Day By Day

Wednesday, August 20, 2008

How to Convert an Economic Downturn into a Depression

I recently finished reading Amity Shlae's wonderful history of the Great Depression, titled "The Forgotten Man". I recommend it highly [if you wish to purchase a copy of this book, click on one of the Amazon links at the top of this page]. Today she had an opinion piece in the Washington Post in which she notes that many of the measures being advocated by today's politicians replicate the mistakes that turned a market crash and economic downturn into the Great Depression. They include:
Passing protectionist legislation that restricts trade.
Blaming and prosecuting Wall Street.
Raising Taxes during an economic downturn.
Assuming that bigger government will stimulate growth.
Mandating inconsistent economic policies.
She's absolutely right. The historical record is solid regarding each of these points -- they are economically counter-productive, although politically popular.

Read her article here and buy the book -- it's worth a read.