Saturday, November 12, 2011

History repeats itself

As Krugman notes, History repeats itself, the first time as tragedy, the second time as tragedy.

Harry Dexter White in 1935:

There were, in meeting the crisis of the 1930s, two positions.

(a) Let the Government spend the minimum necessary to keep men alive and to prevent social disturbance; or
(b) Let the Government spend on such a large scale as to provide a positive powerful stimulus to recovery.

This second alternative is often formally embraced by those who in practice support the first position. That is, the actual scale of expenditures that they propose, while sufficient to bring about a serious derangement of the budget, is not sufficient to exert an adequate stimulus to recovery. In consequence, depression conditions tend to be frozen over a considerable period.

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