Bailouts and Stimulus Packages and Nationalizations, Oh My!

The American economy’s got a fever, and the only cure is to put a lid on government intervention.

That’s the lesson economics professors Harold L. Cole and Lee E. Ohanian gleaned from their 2004 study of the Great Depression that suggested FDR’s New Deal policies actually stifled economic recovery for seven years and prolonged the economic crisis into a 15 year Depression. (Hat tip: Jonah Goldberg.)

“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”

…

“The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

Billions of dollars were spent on economic stimulus checks, and more than a trillion is expected to be channeled toward Paulson’s bailout extravaganza. I’m no economist, but I’m pretty sure those expenditures qualify as significant government intervention and a lack of trust in capitalism.

And now, we’re looking at nationalizing banks and Pelosi has another ill-conceived stimulus package on the way? Doom and gloom may be too optimistic.

Published by Jenn Q. Public on October 9, 2008 at 7:32 am

Filed Under Economy

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