Peter Temin: Lessons from the Great Depression
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George Santayana once wrote that those who could not remember the past were condemned to repeat it. And looking at today’s policy makers at work seeking to combat the huge challenge of unemployment in the aftermath of the Great Financial Crisis of 2008, it appears that there is a lot of collective amnesia evident amongst this crowd. The parallels with the mistakes of the 1930s echo. Peter Temin, currently Gray Professor Emeritus of Economics, MIT, and former head of their Economics Department, has written extensively about the Great Depression. He argued persuasively in that book that the cause, spread and recovery from the Depression must be found in the monetary and fiscal policy regimes amongst the authorities of Great Britain, the US, France and Germany. The Great Depression, according to Temin, was the result of a shock to the system produced by World War I, coupled with an ideologically constrained response that exacerbated a bad situation and turned it into a crisis. Does this sound familiar? In the 1930s, governments practiced austerity to try and preserve the gold standard. And what they did was turn a recession into the Great Depression. And that seems to be what everybody is doing now with austerity. The Eurozone is still struggling with deflationary pressures because of an intensely austerian philosophy promoted by the Germans. In the US, the GOP also appears wedded to cutting government spending (except, it seems, when it applies to the military). The United Kingdom, which has no particular debt problems, is doing austerity because the Conservatives are in power. In other words, governments which have other choices are making the choice for austerity. In the 1930s, they were doing austerity because they were adhering to the ideology of the gold standard. In their minds, austerity was the only way to preserve the gold standard, which would eventually restore prosperity. Today the justification for it is debt. But debt for the United States is de minimus; our debt service is a minor part of our government spending. So you have to believe that there’s another motive, and that appears to be attack on the very foundations of the modern day social welfare state via class warfare. Temin outlines this thesis in the course of the interview, whilst illustrating the importance of integrating history into some rational and cogent form of economic analysis, a view which is sorely lacking in today’s economics profession.
Comments
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Talk among two people that agree. No intellectual spark. Waste of time. Check out the video by Hans-Werner Sinn instead.
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THE REPUBLICANS, ARE NOT SEEKING RECOVERY,WHY WOULD THEY
THE AMERICAN PEOPLE BAIL US OUT, THAT CRASH! TOTALLED 550 TRILLION
FROM CHASE/TO ENRON FANNY IN FREDDY,700.000 AMERICANS COMING HOME
WITH PERMANENT DISABILITY, TO THE RIGHT WING TAX CUTS FOR THE TOP 400
PEOPLE, AND THE BANKS!ALL NEARLY IN ONE, WITH TRAVELERS INS, MERGED WITH
CITI CORP, BANK, CREATING CITIGROUP.
AND NOW PROPOSED, RAIDING OF PENION FUNDS 30 TO 40% TO PAY FOR THE TAX BREAKS
TO THE WEALTHIEST, DESCRIBED BY WARREN buffet, LIKE ONE MAN WORKING A YR.
AT 80.000, AND ONE OF THE TOP, AT 80.000 A WEEK, ALL I CAN THINK! IS JUST WAIT
AND SEE WHAT HAPPENS, AND A MOTHER F*** ARGUE ABOUT MIN WAGE.
DONT FRET, BECAUSE IF YOUR STILL IN THE MIDDLE CLASS! WHEN THERE DONE SCREWING
THE BOTTOM, THAT WILL BE ABOUT THE TIME THE MIDDLE GET THERE,
THEN IT WILL BE REAL CLEAR WHEN DADS WORKING ONE AT MCDONALD'S, ONE AT HARDIE'S, AND MOMS WORKIN HER TWO.THAT THE ROAD WARRIOR LOOK AROUND
HOME WONT BE A MOVIE, IT WILL BE A NIGHTMARE. -
The lack of a left-wing movement today as opposed to the 30s can explained by the influence of the 1%? Absurd explanation, the 1% was there and totally influent in the 30s as well. Amazing display of ignorance by Temin.
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I would not call Japan business culture really that cooperative, more coercive . They have a beautiful culture but their business and salary man culture is absolutely disgusting. Watching bright college grads giving up all dreams and going off into the bowels of some company somewhere is horrid and I rather hate watching it. Work should never be someones entirely life if they don't want it to be.
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thanks great video!
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I hope Ebola breaks out in Harvard and MIT.
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Andrew Jackson, "I killed the (central) bank!"
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What, start a World War? That is the Keynesian theory of the post World War.
Words don't begin to describe how much I hate you. -
Good discussion. I agree that economics is a matter of ideology and choice; and there are many ways we can agree to do business and manage our national economies and global systems.
I would say the greatest problem and challenge we face today is the utterly out of control and criminalized financial sector which functions like a vampiric ghoul engulfing and (in monetary terms) dwarfing the real economy, and sucking it dry.
The real economy in which we all live has become an engine producing a series of performance indicators used as the dice rolls and spinning wheels of the financial casino. That this high stakes leveraged gambling on the real economy in which we all toil and live is regarded as legitimate business is irrational and inhumane.
(especially when we have to pay the losses of the gamblers)
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