> Let things fail, so that the waste can get burned off
I guess the waste here is people who simply can not pay for food or housing? What a naive take.
I guess the waste here is people who simply can not pay for food or housing? What a naive take.
In the scenario you're asking for - the zombie companies just layoff employees, cut wages/benefits, landlords evict, etc. The zombie lives on just fine until the market corrects while everyone else fails.
You're correct that failing companies need to fail but your "just let the free market handle it" approach is a fairy tale.
"Keep the budgets tight" was the mantra in the early 30s in response to the depression. It took a World War that killed millions of people (and was -- surprise! -- a major artificial government stimulus) to get out of it.
Yes, providing monetary liquidity and fiscal stimulus during times of extreme stress is not purely good. It can have an effect of keeping some companies alive that perhaps should not be. That is bad and we should try to minimize it in the context of a recovery effort. But the fact that it's not perfect is not a reason to claim that burning everything down and creating a decades-long horrible depression in which many die of starvation, and that cripples the country, is a preferable alternative.
They think that if you let everything burn down then green shoots will pop up and everything will be happy and folks will rebuild and it'll be better and the government oughta get its snout out of our business and just let pure capitalism run its course and...
You are describing the broken window fallacy here. War and destruction doesn't help the economy. What happens in war is that useful resources in the economy are diverted from productive use and mutual beneficial trade to death and destruction.
When aggregate demand is "stuck" at a depressed level (high unemployment causes low demand, resulting in more low unemployment), the stimulus of war can actually help pull the economy out of its stuck position, even if the war is destructive. Of course, once it's no longer stuck, the continued destructive stimulus is just destructive.
There are better fiscal ways to pull the economy out of a depression than war, because most wars don't pay much in the way of dividends, unlike large scale public works. But even if the stimulus isn't a great ROI in "normal" times, it can have a high ROI in "depressed" times due to its ability to get demand unstuck.