"The Economic Crisis"

   Isn't it interesting that no one will claim the "d" word ("depression") for what is happening? Most people think this is because so-called experts on the economy do not want to frighten an already alarmed consumer public. But another reason, it seems to me, is just as likely:  experts do not want to use the "d" word explicitly because that is an historical reference, and God forbid that we should use lessons of the past rather than economic theory or modeling as our primary guide. But, where now are the theories of Milton Friedman, and his many legionnaires of the "Chicago School"? Where is the theory of "rational expectations" that he and his ideological followers claimed were the iron law of economics. They have gone the way that all ideological solutions go in hard times and times of profound change -- into the garbage. Ideologies are usually the luxury of good, stable times, or are held by persons and groups remote from holding power. Hard times call for using historical experience (although only insofar as historical experience is relevant -- and that is the trick, of course) and for applying practical solutions and for being flexible.  Ideology generally allows none of this. (One of the few exceptions to this might be the French Revolution, when an ideology of "liberty, fraternity, and equality" were the slogans. But it should be noted that "liberty, fraternity, and equality" themselves only work as general guiding principles rather than firm ideological strictures, and these principles all required practicality and flexibility for implementation -- something French Revolutionary ideologues failed to appreciate, thereby ruining prospects for those principles to thrive for a very long time).

   Yet, history is exactly what has insinuated itself into the "economic crisis" discussion despite the fact that "theory" has been the mother and teacher of almost all economic "experts." Ben Bernanke referred to the problem of the need to open lines of credit early on in the crisis, and his reasons, he admitted, flowed from his historical knowledge of the 1930s depression. Now the big issues of "restoring confidence" and eliminating "fear" and "stimulating" the economy and developing infrastructure -- all derived from our knowledge of the Great Depression -- are the watchwords of the recovery. History is useful in this crisis for the big reasons -- to determine how people might behave in either a rational or irrational sense, or how failures to face crises (e.g., Japan in the 1990s) can make things worse. The reason fewer people do not appreciate the use of history in a crisis like this is that technical details of the Great Depression, for example, do not translate readily for our more global economy today.  But it is just in the details that history is of minor use. History may not repeat itself, but large conditions remain the same. The "South Sea Bubble" crisis of the early 18th century has much in common with the depressions of the 1880s, 1890s, 1907, and the Great Depression. Only those who arrogantly assume that the present is superior to the past can foolishly think otherwise.