The Urge to Purge

[lsanderson]

By Paul Krugman

When the Great Depression struck, many influential people argued that the government shouldn’t even try to limit the damage. According to Herbert Hoover, Andrew Mellon, his Treasury secretary, urged him to “Liquidate labor, liquidate stocks, liquidate the farmers. ... It will purge the rottenness out of the system.” Don’t try to hasten recovery, warned the famous economist Joseph Schumpeter, because “artificial stimulus leaves part of the work of depressions undone.”

Like many economists, I used to quote these past luminaries with a certain smugness. After all, modern macroeconomics had shown how wrong they were, and we wouldn’t repeat the mistakes of the 1930s, would we?

How naïve we were. It turns out that the urge to purge — the urge to see depression as a necessary and somehow even desirable punishment for past sins, while inveighing against any attempt to mitigate suffering — is as strong as ever. Indeed, Mellonism is everywhere these days. Turn on CNBC or read an op-ed page, and the odds are that you won’t see someone arguing that the federal government and the Federal Reserve are doing too little to fight mass unemployment. Instead, you’re much more likely to encounter an alleged expert ranting about the evils of budget deficits and money creation, and denouncing Keynesian economics as the root of all evil. Moar

Comments

[galacticvoyeur.livejournal.com]

yep

I like the term "Mellonites". Mellon's old bank is a huge presence in Pittsburgh, where I grew up. There's the Mellon Bank Building, which was the original U.S. Steel Building, and Mellon Square, a huge underground parking garage (outside Minnesota, parking "ramps" are called parking "garages") built in the 1960s, the Mellon Institute, a huge stone edifice sitting between the Carnegie Mellon and Pitt campus's, and a ton of Mellon Bank branches all over the place.