December 6, 1991
I lost my job, I'm out of money and I'm on food stamps. But Bush says I can help boost THE ECONOMY by buying a new car and a new house.
Summers cartoon caption Nov.1991
The answer to the question in the title is nobody. The economy, like any complex system, has a life of its own. It responds to certain events, but it is so complex that everything affects it and no single factor makes it work or fail.
The attitude of our government has been that if we say that everything is fine, then everything will be fine. Why not? Isn't that about all that the government can do? Up to the time that the economy collapsed completely during the great depression of the thirties, President Hoover persisted in saying that everything was going to be fine. It wasn't!
The government could spend money to prime the economy. The new highway construction program is a step in that direction. A major problem is that the interest on the national debt already costs almost as much as the defense budget. It is now 21% of the federal budget. Even if the government wanted to prime the pump, we have an administration that is committed to no government spending except for the military. Since there is no longer a military threat, even that cannot be justified. To prime the pump with non-military spending will probably require a change of administration. No matter which administration is in power, it seems totally incapable of dealing with a continuing increase in the national debt, with its burgeoning interest cost.
After the depression, people figured that the government would prime the pump during recessions. However, the government continued to spend in good times as well as bad. It is now a major part of the problem rather than part of a possible solution.
We have just seen the communist economies of Europe fail. In the thirties, capitalism failed. Since 1941, our economy seems to have been working. Will it continue to work? We'll know in the next 10 years. In the thirties, some people saw socialism as a possible solution. Now that we know that socialism doesn't work, the situation seems hopeless.
The one thing that has characterized governments in general has been an almost total lack of vision. If something works, it is allowed to continue until it breaks down. Then it is changed. If the change doesn't work, it is changed again. Our present economy is based on growth. It is considered bad if the economy is not expanding. It should be obvious that expansion cannot continue indefinitely. What then?
In the process, the ordinary folk pay the price and the aristocracy seems to go on and on. This being the kind of country that it is, we have an aristocracy that exists as a consequence of its wealth. In the old days, being an aristocrat allowed you to become wealthy. Now, being wealthy makes you an aristocrat. A TV or movie performer can now become wealthy almost overnight as a consequence of there being a high demand for his services. Thus, TV anchor persons, athletes, comedians and actors make super-big bucks. In short, you don't have to be born rich to get rich; although it does help.
As in the thirties, should the U.S. economy collapse, it would take the whole world with it. Some people who have come to believe that they can't survive unless they are raking in millions, will commit suicide --no great loss. Meanwhile, the rest of us will try to survive and most of us will manage to do so. Not many people lost their lives as a consequence of the great depression of the thirties, although many lost their jobs and had their faith in the system badly shaken.