• Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Is The Current Economic Crisis The Next Great Depression?

    John A. Miller: Government spending is necessary to spark economic growth, increase jobs and wages -   October 17, 2011
    Members don't see ads. If you are a member, and you're seeing this appeal, click here


    Share to Facebook Share to Twitter

    TRNN is giving us real understanding of the issues and a way around the corporate news spin. - heylair
    Log in and tell us why you support TRNN


    Arthur MacEwan is Professor Emeritus in the Department of Economics and Senior Fellow in the Center for Social Policy at the University of Massachusetts Boston. Educated at the University of Chicago and Harvard University, he has written extensively on international economic issues, economic development, and U.S. economic affairs. Among his books are Neo-Liberalism or Democracy? Economic Strategy, Markets, and Alternatives for the 21st Century, and Debt and Disorder: International Economic Instability and U.S. Imperial Decline. Professor MacEwan writes regularly for Dollars & Sense magazine.


    Is The Current Economic Crisis The Next Great Depression?PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. We're in the midst of what many people are calling the third great depression recession, depending how--guess how long this one lasts. There was 1873, there was the 1930s, and now there's now, I guess, 2008, and we're still in it. So what is it about these three periods that were so serious? And I guess in--specifically, what is it about the one we're in that makes people call it the next great recession? Now joining us to talk about the current great recession is John A. Miller. He's a professor of economics at Wheaton College in Massachusetts. He's also the coauthor of the book Economic Collapse, Economic Change: Getting to the Roots of the Crisis. Thanks for joining us, John.

    JOHN A. MILLER, PROF. ECONOMICS, AUTHOR: Oh, thanks. Thank you for having me on the show.

    JAY: So talk a little bit about why we're calling this not just a recession, not just another business cycle, but another great recession.

    MILLER: Well, this--by the usual standards of economic downturns since World War II, this is by far the most severe. If you look at and measure by an array of different measures, it stacks up that way, if you look at the amount of output that was lost, if you look at the number of jobs that were lost. If you look at what happened to the retail sector, which usually does very well in a downturn, it suffered. And even if you go back and compare it to the double-dip recession, which--and again we're talking about a double dip in the downturn of 1982--it's more severe. And if you look at the other severe downturn of the postwar period, 1975, it's more severe. But I think what really distinguishes this downturn, beyond its severity, from previous recessions since World War II is the fact that it's coupled with a financial crisis. The financial crisis that hit in the fall of 2008--the culmination of the collapse of the housing market and the kind of speculation and proliferation of deregulated financial instruments in the financial sector on Wall Street--really brought the economy to a near halt. If you can think of it as--it's as if the lubricant, the money that needs to be--flow through the economy for firms to hire people, for you to take money out of your ATM, for--to acquire credit for to buy a car, to get credit to send your children to college, even to continue to get credit card credit to sort of--which people rely on more and more to meet their needs, really came to a halt.

    JAY: Okay. But when you go into the roots of why this took place, I mean, isn't to a large extent that so much capital was tied up in finance and so much capital was tied up in gambling and such and non-productive investment? And if you go into the roots of that, how much does that have to do with the fact that, partly through normal, quote-unquote, downturns, but also just--even during supposed upturns, people's wages just weren't going up. There wasn't enough real demand in the economy.

