This is an excellent interview with Tom Ferguson, political science professor at the University of Massachusetts Boston, worth the trouble to post for the witty but grim headline, “The Invisible Hand Is Just Waving Goodbye.”
What does that headline mean? In the present circumstance, it means that so long as the deficit hawks prevail, we are likely to be stuck in a semi-permanent high-unemployment cul-de-sac (“unemployment equilibrium,” Ferguson calls it).
He says that we have a “super-cyclical” crisis, a cyclical crisis with a financial sector (banking) crisis superimposed on top of it.
Speaking of the looming bankruptcy of many cities and states, he says that so long as “national income” is too low, “there’s nothing they can do.”
“Without a national policy to get back to full employment pretty fast … they’re caught between a rock and a hard place.”
Ferguson lays out a compelling — I’m tempted to say “no brainer” — case for the classical Keynesian remedy for what ails us, a stimulus massively greater than any we have had so far.
“There is just one panacea for all the woes of the economy … full employment.” At full employment, all the other problems go away.
Although claiming reluctance to “get directly into partisan politics,” he says we should “ask the Democrats why didn’t they act like Democrats and do something to rescue ordinary people … why did they just rescue the banks?”
“Who would ask a Republican,” he says, laughing a robust guffaw for the only time in the interview, “why they rescued the banks and not the ordinary population?”