Fire! Fire! But where?

So we have entered the age of crisis and that means confusing times. As I have written before, stealing happily from Emanuel and Machiavelli before him, crises are destabilizing and therefore create opportunities for big debates and dramatic changes not normally possible.

A few decades ago, Mancur Olson, the American economist and social scientist, wrote an influential book, several in fact, on how crises challenge the vested interests inevitable in any prospering society. Past success becomes the enemy of the future because those interests who benefit most from a country’s prosperity tend to accumulate influence. They also almost inevitably resist change to the order that has so benefited them, resisting the future in favour of the past. Without crises, says Olson, successful societies may drift into irrelevancy. But that also means that deciding whether there is a crisis and how best to define it is a matter of high politics.

We have no shortage of crises to respond to right now but the big question is which are real and which are the most important to our future. That brings me to the title of this post, again happily stolen, more or less, but this time from Paul Krugman. Here, Krugman warns U.S. policy makers against listening to those who are portraying deficit, debt and inflation as the real crisis. They are wrong, he says; the job of recovery is not yet done. We are still dealing with the recession crisis courtesy of Wall Street and should not risk slipping back.

Others emphasize that the real crisis is whither the economy after the recession. David Leonhardt, in an extraordinary essay, sets out the problem as he sees it for the US, with significant implications for Canada. What are the foundations for growth and will they sustain us for the future? In the essay, he makes a powerful case for government investment that goes beyond stimulus and looks to the future, in education and infrastructure in particular. Anybody interested in policy would benefit from a read of this wide-ranging piece that also has a lot to say about health care and climate change.

And of course, the oil-spill crisis brings to the fore fundamental questions about carbon dependency, sustainability and our preparedness for short term pain for long term gain.

It’s not as though we lack important issues to debate and we have all the crises we need to lend them some urgency.

Comments
2 Responses to “Fire! Fire! But where?”
  1. joeblow says:

    Today’s approach seems to be the worst in both of the worlds that Krugman and Leonhardt describe. Instead of recovery, we focus on slashing deficits; instead of long-term investments in education, etc., we focus on shovel-ready stimulus funding. If “deficit hysteria” comes to undermine recovery, just as it did in 1930s, we might find ourselves in need of further stimulus spending. If so, shouldn’t we be preparing to invest that money strategically to lay the basis for real growth in productivity?

  2. Himelfarb says:

    exactly

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