TEXT OF INTERVIEW
Bill Radke: And we continue with our occasional series, “What’s the Fix?” — a look at possible solutions to the economic crisis. This morning, our guest is British economist Roger Bootle. Roger, what’s your fix?
Roger Bootle: Well the first thing I would do is I would slash interest rates. I think they’ve got to go all the way — do it now, don’t wait. Other, over and above that, I think it’s getting to the point now where we’re going to have to seriously consider big expansions in the public deficit. The private sector’s not going to be doing much spending, it’s not going to be doing much lending and borrowing. Now what is there left in society that can do this spending and borrowing? The answer is the government — the entity in society that has very long time horizons, whose credit is practically unimpeachable, who can go on borrowing masses more. It’s the government. And with that money that it’s borrowing, there’s a variety of things it can do. It can of course spend a lot of money, and there’s something to be said in favor of that. Although as someone who in general is in favor of free markets, I’m weary of that, because governments tend to mess things up.
Radke: What about spending on things like infrastructure?
Bootle: Well I think these are essentially second-order questions. I mean there may well be particular projects which make sense to bring forward. I mean if the government has plans for construction projects which may well be taking place over the next five or 10 years, it makes sense to bring those projects forward. But what I think is potentially a bit dangerous or wasteful is to do what the Japanese did — that’s to say to end up by building bridges from nowhere to nowhere. I’m sure we can do a lot better than that. So I prefer the solution of borrowing in order to give tax cuts.
Radke: We’ve discussed a fix, Roger, may I have a prediction about the global economy.
Bootle: Aw gosh, I mean it’s incredibly difficult to know — but I make my living out of trying to see the future, but I find this one pretty difficult. My instinct is that United States and much of Europe and the U.K. are going to go through I think several years of not a recession, I think more like an extended depression. I don’t think it’s going to be as bad as Japan, I don’t think it’ll be as bad as 1930’s. I’m hoping and praying and sort of believing the policy makers will do the right thing, but I’m pretty convinced this is going to be grim and it’s going to be long-lived. And the world isn’t going to be quite the same afterwards.
Radke: Roger Bottle is managing director of Capital Economics in London. Roger, thank you.
Bootle: Thank you.
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