Sometimes, the aftermath is more devastating than the storm. That is the story of the 2008 financial crisis. It was disastrous at the time, but what has been worse is how long it has lingered. That halting recuperation is why the global economic meltdown is still at the center of the political debate in the Western world.
Much of the discussion is a replay of the familiar battle between the economists John Keynes and Friedrich Hayek: Is the solution stimulus or austerity? Amir Sufi, a professor at the University of Chicago Business School, has been doing provocative research that suggests we should be focusing on a different angle.
The real issue, in Mr. Sufi’s view, is where stimulus dollars should be targeted.
He believes the U.S. government made a costly mistake by focusing on bankers and not homeowners. Mr. Sufi’s argument matters, and not just because there will, inevitably, be another financial crisis. He thinks the intellectual bias that prompted the bailout of Wall Street but not Main Street risks derailing Europe’s recovery, too.
“In my view, excessive levels of household debt were the reason the recession was so severe,” Mr. Sufi told me, speaking by phone from Chicago. “If you look at the spending decline that drove the great recession, that was coming from the households.”