Professor and former Secretary of Labor Robert Reich argues that structural problems underlie the current economic downturn.
Are we in a cyclical downturn of the business cycle, or do mounting structural problems underlie the current recession? This distinction is an important one, both in economic and political terms. Many people around the world assume that the global economy is undergoing a cyclical phenomenon — a deep and dangerous downturn, to be sure, but nonetheless primarily cyclical. It is assumed that a recovery will follow and that the global economy will be restored to its previous, pre-crisis growth path. Many anticipate that recovery to occur within the next year. According to this view, fiscal and monetary policies are necessary to stimulate the global economy in the interim. We may also need some temporary recapitalization of our credit markets and a few modest regulatory changes to our financial systems in order to get credit markets working. Beyond these fixes, however, nothing else needs to change. The recovery will happen, and the world economy will get back on track.