Jeff Frieden: Well, this is certainly the worst crisis since the Great Depression, so far. Now, everyone, in some sense, wonders whether we are headed towards another Great Depression, and no one can answer that question with certainty.
It is my sense that we will, that this crisis will bottom out before we reach through 1930’s level conditions, because governments are more sensitive to the risk of a Great Depression today than they were in 1929, 1930, and governments are cooperating more effectively today than they did in the 1920’s and 1930’s.
So, I think that we are unlikely to see a repeat of the Great Depression of the 1930’s. Nonetheless, this is unquestionably the most serious economic down turn, economic crisis of the past 70 or so years.
What happens in the longer run cannot, with any certainty, be forecast. However, I think that we can say, with a great degree of certainty, that this crisis will last for a fairly long time, at least a couple of years; that it will inevitably involve a substantial series of austerity measures, on the part of major governments; that it will lead to a reduction in the real living standards of many, many millions and hundreds of millions and billions of people around the world; that it will slow or even halt and perhaps even reverse many of the economic advances that we have seen over the past 15 or 20 years.
So, this is a serious crisis. This is going to set the world back a decade or so, and perhaps set the United States back a decade or so, as well.
We have made some very substantial improvements in our macro economic position, in alleviating some of the problems that we had had in the United States with income distribution, in reducing poverty in the US, and much of that is going to be, many of those advances are going to be called into question by the current crisis and the attempts to deal with it in an effective way.
Recorded on: October 14, 2008.