There is a need to support liquidity in the short term. The supply of credit to the economy is being constrained. To an extent this problem can be addressed by government-backed liquidity packages.
Bolstering consumption is more questionable. Tax cuts may get people consuming more in the short term but it will not address the weaknesses of the world’s economies. It will also be bought at the expense of greater austerity in the medium and longer term.
A programme of public spending is more desirable. Even the developed countries, particularly Britain, need better infrastructure. More airports, roads and power stations would be a good start. It would create jobs and the basis for raising productivity. Small increases in personal consumption, in contrast, only have a fleeting effect.
But suggestions for an ambitious programme of public works raise a broader problem of contemporary attitudes to the economy. There seems to be a reluctance to invest in productive capacity. The sphere of production has become stigmatised.
This is a particular problem as the key underlying weakness of the economy is that consumption has moved out of line with production. In the short term this problem was dealt with by the creation of credit but, as the world has seen over the past quarter, reality has a nasty way of biting back.
Rather than reduce consumption growth, the solution is to increase productive capacity. Yet production nowadays is often seen, literally as well as figuratively, as dirty. Just think about the way productive areas of the economy are portrayed. Factories are seen as polluting. Roads are portrayed as producing more congestion. Projects for power stations are subject to protests and strangled by bureaucratic delays. Airports are seen as damaging the planet.
Instead we live in a world where the small-scale and worthless gestures are celebrated. Recycling. Micro-generation of power by mini-windmills on top of houses. The creation of brands and logos.
The fundamental solution to today’s economic problems is a reinvigorated culture of production. Environmentalist dogma needs to be ditched in favour of a genuine growth culture. Productive capacity needs to be raised rather than consumption curbed. The anti-growth and anti-industrial ethos needs to be reversed.