The return of depression economics

Many economists hate to admit it, but today's economic turmoil shares some uncanny-or downright scary-similarities with the prelude to the Great Depre ssion. Many policymakers seem to have unlearned the basic lesson of that ca lamity: boost demand in the face of an economic slowdown and reduce the vol atility of capital flows. Rigid adherence to anti-inflationary policies wil l only deepen the crises in emerging markets. As the IMF continues to insis t on fiscal austerity and many governments instinctively resist capital con trols, a wider recession looms. With a distinct whiff of the 1930s in the a ir, we had better refresh our memories and relearn the basics of Depression economics.