Statists believe that “government spending” is requisite because they are chaffed to refute libertarian theories on road. In my view, government spending doesn’t really do “greater good” for the society. Theoretically speaking, government spending or welfarism sounds ideal. Practically speaking, it beget an utopian society or nevertheless it causes monetary inflation in the long-run. Economists (particularly, mainstream ones) believe that their egotistical views are embedded with ultimate facts. They camouflage their ignorance through statistics and catalyze government to sustain its socialism levels.
I’m not an economist or may be “according to education standards” I am unqualified to comment on economics because I am too young to condemn. This isn’t the major problem. The main problem is that people suffer from eleutherophobia (fear of liberty), speak like an ultracrepidarian and act like politicians. Their ignorance has caused the economic society to develop the theses or status quo i.e. too big to fail. This theses is socially responsible for creating recession.
I boldly confess that recession is good and healthy because it helps us expose the apoplithorismosphobia (fear of deflation) & fight against emporiophobia (fear of free market). Even Misesian economist Ronald-Peter Stöferle has to believe that recession correct the aberrations and excesses of a boom. The benefits of recessions include:
- Sclerotic structures in the labor market are broken up and labor costs decline,
- Productivity and competitiveness increase,
- Misallocations are corrected and unprofitable investments abandoned, written off, or liquidated,
- Government mismanagement of the economy is exposed,
- Investors and entrepreneurs who were taking too great risks suffer losses and prices adjust to reflect consumer preferences,
- Recessions also allow a restructuring of production processes.
Ludwig von Mises understood this when he observed:
The return to monetary stability does not generate a crisis. It only brings to light the malinvestments and other mistakes that were made under the hallucination of the illusory prosperity created by the easy money.
In this regard, government is purely problem to all our solutions. It isn’t or cannot be otherwise. Would you tend to forgive rapist and let it infringe upon you again?
In general, there is the tendency in every democratic system to prevent too-painful adjustment processes as its nature of short-term bitterness and long-term benefits conflicts with the result scheme politicians are reelected for. No democratic government that is presented with the bill for the obvious successes and failures of its administration at the next election, will voluntarily allow a deep recession to occur — even if it were to agree that the adjustment was necessary.
Hence, inflationary policy is always a welcome method of impoverishing the population by decree and thereby pushing through a real adjustment of prices by force. The debasement of money as a rule always hits a society’s most underprivileged the hardest, as rich people can more easily avoid a devaluation of their wealth.
Austrian economist F.A. Hayek suggests that “to combat a depression by a forced credit expansion, is akin to the attempt to fight an evil by its own causes; because we suffer from a misdirection of production, we want even more misdirection — an approach that necessarily leads to an even more serious crisis once the credit expansion comes to an end.”