Raghuram Rajan of the University of Chicago recently said inForeign Affairs (May/June 2012):
"For decades before
the financial crisis of 2008, advanced economies were losing their ability to
grow by making useful things. But they needed to somehow replace the jobs that
had been lost to technology and foreign competition and to pay for the pensions
and health care of their aging populations. So in an effort to pump up growth,
governments spent more than they could afford and promoted easy credit to get
households to do the same. The growth that these countries engineered, with its
dependence on borrowing, proved unsustainable."
Now many of the nations in Europe, North America and leading
Asian countries are facing the consequences of their reliance on debt.
We call it the economic crisis of 2008, or the Great
Recession, but it began long before the Bush or Obama administrations.
Indeed, during the Ford and Carter eras of the late 1970s,
constitutional scholars widely warned of this very problem.
Sadly, their recommendations went unheeded.