Chris Hayes has a very nice review essay in The American Prospect that winds up focusing on the question of whether big business cycle downturns are in some sense necessary, a needed corrective to past excesses. There’s a tendency, that’s larger on the political right but also pops up across the spectrum because it’s fairly intuitive, to basically see the ups and downs of the business cycle in moralistic terms. A huge recession is punishment for our sins, and we need to just sort of bear with it. The evidence, however, suggests that this is wrong and that downturns can happen for reasons that are all out of proportion to the severity of the harm they do.
I think you see the intuitive — but wrong — thinking about this on display every time you hear someone complain that someone else, be it a government agency or a corporation or an individual, oughtn’t be engaging in some act of conspicuous spending during these days of belt-tightening. The sense that it’s somehow inappropriate is very powerful. But the reality is that if most people are tightening their belts, it doesn’t help them for everyone else to do it too. On the contrary, that makes it worse. What you need during a downturn is for those with the capacity to spend to take advantage of bargain opportunities and go out and spend.