There is a dreary sameness to the parade we have been seeing of impending catastrophes which never quite materialize. The most recent of these is swine flu but it isn’t an isolated example. Fareed Zakaria has noticed that the reaction to the economic downturn has followed a similar pattern:
One can see this same pattern of mistakes in discussions of the global economic crisis. Over the past six months, the doomsday industry has moved into high gear. Economists and business pundits are competing with each other to describe the next Great Depression. But the world we live in bears little resemblance to the 1930s era. There is much greater and more widespread wealth in Western societies, with middle classes that can withstand job losses in ways they could not in the 1930s. Bear in mind, unemployment in the non-farm sector in America rose to 37 percent in the 1930s. Unemployment in the United States today is 8.9 percentÖ . And government benefits — nonexistent in the ’30s — play a vast role in cushioning the blow from an economic slowdown.
The biggest difference between the 1930s and today, however, lies in the human response. Governments worldwide have reacted with amazing speed and scale, lowering interest rates, recapitalizing banks and budgeting for large government expenditures. In total, all the various fiscal-stimulus packages amount to something in the range of $2 trillion. Central banks — mainly the Federal Reserve — have pumped much larger amounts of cash into the economy. While we debate the intricacies of every move — is the TALF well structured? — the basic reality is that governments have thrown everything but the kitchen sink at this problem and, taking into account the inevitable time lag, their actions are already taking effect. That does not mean a painless recovery or a return to robust growth. But it does mean that we should retire the analogies to the Depression, when policymakers — especially central banks — did many things wrong.
I’m not as sanguine about this as Mr. Zakaria is because I live in the world of unforeseen secondary effects and I believe that the unforeseen secondary effects of the actions of the last six months are likely to overwhelm their intended effects.
I believe that a similar pattern can be discerned in the reactions to global warming and any number of other issues. We are in the grip of a doomsday industry every bit as serious as the military-industrial-complex that Ike warned about. The problem is that there’s gold in them thar disasters.
The poster boy for this is former Vice President Al Gore. He has taken his connections as the son of a senator from Tennessee and parleyed them into going to the best schools, achieving high elective office, and gaining fame, fortune, and honors through promoting a doomsday scenario that may never materialize. The doomsday industry is a triangle of mass media, government, and NGO’s that exist solely to promote a cause and have little accountability to anyone for anything. Individuals flow from one apex of the triangle to another, picking up momentum on the way.
I’m not alleging collusion. Collusion is not necessary for there to be a problem. But as along as it’s so darned convenient for former elected officials or columnists to promote their pet causes and make money in their spare time the doomsday industry will continue to flourish.
Well, what’s the harm? The harm is that there are limited resources and over-committing these scarce resources to one cause results in our devoting fewer resources to things that may well be more deserving. For example, the investment which will cause our economy to grow and produce the jobs necessary to employ the millions who’ve lost their jobs in the downturn.