Krugman: Spend Now, Save Later

[Final-Fan]

mrstickball said:

[...]

Ultimately, we see government doing more harm to businesses during recessions, than doing a lot of good to help them. An example would be the dust bowl during the great depression - a drought that decimated millions of acres of land, killed many, and destroyed many businesses and jobs. Did you know the sole reason it occurred was due to over-farming? Did you know the overfarming was government-mandated, as a means to stimulate the economy?

We've had these debates for a long time at VGC. Ultimately, through all the research I've done, the best thing for governments to do is to usually stay out of matters, and let the bad businesses fail. Obviously, the government can help via regulatory reforms, making better climates for businesses (ala Reagan in the 80's). Unfortunately, many times, we don't want to admit that doing nothing may be the best practice. Herbert Hoover was a fantastic man - a spectacle to behold in terms of moral virtue. Yet despite that, his best intentions helped spur on the great depression... Much in the same way, we can see people like George Bush and Barak Obama pumping trillions into the economy, which really doesn't fix the problems - it just patches them up.

I think there has been a miscommunication, and perhaps it is my fault for not being sufficiently clear. 

When I say the government is the only one that can intervene in the private markets, that does not actually contradict your position that it SHOULD NOT intervene.  Given the choice between "gov't do something" and "gov't do nothing" about it beyond interest rate manipulation, you would have them choose the latter.  Fine. 

But I believe that your comment about the Dust Bowl is completely incorrect.  The seeds of destruction in that case were sown many years before the crash, and in fact part of Roosevelt's famous first 100 days were focused on repairing the ecological damage.  1929-1933 is not enough time for those farmers to seriously ass-rape the topsoil the way they did. 

Or did you mean they were encouraged to abuse the land before then?  Wikipedia indicates, and this agrees with my dim recollection of research years ago for school, that vast areas had been overfarmed and/or poorly farmed for decades and the Dust Bowl was a more or less inevitable result; the problem was already happening but was turned into a sudden catastrophe because of a severe drought.  If that is what you meant I would ask you to show that the government was the primary factor in this sort of behavior. 

The result of all this was improved (ecologically sound, more sustainable) farming techniques and land usage tactics (not sure if there is better terminology) which was in large part mandated by the government, and at the LEAST the government played a key role in educating the farmers as to these methods.  As opposed to letting them figure it out on their own a la laissez faire.