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Harvard Economic Historian Says, ‘We’re in a depression’

Two big-time economic thinkers duked it out in a debate about the causes of the Recession Tuesday night. The event was sponsored by The Aspen Institute and Roosevelt House, Hunter College’s Public Policy Institute. Jeff Madrick, a Senior Fellow at the New School’s Schwartz Center for Economic Policy Analysis and regular contributor to the New York Review of Books, faced Niall Ferguson, Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor of Business Administration at Harvard Business School. Moderator Brian Lehrer, host of the Brian Lehrer Show, asked tough questions about the economic crisis.

There were sharp disputes over regulation, stimulus ideas, and the value of Keynesian economics. Ferguson tended to argue against government intervention, while Madrick was strongly in favor of it. “On the whole,” said Ferguson, “financial innovation and financial markets have been a boon.” He noted, however, that markets, whether regulated or unregulated, were prone to panic. He placed blame for the crisis on the over-spending, over-leveraged culture that had developed in the United States and globally. Madrick argued that Americans had in many cases been borrowing simply to pay the bills, pointing out that the average American worker did not deserve to be blamed for the downturn. He noted that the typical male in his 30s earned less that his counterpart in the late 60s and 70s during the recent boom years.

After the debate, attendees had the chance to ask questions of their own. One audience member asked when the Recession would be over. For the first time during the evening, the two men largely agreed.

Ferguson took the question first. “We’re not in a recession,” he said. “We’re in a depression. I would say it’s a slight depression, rather than a Great Depression, but we’re looking at five years of subprime growth.” As the audience reeled from this announcement, Madrick commented that while he was not in the business of making predictions, he agreed with Ferguson that we were in for a long, tough road. “There are major obstacles to recovery,” said Madrick.

There’s been a lot of rosy talk about recovery lately, so it was  a bit of a shock to hear these gloomy forecasts. Ferguson said that he, too, got excited everytime Jim Cramer (of CNBC’s Mad Money) came out with happy predictions about the economy – but so far, he wasn’t buying it.

Tags: debate, depression, economics, Jeff Madrick, Niall Ferguson