The international economic recession began in banking and finance but has now spread far beyond. The production of goods as well as services has been very hard hit in the long established advanced industrial economies of Europe, North America and elsewhere, though China continues to drive growth in Asia.
While there are signs of recovery in demand, unemployment remains very high. For several decades, U.S. companies in particular have been notable for cutting costs through eliminating jobs. Technology in machines as well as computers facilitates the process. In consequence, unemployment will undoubtedly remain high even with recovery.
This past week, Chairman Ben Bernanke of the Federal Reserve Board was stage center in discussion of the "Three R's" of recession, recovery and regulation. Public Television (PBS) and the Kansas City regional Fed collaborated on a special program with a well-informed studio audience in town meeting format.
Exceptionally effective educational TV resulted. Economists are notorious for esoteric ideas, jarring jargon often at odds with clarity, and a penchant for hedging on policy.
Plain-speaking President Harry Truman said he longed for one-armed economists because when asked for advice, their response usually was along the line of "on the one hand, Mr. President, but on the other hand..."
Bernanke breaks the stereotype. In the recent financial meltdown, the Fed has acted fast on varied fronts. Funds were loaned directly to investment banks, and new forms of consumer credit relief have been developed. The Fed has pursued fresh "swap" accords with other central banks even while pumping enormous amounts of money into the system. During the final months of the Bush administration, Bernanke and Treasury Secretary Henry Paulson collaborated in pressing for the Federal banking rescue package.
The chairman is now pressing hard for regulatory reform. With refreshing candor, he does not claim to have a complete blueprint. Rather, he argues for comprehensive analysis encompassing traditional banks and newer credit sources. Effective policing will require integrated oversight. Monetary policy alone is too blunt and rigid.
At the start of the recession, unpersuasive optimistic declarations by President George W. Bush conjured up the eerie image of unfortunate President Herbert Hoover, who declared the U.S. economy "fundamentally sound" even as the Great Depression took hold. Congressional hearings, where Bernanke has been prominent, also recall the Depression era in giving vent to public anger about commercial excess.
During the presidential campaign, nominees Barack Obama and John McCain emphasized the importance of economic regulation, and Congress collectively is now doing the same. Simply bailing out failed financiers is rightly viewed as far from sufficient.
Only about a decade ago, President Bill Clinton and long-term Fed Chairman Alan Greenspan were praising dramatic deregulation, which included abolition in 1999 of the Glass-Steagall Act, the 1933 New Deal reform which established the foundation Federal Deposit Insurance Corporation and strictly separated commercial and investment banking. In the wake of the latest crash of investment markets that had turned into casino gambling, public sentiment has sea changed back to pro-regulation.
Bernanke's strong intellectual and policy credentials argue for continued leadership. Obama should reappoint him when his term as chairman ends next year. He clearly wants to stay; the PBS performance is part of a comprehensive media offensive. Obama has already endorsed expanded Fed financial oversight.
Before becoming chief financial fireman, Ben Bernanke spent his career as a professor. Academics, take heart.
Arthur I. Cyr is Clausen Distinguished Professor at Carthage College and author of "After the Cold War" (NYU Press and Macmillan Palgrave). E-mail: firstname.lastname@example.org