‘The Return of Depression Economics and the Crisis of 2008’ by Paul Krugman book review
Paul Krugman is a well-decorated American economist and professor of economics at Princeton University. He is a leading liberal voice in American policy debate and has been labelled one of the most influential academic thinkers in America. Krugman is the recipient of the 2008 Nobel Prize in Economics. He is the author of a twice-weekly column for the op-ed page in the New York Times and has been named columnist of the year by the Editor and Publisher magazine. Krugman is well-known for his outspoken criticism of the Bush Administration.
This book was written in light of the 2008 financial crisis (The 2008 book is an updated version of his 1999 work), The Return of Depression Economics and draws parallels between the 2008 financial crisis and the Great Depression and essentially, Krugman proves - through countless examples - how the demand side (government intervention) has rescued the supply side (banking and industry) over the last century. Yet the uniformed right wing either deny the facts, don't know them or are 'ideologically' opposed to them. This book originally focused on the Latin American and Asian banking crises but has been expanded to deal with the onset of the great 2007-8 disaster we are still living with.
Why Krugman wrote this book seems to be made very clear – he believes that the reasons for why the financial crisis occurred and the lessons to be learnt should be understood by everyone, regardless of their previous economic understanding. He therefore wrote the book in a way that it could be understood with ease by using many extended metaphors to help simplify the complex models for the readers.
In the first chapter, Krugman tries to make a point that the world believed that depression economics was over and that the business cycle had been tamed but in fact both of those statements, as shown in Japan's liquidity trap and Asian crisis. Thus, he says that these subject needs further study and more resources should be invested into it.
Krugman then goes onto to detail how history repeats itself – giving particular focus to the
Tequila Crisis in the 1970’s where the ‘stable and sophisticated Mexican government entered a feverish boom’ which led to Mexico’s economy growing too quickly and then the government running out of money so they had to go to Washington D.C to explain why they can no longer honour their debts. In addition to this, Krugman also explains how lessons failed to be learnt in the...