The experience of watching a tragedy is said to engender feelings of awe and pity: awe at watching a person of greatness fall and pity at his or her suffering.
To watch a tragedy unfold is also to experience frustration. You see it happen before your eyes, elemental forces colliding, disaster occurring with seeming inevitability. Except it’s only inevitable because of the blindness, pride or other flaws of the tragic figure.
Watching the world economy at present is like watching the early stages of a tragedy. You want to shout at the stage: Stop, don’t do that, don’t you see? Just as we are aghast at the foolish decisions made by King Lear and our anticipation of the disasters they are likely to cause, we are aghast at the limited vision of world leaders and our anticipation of disasters yet to come.
Discussion of the world economy is awash in historic parallels — usually with the Great Depression or the Lost Decade, or decades, that have crippled Japan.
Economists and journalists who have explored the parallels are increasingly worried that we are repeating the mistakes of the Great Depression, not just in Washington, but in Europe as well. We recall that unemployment during the Depression reached as high as 25 or 30 percent, and that was before the safety net created by the New Deal was in place to break the fall of people descending into joblessness and poverty.
Things are not so bad now, though unemployment and underemployment mean that one in six Americans is living on the edge. The bread lines and Hoovervilles that form our collective memory of the Depression may not be so extreme, though food shelves are reporting record demand, and millions of Americans have lost their homes.
We think of the Depression as lasting a decade. Already our present collapse has lasted almost half a decade if you count from 2007 when the housing market started to collapse, and even longer if you consider the economic stagnation of the 2000s.
So we are in the midst of a prolonged and historic chapter of economic misery, and there is reason to fear that it will be made worse by the Hoover-like policies being pursued in the United States and abroad.
Economists say that when governments pursue a policy of economic contraction during a recession or depression, it is exactly the wrong medicine. But that is what the U.S. government has done. President Obama’s stimulus program of 2009 slowed the decline, but massive cuts to employment by state and local governments have more than offset the positive effects of the stimulus.
Economic contraction has been forced on the federal government by fear of deficits in Congress and popular disgust with the perceived axis of evil that includes Washington and Wall Street. In Europe, contractionary policy is being pushed by those in Germany, among other nations, who resent helping out the failing economies of Greece, Spain and Italy. Authors of austerity say that Greece must shrink its economy to pay for past sins. But when everyone is shrinking his economy, economic demand also shrinks and the economy will take everyone down with it, including Germany and the United States.
The Great Depression was worsened by a beggar thy neighbor policy of trade warfare. Enforced austerity is creating a new form of beggar thy neighbor.
It appears that Wall Street and Washington are both extremely worried about a possible new collapse in Europe. German Chancellor Angela Merkel, like Obama, is trapped between the need for economic stimulus and the resentments of those who wish to shrink government. The result is that neither has been able to push stimulus adequate to the job of pulling their economies out of the ditch.
The Great Depression became the worst of tragedies when economic collapse led to political upheaval and world war. Our present tragedy, frustrating and awful, can still be averted, we hope. But the paralysis in Washington, caused in large part by Republican tactics and ideological blindness, is creating conditions that are flirting with a disaster that will be terrible to watch.
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