The True Lessons of the Recession

The West Can’t Borrow and Spend Its Way to Recovery

Good article in Foreign Affairs by Raghuram G. Rajan. Here is a summary and link.

Most experts think the global recession was caused by a collapse in demand–and so, in good Keynesian fashion, they want governments to ramp up spending to compensate. But the West’s recent growth was dependent on borrowing. Going even further into debt now won’t help; instead, countries need to address the underlying flaws in their economies.

The way out of the crisis cannot be still more borrowing and spending.

The industrial countries should treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades.

Full article.




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