The Great Recession from a different angle

January 24th, 2012 by Rick Drain

Joseph E. Stiglitz, Nobel Laureate and Columbia University economics professor, wrote a thought-provoking article for Vanity Fair magazine. He looks at our recent recession and ongoing recovery from a different angle:

“The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to ‘where it was’ does nothing to address the underlying problems.”

“The good news (in a sense) is that the United States has under-invested in infrastructure, technology, and education for decades, so the return on additional investment is high, while the cost of capital is at an unprecedented low. If we borrow today to finance high-return investments, our debt-to-G.D.P. ratio—the usual measure of debt sustainability—will be markedly improved.”

Click here to see the whole article: The Book of Jobs