Must-Read: Jason Furman: It Could Have Happened Here: The Policy Response That Helped Prevent a Second Great Depression

Must-Read: I used to think that Jason had this right. I am now worried he doesn’t. Barry Eichengreen keeps arguing that the memory of the lessons of the Great Depression was strong enough to halt the crash, but not strong enough to get policies adopted to spur the recovery. Thus, Barry argues, it may well be that–somewhat paradoxically–the fact that a second Great Depression was avoided in the short run may well mean that the longer-run consequence will be that 2007-9 will cast a larger and darker economic shadow on the future of the global economy than was the economic shadow cast by 1929-33.

Jason Furman: It Could Have Happened Here: The Policy Response That Helped Prevent a Second Great Depression: “The achievement of avoiding a second depression is not one to be minimized…

…The similarities between macroeconomic variables during the onset was in many respects worse than in 1929 and 1930, but the policy response and the resulting outcomes could not have been more different. As difficult as it was losing hundreds of thousands of jobs per month, the 20 percent-plus unemployment rates of the 1930s should not be forgotten. As United States–and global–economic policy shifts its focus from crisis response to continued structural reform, it will be important to learn from what has worked and what has not as we continue to encourage more, shared growth in the twenty-first century.