Ideologies
Posted by Shane on March 15, 2009
There is no greater complaint about economics among laymen than the sheer amount of disagreements between the so-called leaders in the field, that is assuming that said laymen do not first consider economics to be too boring and esoteric. Economists are always split between ideological lines: Should the government central plan the economy, or should markets be left to reign? Should central banks target economic stability through monetary policies (inflation and interest rate controls) or through fiscal policies (stimulating aggregate demand)? Are people rational creatures, or can they benefit from a nudge?
The current credit crisis has laid wreckage to numerous financial institutions and destroyed the value of many others. Yet in trying to devise solutions to the crisis, economists are still split across ideological lines and politicians all too blindly follow along these divides. With the release of the preliminary GDP for 4Q 2008 showing that GDP had contracted during that quarter at a rate of 6.2%, the Obama administration is quick on its heels to counter the recession. Conforming to the Democratic Party’s ideologies, the administration is utilizing the Keynesian approach to resolve the economic slowdown: stimulate aggregate demand and all else will follow through.
The road ahead for the administration is quite an arduous one. The administration needs to stimulate confidence in the stock markets to allow capital to flow back once again. GDP needs to grow in order to allow unemployment to reverse its current trends. After solving these issues, the administration can look forward to also attempting to resolve other issues in the financial, healthcare and energy sectors. The quandary is that there is no consensus on the solutions required to resolve these issues and no matter what approach the administration embarks, there will always be opponents. The test of this administration will be how they stand up and act (or react) amidst the onslaught of criticism that is sure to follow. Now, if only the administration can vet a little faster so that Geithner can complete his staff and begin working on getting out of this mess.
Daris said
Can we just make the rich pay for everything to get the nation back on its feet?
Shane said
Only if they want to. Someone needs to make some sacrifice for the benefit of mankind…
Richy Rich said
I think the rich have done enough thank you very much. Can we squarely place blame where blame is due. The government had a think hand in creating this financial mess. Don’t get me wrong people on Wall Street royally screwed mainstreet while it was blindly shoveling its money into the incinerator that is derivatives and housing. However, the government’s policy of low lending gave Wall Street the rope with which it hung itself. Now deficit spending and bailouts are merely giving us a bandaid for cancer. The problems are still there and we all need to suffer before it gets better, our entire economy needs a painfully, but healthy readjustment. We are prolonging the inevitable and its going to be way worse when this house of cards blows apart.