The problem from the current world wide economic slowdown might be that there are no lessons to be learned from it.
Human beings will from time to time make wrong decisions. That cannot be prevented. And when the wrong decisions appear to be both correct at the time, and profitable, avoidence is that much more difficult. And, even when it appears that things are heading to an inevitable eventual decline, it must be remembered that no one likes a Cassandra, and few people want to be one.
And, to make things worse, of course, the touted boon of globalization becomes a curse, as a problem anywhere has repercussions everywhere.
Should there have been more oversight? Perhaps, although the overseers could have been wrong as well. Is capitalism the problem? Perhaps, but socialistic controls certainly have never proven themselves better (or even equal) to a reliance on a regulated free market.
To a great extent, our problem is a banking (or lending, or credit availability) problem, to be sure. Banks are short on assets, have enormous liquidity requirements made more complex by recent accouting practice changes, have been troubled loans outstanding (and perhaps even more which are potentially troubled), and don’t know what to do with the money they have. They are being told that they have to make funds available; they are being told that the problems exist because they in the past made funds too available. They simply don’t know what to do, especially when a credit analysis of a borrower has to be based on future expectation which mean future macro-expectations as much as expectations of the borrowing entity itself.
Not being an economist, I have to rely on instinct. And instinct tells me that pouring money into lending institutions which have these problems and uncertainty is either unwise or insufficient. I think that money needs to be directed in two directions.
First, and everyone says this, jobs must be created. And I think they should be created directly at this point, with great emphasis on government contracting at all levels, for all of those infrastructure, research, military and other needs that we have. Only if people have money will the economy begin to correct itself, and only if people have jobs will they have money.
Second, I think that economc efforts have to be made to help struggling families keep afloat. To help with mortgage payments, and other forms of economic support. This is the other side of the same coin. Until jobs are created, people need money to keep them going.
The devil is in the details, of course. And the devil in the details is normally what derails progress considering the general inefficiency of the government’s decision making. This is one of the Obama administration’s biggest challenges and if it cannot be surmounted, with the Democrats controlling both houses of Congress fairly comfortably, the administration will fail. But this will not be easy, for reasons having to do with personality and ambition as much as ideology or policy preference.
And what do we want to be when we come out of this? Do we want the cream of our young intellectual crop deciding that Wall Street is the place to be, and making millions of dollars while still in their twenties? Do we want so much of the country to be dependent on an automobile business, when other forms of transportation may be just around the corner? Or is this like dependency on the slave trade, or on tobacco, both of which were economically crucial at times? Do we want to continue to import our toys and do-dads from China? Do we want to foster off-shore growth at the expense of jobs and federal revenues? How much will be willing to do to enable more of our lower classes to become middle class? And of course, how are we going to handle health care, and social security and all of that?
Do the econometric models exist to plot this out? To show what needs to happen for recovery to be most likely? To show what must happen if there are unanticipated bumps in the road? Perhaps, those with the capacity to do so, are putting these together in a way that will be useful. It seems to me that we need complex and flexible modeling to enable the policy makes to see what needs to be done, and gives them the flexibility to adjust when things go wrong.