Live

Watch CBSN Live

Has Big Government Saved the Economy?

When it comes to hard economic times, sales reps are defintely on the front line. So sales reps should breath a sigh of relief that the world economy hasn't slipped into another Great Depression. While we're definitely in a long recession, there are now enough positive economic indicators showing while things are bad, they won't be nearly as bad as many economists were predicting during the actual meltdown.

The Pulitizer-prize winning columnist and economist Paul Krugman recently pointed out:

A few months ago the possibility of falling into the abyss seemed all too real. The financial panic of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators - world trade, world industrial production, even stock prices - were falling as fast as or faster than they did in 1929-30. But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be ending after just one terrible year.
What saved us from a full replay of the Great Depression? The answer, according to Krugman, is "big government."

As Krugman describes it, at the beginning of the Great Crash of 1929, the federal government let the "invisible hand" of the market give the financial sector a well-deserved drubbing, causing the entire infrastructure to collapse. It then proceeded to slash spending, making the crisis worse and (ultimately) longer-lasting.

By contrast, after the Great Meltdown of 2008, the federal government bailed out the financial system, preventing a complete lock-up, and then expanded its spending, thereby keeping the infrastructure up and running, while putting more than a million people to work, with more to come. As a result, the blow was cushioned and a replay of the Great Depression averted.

Please note that Krugman isn't saying that things aren't difficult... only that the absolute worst has been averted.

What do you think?

View CBS News In
CBS News App Open
Chrome Safari Continue