The economy will not 'cure itself' through benign neglect and liquidationism, because it did not get this way by itself. It did not suffer an accident, or an act of God. This is an unfortunate application of the principle of human healing after an injury to the economy.
The market was warped and distorted for many, many years by the neo-liberal forces of crony capitalism. It does not have the natural forces and efficiency for self-organization, and certainly not for self-repair. It is a man-made thing, and requires intelligence and hard work.
To say that the economy can somehow heal itself now is nothing more than an extension of the efficient markets hypothesis. The market will repair itself and get back on the road to recovery if only we will leave it alone, get the government out of the way, and allow the natural goodness and efficiency of traders to flourish, while handing out some additional and unnecessary pain to the victims.
To suggest that by subjecting the economy to harsh austerity measures, but without changing the abuses that caused it to become distorted and unstable with a bloated and intrusive financial sector, and then crash in the first place, is merely to hasten the final collapse, and the tearing of the fabric of society, which some wish to see for their own dark purposes.
This is the failure of those who prescribe austerity, or stimulus, but without significant systemic reform. There are those who wish to bring the economy down, and to institute a command and control form of government.
The austerity without reform being promoted is what the Americans call 'a con.' Here is a decent description of it by my friend, Charles Hugh Smith in his essay, The Con of the Decade part II.
Are austerity and stimulus without reform equivalent? No. Austerity is designed to benefit those who have already benefited unjustly and sometimes immensely by the financial frauds. Stimulus can at least mitigate the suffering of those who are being squeezed by the economic dislocation.
However, and I wish to stress this, the core issue is and has been reform, eliminating the ongoing 'con' in the system that is merely serving to transfer wealth from the many to the few in the form of monopolies, fees, and soft taxes, starting with but not limited to the financial sector.
Corporatism is fascism. And the opportunity and impulse to reform has been co opted by the promotion of a stalking horse, a new Emmanuel Goldstein, into the presidency. Obama's tenure may be remembered as Bush' third term.
Judging from the inane and virulent emails that are circulating, most of which cannot survive a few minutes of common sense or the 'Snopes' test, the American people are being prepared for domination by a 'strong leader.'
Why do people forward such easily debunked rubbish? Why do so many older people get angry when the error, the blatant lie, is pointed out to them? Because they have set aside reason, and the burden of freedom, and taken the easier path to fear, blind hate, and serfdom. And in too many cases, it is working. I would again caution those promoting this campaign that madness has no master.
The banks must be restrained, the financial system reformed, and balance restored to the economy, before there can be any sustained recovery.
