One Man's View of the World

by Lee Kuan Yew

When it comes to stabilising the economic system as a whole, however, government intervention can be both desirable and feasible. The Americans tried to stave off recessionary pressures by pumping liquidity into their economy – essentially, printing dollars. A looser monetary policy has been the standard way to fight downturns, although more non-conventional approaches are used this time, and the size of the latest American monetary infusion has been large by historical standards. Not everyone, however, favours this approach. Critics who subscribe to the views of the Austrian economist Friedrich Hayek believe such policies prevent fat in the economy from being trimmed, prolongs the life of inept companies and industries, and ultimately do nothing more than kick the can down the road. Natural adjustments to the economy must come eventually, they say, and blocking that through quantitative easing at best prolongs the necessary adjustment process and at worst builds inefficiencies into the system that will ultimately result in long-term sluggishness, if not a bigger recession later on.