Steve Keen on the Great Depression
On 12 February the Economic Society held a joint meeting with the Melbourne
History of Economics Forum in which the guest speaker was Dr Steven Keen,
Associate Professor of Economics at the University of Western Sydney.
The topic of his presentation was, “The Great Depression: Are those who
Misunderstood History Doomed to Repeat It?” His answer was not only yes, but that
this time the depression will be no Mr Nice Guy.
The central thesis of Dr Keen’s address was the failures that have followed from not
attending to the implications of accumulating debt. Starting from a Minskyite
position, he argued that the horrors that the financial system has encountered has left
the American banks so toxic that there is no answer but eventually to nationalise the
banking system of the United States and more or less start again.
Here in Australia we are slowly but surely heading towards a double digit
unemployment rate that will be coupled with a relatively slow deflation, particularly
in housing prices. Over the next decade to decade and a half, house prices should, in
his view, be expected to fall by around 40%.
Whether or not one agreed with Professor Keen, he demonstrated why he is
recognised as one of the best presenters in the whole of the Australian economics
community and someone with a perspective not often enough heard. The presentation
to a completely packed house began at 5:30 and when Steve’s voice finally gave way
at 7:20, most of those were still there as he took his questions from the floor.
That economists do not have a full understanding of the implications of debt and its
impact on economies was certainly brought home. That none of us also really know
how deep the current recession might go was also clear. And while each of us has our
own views on what needs to be done, it was useful to have these views contend with
These are certainly interesting times to be an economist and the Society was
privileged in hearing from someone with a very distinct voice and timely approach to
understanding the mess the economy is now in.