Commentary

By Cheree Cleghorn, Editor

We post economic stories from time to time because the economy, health and health care intertwine. This is one of the best columns I have seen so far on the current situation.

This writer who understands that we have serious puzzles for which we must find answers but one who also understands we can talk ourselves into even more trouble than we have.

This writer’s commentary in full is not arguing that a discussion of the last depression is not relevant to today’s dilemmas.

He is saying there is a point at which talk becomes a self-fulfilling prophecy.

We live in a time when the old saying still applies: “There never is a bear market for a great idea.” Believe me, in some garages or attics in this country, entrepreneurs are working on their ideas. Microsoft came out of a garage, admittedly one attached to a very successful family’s home, but a garage still.

We live in a time when the capital required to start an Internet-related business, is astonishingly low. Granted, one has to have the idea but one does not need a factory.

We live in a time when the nature of work itself is changing. Smart is going to be in again. Science will be in again.

We live in a time when the genuine hardships of so many people must be addressed. When we do that right, the nation will be stronger for it.

New York Times

….”This Depression narrative, however, is not merely a story about the past: It has started to inform our current expectations.

“According to the Reuters-University of Michigan Survey of Consumers earlier this month, nearly two-thirds of consumers expected that the present downturn would last for five more years. President Obama, in his first press conference, evoked the Depression in warning of a “negative spiral” that “becomes difficult for us to get out of” and suggested the possibility of a “lost decade,” as in Japan in the 1990s.

“He said Congress needed to pass an economic stimulus package — as it ultimately did — to prevent this calamity.

“The attention paid to the Depression story may seem a logical consequence of our economic situation. But the retelling, in fact, is a cause of the current situation — because the Great Depression serves as a model for our expectations, damping what John Maynard Keynes called our “animal spirits,” reducing consumers’ willingness to spend and businesses’ willingness to hire and expand. The Depression narrative could easily end up as a self-fulfilling prophecy. (Emphasis added)

…”To understand the story’s significance in driving our thinking, it is important to recognize that the Great Depression itself was partly driven by the retelling of earlier depression stories. In the 1930s, there was incessant talk about the depressions of the 1870s and 1890s; each of those downturns lasted for the better part of a decade. Christina Romer, now the chairwoman of President Obama’s Council of Economic Advisers, has shown that the unemployment rate stayed above 10 percent for each of the five years from 1894 to 1898.”

Source:  New York Times, February 21, 2009