Economist Brad DeLong at Reed College

Berkeley’s Professor of Economics Brad DeLong spoke at Reed College (11/7/09). I attended. This was a treat for me. I am a regular reader of his blog (here). He is a Democrat with distinctly liberal views.He's also a first rate public intellectual.

The title of his Reed presentation was “Financial Crisis and the Macroeconomy, 1825 – Present.” The slides used in the presentation are posted on his blog site (here).

Just a few comments:

(1)   I really enjoy his sense of humor and wit.

(2)   Check out his first slide “The Employment-to-Population Ratio is in Free Fall.” It gives him nightmares.

(3)   I wondered why he started at 1825. It was the first industrial era financial crisis in which the failure of financial institutions could have caused massive unemployment. The Bank of England bailed out the first “too big to fail” private firm.

(4)   DeLong thinks more stimulus is needed. He would have created the initial stimulus in two parts, with the second part set to trigger-in now if unemployment was over 10%.

(5)   DeLong thinks China will continue to finance US debt. He noted he has a Berkeley colleague who has been predicting China would stop for eight years.

(6)   DeLong suggested $50 billion capitalization as the maximum size a financial firm should have, but stressed the difficulties of getting any such legislation through the US political system.

DeLong, several years ago, blogged the strongest reason for developing more Mandarin and study abroad programs in China. I’ll take this as an opportunity to reposted it. From DeLong:

Think of it this way: Consider a world that contains one country that is a true superpower. It is preeminent--economically, technologically, politically, culturally, and militarily. But it lies at the east edge of a vast ocean. And across the ocean is another country--a country with more resources in the long-run, a country that looks likely to in the end supplant the current superpower. What should the superpower's long-run national security strategy be?

I think the answer is clear: if possible, the current superpower should embrace its possible successor. It should bind it as closely as possible with ties of blood, commerce, and culture--so that should the emerging superpower come to its full strength, it will to as great an extent possible share the world view of and regard itself as part of the same civilization as its predecessor: Romans to their Greeks.

In 1877, the rising superpower to the west across the ocean was the United States. The preeminent superpower was Britain. Today the preeminent superpower is the United States. The rising superpower to the west across the ocean from the world's industrial and military leader is China.

Throughout the twentieth century it has been greatly to Britain's economic benefit that America has regarded it as a trading partner--a source of opportunities--rather than a politico-military-industrial competitor to be isolated and squashed. And in 1917 and again in 1941 it was to Britain's immeasurable benefit--its very soul was on the line--that America regarded it as a friend and an ally rather than as a competitor and an enemy. A world run by those whom de Gaulle called les Anglo-Saxons is a much more comfortable world for Britain than the other possibility--the world in which Europe were run by Adolf Hitler's Saxon-Saxons.

There is a good chance that China is now on the same path to world preeminence that America walked 130 years ago. Come 2047 and again in 2071 and in the years after 2075, America is going to need China. There is nothing more dangerous for America's future national security, nothing more destructive to America's future prosperity, than for Chinese schoolchildren to be taught in 2047 and 2071 and in the years after 2075 that America tried to keep the Chinese as poor as possible for as long as possible.