Why a Deep Recession Must Be Avoided

Some folks want the government to do nothing to ameliorate the economic downturn. Better a depression than a big expansion in government power, they say. But a sharp downturn could actually result in worse economic measures being undertaken. As Nobel Prize winner Gary Becker blogs:

On the other hand, if I am wrong, and there is a prolonged and deep worldwide depression, not simply a recession, the retreat from capitalism and globalization could be severe, as happened during the Great Depression. Many countries would increase their tariffs and other trade barriers to reduce the competition to domestic production from imports. Nationalization rather than privatization will be in favor as governments take over ownership of many weak companies. Regulation of executive salaries and other wage and price controls will become much more common. Competition will be stifled as governments encourage companies to coordinate their pricing and other policies, and change laws to make it much easier for unions to organize workers. These are not attractive prospects.