    MILLER: Yeah. I think those two are directly related. What we saw was that average income, up to 2007, continued to go up. But what happened was more and more people and more and more families missed out on that increase in average income. It was because the people at the top were making out so well that they were pulling up the average. Sixty, eighty percent of working people, working families, saw their incomes stagnate. As a result, they had to turn to credit to meet their needs. It wasn't as if they were no longer part of a market economy. And to survive, they needed to borrow, and the borrowing was product of the stagnation of their income. And you found ready lenders. The Federal Reserve board continued to throw money into the economy. And at the same time what we saw was a kind of rise in housing prices that was wholly unprecedented by historical standards. Anyone that takes the time to look at what happened to average housing prices sees a pattern where you see an upturn in the '80s that looks like a lump, and then all of a sudden, in 1995, as money flowed from the Federal Reserve Board, as more and more people relied on credit, as money flowed in from abroad to finance the budget deficit of the United States, and [incompr.] importing more than we export, it just permeated the entire economy. And that money and that spending drove up housing prices at a rate that literally you haven't seen since--in the history of housing prices, going all the way back to 1890. People then used their house as an ATM. That added more borrowing and more spending to the economy. It pumped it up in a way that really provided little income growth, but led to large and unprecedented profits for the financial sector that were at about twice the level that they were before, compensation for the heads of the financial firms that were unprecedented. And, you know, back 30 years ago, 40 years ago, people in the financial sector on average got paid just about what other people got paid in different industries. And that throwing money sort of led to a process that was obviously unsustainable, a housing bubble, and when it burst, the drawing out and the pulling back was enormous.

    JAY: Now, that suggests that while more finance regulation will stop some of the extreme of this, it won't deal with the underlying issue of stagnant wages and, you know, growing inequality gap and all of that.

    MILLER: Yeah, that's true. And if you actually look at this pattern, what [incompr.] look at the pattern of inequality in the mid '70s, in which we were still reaping some of the benefits of the period right after World War II, as we escaped the crisis of the second great depression, the depression of the '30s, we saw inequality, and particularly the share of the richest 1 percent, decrease rather steadily; we saw a period of economic growth where the gains were spread rather widely. In fact, on a percentage basis, those in the lowest fifth of the income earners and the next fifth saw larger percentage gains in their income than those at the top. There was a period of a kind of compression of inequality. It didn't make inequality go away, but it moderated it. And it was also a period where we saw fewer bank crises, fewer banks going under, few--. It was a period where, really, the economy put together a record, by historical standards, of sustained economic growth that we haven't seen in any other period.

    JAY: So if the underlying issue seems to--at least one of the major issues is the issue of wages, and right now wages are going down--like, contract after contract, you're seeing concessions. The auto industry, you know, sort of ushered in by the Obama administration, went to this two-tier contract where new workers are getting half the wages. You're seeing this in places all over North America now. What kind of public policy could reverse this?

    MILLER: Spending, and spending on a much larger scale than the Obama administration is talking about now.

    JAY: Why would spending increase wages?

    MILLER: When you interview small businesses and you ask them, why aren't you hiring someone, what's the biggest problem that you're facing, name us three, and two of them are the ones that you might expect an advocate of deregulation in the free market to say, is, oh, there's overregulation, and that's affecting us, and they also talk about taxes--. But the largest single element, according to small businesses, that's holding them back is a lack of sales, as you know and as we just said, that households aren't in a position to do that kind of spending now. And banks, we didn't--we didn't--we bailed out both the banks and the bankers and got little control over the financial sector, so we don't have direct levers to be making banks lend money and finance investment in the way we would have seen in other recoveries. So that leaves us one sector to turn to, and that's the public sector. And if we could add massive--two times, three times the kind of stimulus that we saw earlier, massive spending, that would, I think, promote jobs and promote--by promoting jobs, we would get people income, and that income would flow through the economy and get it going again, and it would be the beginning of a wave of hiring that would tighten labor markets. Tighter labor markets, where there are more jobs to be had, increase the bargaining power of working people, who can then turn to their employer and say, no, no, no, no, no, I've really suffered in this downturn, we're in bad shape, you've got to pay us better. Oh, no? You don't want to do it? Well, I can get a job down the street. When there's no job down the street, it's awfully hard to go in and push for higher wages.

    JAY: Now, how long can that be sustained? I know you're talking for a much bigger stimulus, but the stimulus that the Obama administration did do, you know, when it ran out, states and municipalities started laying off again. And why wouldn't that happen again? I mean, at some point you would think you can't keep stimulating jobs in the public sector. So how does that then not just wane out at some point?

