Doug Henwood’s discussion of Swedish monetary policy helps me to understand what it is we’re disagreeing about. The title of his post is that Sweden is “no paradise of monetary ease,” but he actually concedes that the Riksbank dealt with the recession through a campaign of aggressive monetary easing. It’s just that the Riksbank “believes that there’s not much that monetary policy can do to affect the long-term path of an economy,” which is something I certainly agree with. But today I’m not that worried about the long-term path of the economy, I’m worried about 9.1 percent unemployment in the short-term. Henwood, though, says this is just a way of dodging the need for structural reform:
It doesn’t have all the deep structural problems of the U.S. So its recovery was relatively quick and strong. Not so the U.S. But the Fed remains indulgent, and is likely to stay that way for months to come.
This is normally the argument we’ve seen right-wingers make against all fiscal and monetary efforts to stabilize aggregate demand and boost employment. Presumably Henwood has a different set of structural reforms in mind than, say, Narayana Kocherlakota. But their argument about the recession is the same — we shouldn’t try to seriously reduce joblessness in the short-run except as part of a more ambitious effort to remake the American economy. Personally, there are any number of reforms I’d like to see implemented in the United States. But I don’t think that this is a constructive approach to recessions. There are a lot of people suffering right now who’d be in better shape if we boosted demand.