System of a Down
Publisher: International Socialism Journal
Date Written: 05/04/2017
Year Published: 2017
Resource Type: Article
Cx Number: CX21113
Book review of Michael Roberts 'The Long Depression'.
Roberts draws a distinction between ordinary recessions and outright depressions. A recession is part of the regular "business cycle" of boom and bust -- a dip in growth followed by a rapid recovery, a V-shape on the graph. A depression is more like a square root sign, taking a decade or more to return to the pre-crisis trend. The 2008-9 recession lasted 18 months. The depression drags on after eight years. The biggest economies have lost more output relative to the pre-crisis trend during the "recovery" than during the recession and the United States Congressional Budget Office believes growth will never return to trend, making a "permanent recession".
Roberts shows how a variety of mainstream approaches fail to explain this. Alan Greenspan, then chair of the US Federal Reserve, responded to the crash with "shocked disbelief". Financial analyst Nassim Taleb called it a "Black Swan"--not impossible, but not predictable if you've only ever seen white swans. Nobel laureate George Akerlof raised the animal stakes. Akerlof, co-author of a book arguing that the crisis was due to unpredictable movements in "animal spirits", said: "It's as if a cat has climbed a huge tree The cat, of course, is this huge crisis. And everybody at the conference has been commenting about what we should do about this stupid cat and how do we get it down." Previous depressions fare little better. Greenspan's successor Ben Bernanke said explaining the 1930s crisis was the "holy grail".