Finding good sense in the Wall Street Journal

Economist Ha-Joon Chang rightly informs his readers that the first phase of the post-2008 recovery had a distinct Keynesian flavor, and included activist government and stimulus spending. Most governments eventually abandoned the Keynesian approach, replacing it with one that reflected neoliberal verities. Ha-Joon Chang believes the neoliberal approach will end in failure. His reasons focus on the false premises embedded in that approach. These premises are:

  1. Governments must reduce their deficits before a recovery can begin.
  2. Governments must reduce welfare spending
  3. Governments must reduce welfare spending in order to secure long-term growth
  4. It is a mistake for governments to tax the rich
  5. Governments must reduce or eliminate regulation in order to secure long-term growth

Succinctly put, Chang’s analysis reflects an approach to modern economies which treats them as demand-constrained, not supply-constrained. I can’t argue with that.

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