Ten years on from the crash, we need to get ready for another one | Robert Skidelsky

The lessons of 2008 have not been fully learned: stop risky lending by banks, address fiscal policy and reduce inequality

The collapse of Lehman Brothers on 15 September 2008 unleashed the worst global downturn since the Great Depression of 1929. And it was almost entirely unanticipated. Ten years on is a good time to ask what governments, policymakers, and economists might learn from this catastrophe – how to prevent future ones, and how to overcome them if they happen. Of these two, prevention is far better than cure. Once a downturn gathers momentum, the scale of intervention needed to reverse it becomes frighteningly large. Budget deficits balloon, public debts soar, governments take over banks – all conjuring up visions of looming state bankruptcy, or worse, state control over the economy. So the most important question is: how can these catastrophes be prevented?

By prevention, I do not chiefly mean trying to stop the semi-regular fluctuations of the business cycle. Capitalist market economies exhibit rhythms of economic activity. The political economist Joseph Schumpeter called them waves of creation and destruction, or perhaps they simply arise from temporary mistakes of optimism and pessimism. The authorities already possess the tools to dampen, if not altogether prevent, these fluctuations – if they want to. Central banks can use interest rates to restrict or expand credit; government budgets have built-in stabilisers, with revenues falling when the economy turns down, and rising when it expands.

Related: Ten years after the financial crash, the timid left should be full of regrets | Larry Elliott

Related: Our financial system only works for the 1%. It will take another crash to fix it | John Quiggin

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