The FT’s economics editor needs to learn some economics

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The FT's economics editor,  Chris Giles,  has written this morning that:

Voices on the left and right are urging [Osborne] to adopt a “Plan B”. Some 30 business titans are insisting the solution is that they pay less tax.Academics by the bucket-load demand fewer spending cuts. Quite why they believe Britain's current huge level of public borrowing condemns the country to penury, while just a little bit more borrowing brings nirvana puzzles me.

I note he never addressed the right, saying instead:

The chancellor is right to reject the arguments of the Plan B brigade because the risk that investors would lose confidence in the deficit reduction plan far outweighs the likely small economic gains.

Oh dear: there's a believer in the confidence fairy at large, which is unsurprising given that Giles is yet another of the ex Institute for Fiscal Studies, BBC cohort who have done so much the spread neoliberal dogma through the media.

No doubt Giles was educated in the era when Keynes fell off the economics curriculum. No doubt he believes as a result that economics always achieves equilibrium and the unemployed are only so because they don't want to work, and so don't matter, because that's what this school thinks despite all the evidence to the contrary (but then evidence is something they're really rather good at ignoring; dogma is all that matters).

But as Keynes pointed out the good reason for spending now is that the government is the only agent capable of breaking the downward spiral in the economy when consumers, companies and net exports won't (and they're the only other possibilities). Literally nothing bar government can get us out if the mess we're in. So governments have to act - and if they did, the spending would pay for itself, as the multiplier shows.

But instead we have a neoliberal economics editor urging the Chancellor to be a cowardly politician and sit back and do nothing when what we need are courageous politicians with the gumption drive and intellect needed to make decisions on what we need to do to reverse the current crisis, which is, after all, what we elect them to do.

Needless to say, this is a major theme in The Courageous State that by chance gives the book its title. The evidence of the need for the alternative I propose grows by the day.


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