This paper compares the depth and length of the recent crisis with the Great Depression in the 1930s. It claims that economic
policy played a crucial role in shortening and curtailing the recent crisis. We analyse which policies were applied during
the recent crisis and which measures worked. We know that policies relying on large infrastructure projects inherently involve
an implementation lag. These lags have been very high in the recent crisis and some expenditure planned will maybe never be
spent. We therefore suggest implementing a leakage rate for government expenditure programs which represents the part of intended
public expenditures not spent in the first twelve months after the program is set into action. It might be higher than the
savings rate out of a tax cut. Furthermore, exit strategies should ideally cut expenditure to the same extent as the increase
in government spending during the crisis had been, so that sooner or later tax rates and debt rates may return to pre crisis
levels. The core of the Keynesian policy recommendation is to raise expenditure in the crisis but to achieve a balanced budget
over a full cycle. If expenditure is not cut after the crisis tax and/or debt rates will increase after each downturn and
the basis for any Keynesian policy in the next crisis will be eroded. This does not preclude that it might be useful in the
exit phase to change the tax structure in order to lower taxes on labour, specifically for low wages, while increasing taxes
on financial transactions, carbon dioxide emissions, capital gains or property. This would lower unemployment and boost demand
in economies with tendencies to underconsume.
Keywords:financial crisis, business cycle, stabilisation policy, resilience
Forschungsbereich:Industrie-, Innovations- und internationale Ökonomie