John Rapley is a political economist at the University of Cambridge and the managing director of Seaford Macro.
For Joseph Schumpeter, a scholar of Austrian economics in the early 20th century, it was failure, and in particular business failure, that was essential to economic dynamism. He was the one who’d coined the phenomenon “creative destruction.” Market crashes killed off inefficient businesses and freed resources – their clients, capital and workers – to go toward the more promising firms.
If the predicted recession does come this year, maybe politicians and central bankers should simply step aside and let the market do its work.
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When regulators & politicians, to avoid being blamed, blithely ignored any benefits a hard landing could offer and kicked the 2008 crisis can very hard down the road, they set up our children and grandchildren to something much worse.
There is no doubt that well intentioned government intervention in the economy has produced massive unintended consequences (2008 GFC, 2023 ‘sticky’ inflation). At some point government’s ability to ‘avoid the pain’ will be gone.