Afternoon Must-Read: Martin Wolf: Radical Cures for Unusual Economic Ills

Martin Wolf:
Radical cures for unusual economic ills:
“Crises are cardiac arrests of the financial system…

…The time to worry about a patient’s lifestyle is not during a heart attack. The need is to keep them alive…. In my book, The Shifts and the Shocks, I suggest that a number of shifts in the world economy created chronically weak demand in the absence of credit booms… excess savings in emerging economies… shifts in income distribution, ageing and a secular decline in the propensity to invest in high-income countries… globalisation, technological innovation, and the growing role of the financial sector. It is not enough to clean up…. Policy makers also have to eliminate the dependence of demand on unsustainable credit. Without that, even a radical clean-up will not deliver buoyant demand…. The crisis left a grim legacy. The eurozone has done a worse job of dealing with this than, say, the US. But the origins of the crisis are to be found in longer-term structural weaknesses. Policy has to address these failings, too, if exit from the crisis is not to be the beginning of a journey into the next one. The answers are likely to be unorthodox. But so, too, is today’s economic condition. Rare ailments need unusual treatments. So look for them.