You are here: Home>Collections>Economies  Beware: Recession may
be Hayekian  Swaminathan S Anklesaria Aiyar, ET Bureau Jan 28,
2009, 07.06am IST  Governments across the globe are using
Keynesian stimuli to revive drooping economies. Even George Bush
has presided over the greatest stimuli in US history, with a
projected fiscal deficit of $1.2 trillion and monetary injection
of almost $2 trillion by the Fed.  But is the recession
Keynesian? Trillions of dollars of stimuli have failed to end
the downswing. Keynesians argue that even trillions are not
enough. Really?  The current recession looks more Hayekian than
Keynesian. A Keynesian recession represents a sudden fall in
demand, and can be remedied within six months by pumping enough
purchasing power into the economy. A Hayekian recession,
however, is caused by misallocation of resources over a long
period, driven by unrealistic interest rates, ending in a bust
that requires years of structural adjustment. Such a recession
can last a decade (as in Japan in the