Back in early 2009, Sam asked what the contemporary lessons were of Japan's fiscal stimulus efforts during the 1990s. I suggested that one lesson from both Japan and the 1930s US experience was that fiscal stimulus works when it's tried, but that inconsistent, or insufficient, stimulus was unlikely to deliver the desired results. Sam's response at the time suggested he didn't necessarily buy this.
I was reminded of this by the ongoing debate about the effectiveness of the US fiscal stimulus. Earlier this week, Martin Wolf had a very good column in the FT, arguing that the Obama Administration had been far too cautious with its stimulus package. One result: 'This has allowed opponents to claim that policy has been ineffective when it has merely been inadequate.'
Note that this is not a case of being wise after the fact. Wolf also pointed to an earlier column where he had warned of the inadequacy of the measures being planned: 'Unfortunately, what is coming out of the US is desperately discouraging. Instead of an overwhelming fiscal stimulus, what is emerging is too small, too wasteful and too ill-focused.' Paul Krugman, who also argued at the time that the Obama package was going to be too small, has been making the same kind of point.
But, and for pretty much the same reason that Sam doubted my response to his question, I suspect that, for many, these arguments will fall on deaf ears. Maybe the success of emerging Asia's stimulus efforts will make for a more compelling example of how stimulus can work?
Finally, that Martin Wolf column begins with a thought-experiment about what might have gone wrong with FDR's policy response in the 1930s, had political circumstances been different. For one very grim take on a possible alternate America, keying off from a prolonged Great Depression, see this short story by Jo Walton.
Photo by Flickr user cbcastro, used under a Creative Commons license.
