The Return of Depression Economics

In the last three years, seven economies have experienced slumps eerily reminiscent of the Great Depression. A bothed devaluation in Thailand set off ripples all the way from Indonesia to South Korea. Russian debt default triggered disaster in Brazil. Hedge funds seemingly unaccountable to any government nearly succeeded in their aim of forcing up interest rates in Hong Kong. And almost no one had predicted these developments. Perhaps, argues Paul Krugman in his dazzling polemic, that is because we are trapped by a cozy free-market orthodoxy which cannot accept that ’bad things happen to good economies’. Yet if we truly hope to confront the immence challenges which lie ahead, we had better start facing up to reality right now.