Proposed Remedies

Proposals for coping with depressions range widely. At one extreme are economists who say little or nothing should be done to interfere with what they consider to be natural forces of recovery. They believe, in keeping with the business cycle theory, that depressions are self-correcting. Some economists argue that, except for the hardships, depressions are desirable. They say that depressions put inefficient producers out of business and thus clear the way for an economic system that is improved after each recovery.

However, other economists advocate drastic government action of various kinds. Large expenditures on public works, such as highways and hospitals, are urged by economists who agree with Keynes on the cause of depressions. They argue that government deficit spending, or spending that exceeds revenue, is both necessary and desirable to offset a lag in private investing. Other proposals for government action involve adjusting the monetary system, such as by making money and credit more plentiful; raising or lowering certain taxes; and granting subsidies or loans to businesses or farmers. Advocates of government action also urge a social welfare program, or expansion of such a program if one exists, for providing direct payments to unemployed workers.

Holding a middle ground between these views are economists who favor a mixture of restrained government action and private enterprise to cushion the impact of a depression. Labor unions and others urge higher wages, or the equivalent (such as shorter working days that spread jobs among more workers), to increase consumption and to maintain economic stability.

, J. M.—