New Hampshire's Virtual Town Hall
U.S Fiscal advice for underdeveloped countries for the past fifty years can be summed up in one basic teaching: do not get in debt to pay for consumption goods. However, last decade has represented a complete contradiction to such predicament. Harvard Professor Jeffry Frieden explained at UNH Manchester the intricacies of the first global economic crisis of the 21Ist century.
“This is a classic debt crisis, yet different from all previous ones. I define it as the consequence for borrowing from the rest of the world, and investing resources incompetently.” Mr. Frieden explained why the current recession is sui generis despite identifiable patterns. First, Tracing back the origins of the crisis, the Harvard Professor referenced the Bush administration, when in 2001 the U.S had a 250 billion superavit. With such outstanding fiscal performance, economists likes Allan Greenspan warned about the negative effects of a state that was buying its own debt, the danger of government buying assets in the private sector. President Bush decided after 9/11 to start massive cuts that inversed the referenced superavit into a 500 billion deficit. Frieden explain in depth the problems of such deficit, where the U.S started borrowing money from Germany, Netherlands, China and Saudi Arabia, and instead of using such capital for investment, it was used to fuel a consumption boom.
The lecturer referenced then one of his visits to Brazil, where President Itamar Franco announced massive fiscal cuts, “announcing the party was over. However, the morning after, people showed up in the streets with signs that said ‘the party is over and we were not even invited’.” Such anecdote summarizes the political dimension of the economic crisis according to Frieden. “Who’s going to pay for the bailouts? Germany? China? You can convince tax payers to a certain extent, after a while they will refuse to pay the neighbor’s bills.”
Mr. Frieden analyzed the difference between European protest movements such as the Indignados in Spain and ‘Occupiers’ in the U.S. “Here the conflict is not regional, but revolve around personal experience through the crisis.” Statistics may be helpful. The lower economic tier (earning less than $40 000 yearly per household) suffer 18% unemployment. Those digits quickly turn into a dramatic 36%, when one considers those who are willing to work full time, but are only hired for limited hours, and those who gave up searching for a job. Those on the second tier (earning more than $80 000 yearly pr household) have experienced a much different situation, with only 4% unemployment. At last, the lecturer referenced the richest 1%, who saw their income raise 60% during the past decade. “There is a broad perception the country has become unequal."