When the world is in crisis

Simon Johnson has a very interesting article in the May (2009) issue of The Atlantic. But I find bits of it not only disconcerting, but dangerously wrong. Like this: "Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut..."

Think about this. It might be useful advice for a single country (or not; ignoring comparative advantage has its costs). But when the entire world economy is in crisis, this is dangerously bad advice, bad because it cannot be done. (If we all reduce our imports, then we must all also reduce our exports.) Bad because it will make the world crisis worse. (As we did in the Great Depression.)

What might (and I repeat, only might) be true for a single country, can, and often is, extraordinarily misguided for us all.