Tuesday, November 18, 2008

The Conservatives and the Great Depression

I'm currently making my way through The Great Crash by JK Galbraith (it's a good read and contains some very intersting historical paralells), I'm currently up to the section discussing what exactly turned the crash into a depression. One conclusion Galbraith makes is that the policy prescriptions pursued by both the Democrats and the Republicans were the wrong ones, balanced budgets, controlling inflation and economic stimulus primarily through monetary not fiscal policy.

On balanced budgets he stated that the idea of keeping a balanced budget was simply not suited to the complex problems the economy was encountering and was essentially applying a simple logic you might apply to a household nudget to a complex macroeconomic problem was a serious mistake.

On control of inflation he said that a desire to keep it in check was obsessing over memories of bad experiences from the past.

On monetary policy he said something along the lines of "Monetary policy is a thin reed with which to prop up the economy".

So, with that in mind it's good to see one party stand up for traditional solutions, blindly sticking to the same policies that followed the great market crash of 1929 and lead to the great depression. That party, is of course, David Cameron's Conservatives.

1 comment:

Hugo said...

When you finish, read "America's Great Depression" by Rothbard.