    MILLER: Well, I don't think you're stimulating just jobs in the public sector, but it's reliant on public spending and it's a bet. You're putting money into the economy in order to really spark economic growth, to really accelerate economic growth. You need to get a widespread process of economic growth going. And by doing that, you can actually increase people's incomes, you can increase the potential tax revenues of the government--because people have more income, you've got more money to tax. If corporations hire more people and produce more, at least on a volume basis, they'll make more profits. And if we had a real corporate income tax that we're--or that wasn't riddled by loopholes, where people get out of paying it, you could collect more revenues that way. So I think the alternative is, if we don't act now, we do move--we at minimum continue to stagnate. That means tax revenues--there's not revenues out there or income to be taxed and revenues to be collected by government. And the deficit isn't going to get smaller; it's going to get larger, because the tax base is disappearing. We need to get economic growth going. We need to do it in a way that will actually provide clear and visible benefits if we're going to get people behind this. And--you know, and one of the problems is, when you propose stimulus packages that aren't large enough, people turn around and say, look, it didn't work; well, it slowed the downturn, but it didn't spark economic growth. And if you're worried about how much we can spend, I think you can think back to World War II. At the close of World War II, government debt relative to the size of the economy was about 120 percent. Today it's about 60 percent. By those standards, we've got a long way to go.

    JAY: Some people are arguing that the only kind of stimulus that would really work is a big, massive, 1930s style direct jobs program. Do you think that's true?

    MILLER: I think it would help. I think infrastructure spending spread across the economy--I mean, you can think of the Hoover Dam. But you know what, if you look at the jobs program of the '30s, it had, you know, a multitude of different facets and different areas of intervention. In the backwoods and [incompr.] of Kentucky, they paid public librarians to go out on horseback delivering magazines and books to poor people. They worked for the WPA, for the Works Project Administration. You know, on--you know, in New York on Broadway and off-Broadway, you know, there was a whole program promoting the arts. In Oregon, they built a resort on top of Mount Hood, where they hired designers to put in Native American decorations on the walls. They put people to work across the economy. And those people had money, and their spending actually promoted rather rapid growth after the worst of the Great Depression in 1933. And the economy was growing at just about double-digit levels after 1933, once the interventions got underway. And that growth then disappeared when the Roosevelt administration began to worry about the budget once again. And it's really important to remember that Franklin Delano Roosevelt came into office promising to balance the budget and cut government spending by 25 percent, and it was the severity of the crisis that convinced him, ultimately, to do something different. Four years later, he made a famous speech in Pittsburgh at Forbes Field, which was then the home of the Pittsburgh Pirates, the same place where he had four years earlier promised to balance the budget, and he reported that to balance the budget in 1933, 1934, and 1935 would have been a crime against the American people. That's a tremendous reversal and turnaround in policy. That's what we need today, and that's the kind of change in political position that--with popular forces and with pushing for putting people back to work, first and foremost, that we could make that I think would cure an economic crisis, that would put the lubricant of spending back into the economy and get us going again.

    JAY: Thanks very much for joining us, John.

    MILLER: Thank you very much. I've enjoyed it.

    JAY: And thank you for joining us on The Real News Network.

    End of Transcript

    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at


    Latest Stories

    South African Platinum Miner's Struggle Challenges ANC Leadership
    Manning Determined to Fight Back After Army Upholds 35-Year Sentence
    Hundredth Anniversary of the Ludlow Massacre
    The Bundy Ranch Standoff Demonstrates Values Shared by Corporations and the Far Right
    The Resegregation of American Schools
    The Modern History of Venezuela, Why Still So Much Crime? - Edgardo Lander on Reality Asserts Itself (7/9)
    What Role Has Russia Played in Eastern Ukraine?
    Can Johns Hopkins Afford to Pay A Living Wage? (2/2)
    University Sit-In Targets World's Largest Private Coal Company
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    One Percent of Environmentalists Killings Lead to Convictions
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7), Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting