregulated economic policies that have been prominent since the early 1980’s. Today’s popular opinion says that those policies led to, and are responsible for, the current Global economic crisis.
The new policies arose as a sort of overreaction to what officials deemed the failure of the previous policies influenced by the theories of John Maynard Keynes prominent in the 60’s and 70’s. Keynes’ theories promoted a larger role of government intervention in economic regulation. However, elections worldwide introduced leaders like Ronald Reagan and Margaret Thatcher, who brought their anti-regulation policies, such as Reagan’s supply-side economics, into action.
Thanks to the recent recession, often called “The worst crisis since the Great Depression,” a public backlash has arisen against these policies, and the role of government in politics is increasing under the Obama Administration. Keynesian economics is once again on the rise. Even Alan Greenspan, former Chairman of the Federal Reserve and proponent of deregulation, has expressed his “disbelief” that the policies he put in place had failed the economy.
If there is anything the recession has taught us, it is that deregulation, to the extent that it was practiced, can cause severe repercussions in the long-term. In order to prevent this type of crisis from happening again, we need to learn from our mistakes. New policies must find a middle ground between the “wild west” deregulation of the 80’s and 90’s, and the left-leaning Keynsian economics of the 50’s and 60’s.
URL: http://www.ft.com/cms/s/0/c6c5bd36-0c0c-11de-b87d-0000779fd2ac.html?nclick_check=1Reference:Wolf, Martin. "Seeds of Its Own Destruction." Financial Times. Financial Times, 8 Mar. 2009. Web. 6 Dec. 2009.