As always current events are of little interest to me, unless the affect the really big picture. The current economic crisis does fall in that category.
It seems obvious to me that the people running things don’t have much idea what they are doing. They know what worked in the past, or what was thought to have worked in the past, but they are just guessing now.
Monetarism seems to be the big loser here. Monetary policy- raising interest rates on the threat of inflation, lowering them on the threat of recession- had a long and apparently successful run, from 1981 or so until around 2006. The idea that modulating interest rates will produce optimum long term results and prosperity seems a little too simple. Wealth and prosperity don’t come from the money supply, they come from accumulated capital.
Keynesian policies don’t seem to have worked as well as advertised, less now than before. In the 80’s Keynesianism lost some of its appeal, if only because in the 60’s the money spent was used to benefit minorities and the far left. But they will always be popular in a democracy so we are back to being all Keynesians pretty much. A significant portion of the populace is very upset by debt and spending but I doubt this political energy will every be put into actual policy.
In the middle part of the last decade the Fed seemed to lose their touch. Loose money is generally what’s popular and taking away the punch bowl is not easy. When things get away they really get away though, regardless of Bernanke’s claims.
Rich people can spend their money on what they want- gold-plated plumbing fixtures, Porsches, garish clothing, high end French restaurants- but only as long as the money lasts. The US has been rich for a long time and has seen fit to spend a lot of money on things that make many people feel better but do not actually make the nation wealthier.
Education is the best example. Most liberal arts degrees are useless, and yet millions are earned and granted every year. The idea that these degrees substitute for IQ tests that employers cannot legally give is a little weak; a college degree of any kind once indicated you were a person of at least a little refinement and I think that tradition continued for a generation or two after it really meant anything. As highly praised as higher education is in providing benefits to society it mainly provides the illusion to those attending and their parents that they will be members of the middle class.
K-12 education is a much worse situation. When not useless it is actually harmful. Little of value is taught. Special education has become an obsession, and a great deal of money is spent on students who have no chance of benefiting from it. Autism is the worst case; assigning one teacher and one aide to each autistic “student” is an incredible waste of money.
Real education is an elitist enterprise, an elitism of meritocracy which makes it all the more repulsive to both the “elite” and the hoi polloi. The idea that everybody can and should be educated is the compromise reached and as a result fewer are really educated than should be.
If public schools, and public subsidized private schools, simply eliminated much of their liberal arts programs, and kept only enough to provide teachers and professors of the subjects, the prospective college student would be faced with the choice of pursuing a degree in something productive and useful or not going to college at all. Most soft subject students don’t get much more than a piece of paper and worse waste a lot of their or their parents’ money or take on a huge debt load.
I don’t think American society as a whole is going to learn any lesson from this. Only individuals who want to see what works and doesn’t work will be able to benefit. People with real assets, without debt, and with valuable skills are likely to have the best opportunities in any economic environment. The same is true of nations, but nations are not people.