Business Books: Time for big government?

By Pedro Nicolaci da Costa

NEW YORK, Nov 6 (Reuters) - "The Case for Big Government" (Princeton University Press, $22.95) comes at an auspicious time.

With the global economy in crisis, experts of all stripes have suppported government intervention. At the same time, Americans have elected Democrat Barack Obama, who has favored greater federal involvement, to lead the country.

Author Jeff Madrick argues that government involvement in economic affairs is not only beneficial in times of crisis, but can also enhance long-term economic growth by giving incentives for industries and households to prosper.

Rather than being ashamed of government, Madrick says Americans should encourage significant federal spending in areas like health, education and infrastructure -- things that are not often adequately provided by the markets.

"Active and sizable government has often been essential to growth and prosperity among the world's rich nations," writes Mardick, who is the editor of Challenge Magazine and director of policy research at the Schwartz Center for Economic Policy Analysis in New York.

In the current financial crisis, the U.S. Treasury and the Federal Reserve have flooded the banking system with dollars, and devised elaborate rescue plans to the tune of nearly $1 trillion aimed at unclogging the credit system.

According to Madrick, history suggests that, rather than withdrawing into obscurity when a recovery takes hold, the federal government should find creative ways to remain involved in guiding the nation's economic affairs.

For some, the global meltdown in lending markets is a case in point. If regulators had been quicker to intervene, they say, much of the current pain might have been avoided.

A centerpiece of Madrick's thesis is that America's radical skepticism of government, which often leaves politicians vying for the very offices they deride, ignores the major contributions of public institutions to the country's economic success.

This runs from the development of highways and railroads to the space program, academic institutions, and the Internet.

Madrick says this cultural aversion to government has retarded America's progress, and is still depriving millions of its citizens from proper access to health care and retirement benefits.

"Writers alarm the public merely by telling them how large government is," he says. "It reflects a willful misreading of history. A complex economy requires such a government to function." (Reporting by Pedro Nicolaci da Costa; Editing by Eddie Evans)