End This Depression Now!

End This Depression Now!

Author	Paul Krugman
Language	English
Subject	Great Recession
Genre	Nonfiction
Publisher	W. W. Norton & Company
Publication date	2012
Publication place	United States
Media type	Print (Hardcover), audiobook
Pages	272
ISBN	[[Special:BookSources/ISBN+0393088774%3Cbr%3EISBN+978-0393088779 |ISBN 0393088774 ISBN 978-0393088779]]

End This Depression Now! is a non-fiction book by American economist and winner of the Nobel Prize in economics Paul Krugman. He writes a twice-weekly op-ed column for The New York Times and a blog named for his 2007 book The Conscience of a Liberal. He teaches economics at Princeton University. His books include The Accidental Theorist, The Conscience of a Liberal, Fuzzy Math, The Great Unraveling, Peddling Prosperity, and two editions of The Return of Depression Economics, both national bestsellers.

The book is intended for a general audience and was published by W. W. Norton & Company in April 2012. Krugman has presented his book at the London School of Economics, on fora.tv, and elsewhere.

Premises of the book

The book is viewed as delivering a call for stimulative expansionary policy and an end to austerity. It points out that existing historical economic data demonstrate: fiscal cuts and austerity measures just deprive the economy of precious funds that can circulate and add to a poor economy. If there is large unemployment, there can not be sufficient consumption. Under poor consumption people are unable to spend and markets cannot thrive. Krugman disputes that although it is necessary to cut debt, it is the worst moment to do so at the time when an economy has just suffered the severe financial shocks. It must be done when an economy is full-employed and the private sector can endure the burden of decreased government spending and austerity. Failure to stimulate the economy by public or private sectors will just unnecessarily lengthen the current economic depression and make it worse.

Synopsis

Since the housing and financial crash of 2008, America’s economy has been stuck deep in the doldrums. Indeed, GDP has remained well beneath pre-2008 levels, and employment levels have failed to recover. In an effort to resuscitate the economy, the American government tried first to jump-start it through stimulus spending, and has now replaced this approach with greater austerity. Nothing seems to be working. For economist Paul Krugman, though, the answer is clear: the problem is that the original stimulus effort was too small, and, since that time, the government is moving squarely in the wrong direction. Indeed, Krugman argues that America’s current situation bares a striking resemblance to the stagnation of the Great Depression, and that history has taught us what to do in such situations: the government must take an aggressive approach to stimulate the economy into recovery. This is the argument that Krugman makes in his book ‘End This Depression Now!’

Now, Krugman is not a proponent of big government spending under normal conditions. Indeed, even in a recession, Krugman’s preferred approach is to drop interest rates in order to spur consumer spending. The problem now is that interest rates are already at zero, and this has not been enough to get consumer spending off the ground, thus leaving the economy in what is called a ‘liquidity trap’. For Krugman, the liquidity trap is actually quite common in economic downturns that follow financial crashes (as is the case with the current one, and as was the case with the Great Depression), and is why such slumps tend to be deep and prolonged.

According to Krugman, the best and surest way to save the economy from a liquidity trap is for the government to step in and undertake the spending that consumers won’t. That is, the government must stimulate the economy back into action, until consumers can get back on their feet enough to take over for themselves. For Krugman, this is precisely what happened in America during WWII, when the government’s military spending served to stimulate the economy and save it from the grips of the Great Depression.

Now, Krugman’s opponents will point out that the American government has already tried the stimulus approach during this downturn, and that this strategy did not work, thus showing that it cannot be relied upon. What’s more, these same opponents argue that the government’s debt is already enormous, and indeed dangerously high, and that further government spending at this point may well render the debt completely unmanageable, if not force the government into insolvency (which is indeed a threat that is currently being faced by several countries in the European Union). Finally, Krugman’s detractors maintain that pumping more money into the economy at this time only threatens to drive up inflation to dangerous levels, perhaps even triggering a hyperinflationary spiral.

Krugman, though, claims that he has answers to all of these objections. In the first place, as noted above, the author maintains that the failure of the government’s first stimulus effort did not prove that this approach is ineffective, but that it simply wasn’t large enough to do the trick. Second, Krugman argues that though government debt does pose a concern, America’s debt is actually not that dangerous by historical standards. What’s more, since America has its own currency (unlike the countries of the European Union), it is able to print money to turn over its debt, thus preventing the possibility of bankruptcy. Finally, with regards to inflation, Krugman contends that inflation simply cannot get off the ground in a depressed economy (as the current situation would attest to), and that when it is triggered in an upturn the government can always reverse its policy, thus keeping it firmly in check.

External links

• Aitkenhead, Decca (June 3, 2012). "Paul Krugman: 'I'm sick of being Cassandra. I'd like to win for once'". The Guardian.
• Kim, Joshua (June 3, 2012). "Keynes, Krugman, and "End This Depression Now"". Inside Higher Ed.
• "End This Depression on Democracy Now!". The New York Times. May 17, 2012.