It always amazes me that in defence of their failed economic policies so many governments in and out of the Caribbean turn to the notion that the 2008/2009 global recession has been the worst economic and financial crisis witnessed since the Great Depression.
I will leave that discussion for another occasion, but I believe it can be quite educational to address the issue of the Great Depression and what it may or may not mean for approaches to economic management in this era.
Let me quote from Great Myths Of The Great Depression, written by Lawrence W. Reed:
“The terror of the Great Crash has been the failure to explain it,”
“People were left with the feeling that massive economic contractions could occur at any moment, without warning, without cause.
“That fear has been exploited ever since as the major justification for virtually unlimited federal intervention in economic affairs.”
“Old myths never die; they just keep showing up in college economics and political science textbooks. With only an occasional exception, it is there you will find what may be the 20th century’s greatest myth: capitalism and the free market economy were responsible for the Great Depression, and only government intervention brought about America’s economic recovery.”
The author continues: “The apparent lesson to be drawn is that capitalism cannot be trusted; government needs to take an active role in the economy to save us from inevitable decline.
“But those who propagate this version of history might just as well top off their remarks by saying: “And Goldilocks found her way out of the forest, Dorothy made it from Oz back to Kansas, and Little Red Riding Hood won the New York State Lottery.”
“The popular account of the depression as outlined above belongs in a book of fairy tales and not in a serious discussion of economic history.”
What we have here is a classic case of who do you believe, isn’t that so? How, as an individual, trained or not in economics, do you approach such a huge puzzle on a matter as complex and decisively important as the Great Depression and its implications? The simple answer is research with an open and critical mind!
You see, some who record economic history will be unbiased, others will be extremely biased, yet still there are those who will allow the facts to dictate their positions. The truth is that when reading accounts of the Great Depression it can be very difficult to determine the modus operandi of the writer(s). Hence the need to be critical in your assessment of everything you read and the importance of gathering as much data as possible to aid your analysis and inferences.
But as individuals who live in Barbados and other small, open and highly vulnerable economies in the Caribbean the issue of whether capitalism and the free market or government through direct and indirect interventions can effectively determine the direction and pace of economic recovery will forever remain a moot issue. What an economic teaser!
Clearly, for us in the Caribbean, such an ideological question ought not to be the centrepiece of our approaches to economic planning and management.
Instead, the strategy we adopt should be based on a simple criterion: Let markets do what markets can handle better and allow governments to do the things governments are effective at doing! Are you with me?
Otherwise, we would be left with no alternative but to take comfort in continuing to point our fingers at the 2008/2009 global recession as the worst crisis since the Great Depression and hence as the main culprit for our present and possibly future economic woes. And that scenario has “depression” written all over it.
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