From Martin Wolf this morning:
The UK Treasury considers John Maynard Keynes to be an idiot. He famously said that “the boom, not the slump, is the right time for austerity”. The Treasury rejects this view. As so often before, it is wrong.
One might fairly say all other UK economic debate is a footnote to that.
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Hubris I think.
Richard,
Can you point to one of your articles that proposed cutting public spending in the boom that ended in 2007/8?
In my view, the problem with Keynes is that he has no followers. There are those who want higher public spending always. There are those who want to cut always. And hence we go from boom to bust.
No
But back then I wrote little economics
Roger
On the main point you’re right, of course, but the same can be said of any economist.Insofar as Economics has any value as a science, it will always be at risk of corruption because politicians only want to know the bits that will chime with, as they see it, the electriate.
FWIW, my recollection is that Ken Clarke in the last 2 years of Major & Brown, in the first 4 years of Bliar, did run surpluses in a booming economy & pay down debt.
The problem came that Iraq was expensive, as wars tend to be, &, having made that dreadful decision, we should’ve cut all domestic spending to afford it. Bliar, however, having angered his party, sought to buy their support by increasing domestic spending, when the only sane response would’ve been to drastically cut it.
Things got worse from 2006 on when it became clear that Brown had no interest in what was going on in no11 except insofar as it affected his route to No10.
I don’t think any of that, in any way, invalidates Keynes
I think you’re right that it doesn’t invalidate Keynes.
The (slightly perverse) question is, given that significant growth was predicted at the time most cuts were due to come into effect, did the Coalition spending plans actually follow Keynes doctrine from this statement?
Am I right in thinking that a true Keynesian would be highly critical of Labour’s spending policies prior to the downturn?
No
Because you see, Labour did run surpluses and borrowed for capital
Not entirely I agree post 2004- and I would criticise then – but it’s a small point
Not THAT small — four years of overspending like there’s no tomorrow……
Agreed you wrote little economics then…. no doubt during the next boom you will be urging austerity. I look forward to it.
I will undoubtedly – because I will argue green not growth
Disagree, I think he would’ve been, see above.
Keynes did propose running a government surplus during a boom but this, I think, was partly to do with curbing inflation, as much as building up a reserve for the inevitable recession.Osborne , this week, was criticizing Labour for not doing this.
In his day possibly a third of the money stock was cash but now it’s around 3%. The gold standard limited the creation of money, even though the UK come off it in 1931,and this was a factor until the end of the Bretton Woods agreement in the early seventies. Since then the banks have created money in huge quantities. It is not mainly the governments’ deficits that account for the extra money. I’m only a casual reader in this field but today there seem to many schools which interpret Keynes for the modern world- ‘post Keynesians’, noe-Keynesians etc.
You are possibly right, Mitch, and this might be a judgement against the last govt. -although truer of the latter years. However, It seems more damage was done by the banks creating more money and an asset bubble which led to the downturn.
Perhaps there is a real economist out there who could comment?
And now you do. So you shouldn’t have any problem answering phlem’s question in restrosepct should you.
I answered it
Completely accurately
To help George Osborne adopt more credible macroeconomic policies, the IMF have recommended that the UK Treasury be sent on a team building course.
http://www.youtube.com/watch?v=GgevO04hscE
A low growth, sustainable economy means all the text books will need changeing -which means patterns of human behaviour will need to change. We are still living in the wake of the post-war ‘you’ve -never-had-it-so-good’ modus vivendi. The foreign holidays, the four cars outside the house, I’m alright Jackism and the never ending flow of techno-junk just cannot carry on anymore. We now know the ‘good’ aren’t ‘delivering the goods’ in terms of happiness and well being.
I have a book of Bertrand Russell’s comments, being quizzed by the then Labour, (after savagely r-wing) MP Woodrow Wyatt in about 1960. At one point WW asks BR about the (then new) computerisation.
BR says it will be wonderful. Once computers can do all the donkey work, everyone will be able to live the life that a 19th century squire lived. About 13 or 15 hours work a week & the rest of your time devoted to such pursuits as suit you, some will devote their time to gardening, music, painting, others to antiquities, some will throw themselves into public works etc.
Where did it all go so wrong ???
What planet are you on? One of things which puzzles me is the idea that we had a boom before this bust. There is no such thing as a boom when unemployment stands at more than 2 million, as it has for most of the period from 1979. It seems to me that we need to reframe the narrative far more radically
And maybe the DWP ought to be sent on a maths course while they’re at. Mr Iain Duncan-Smith is to face an inquiry over his misuse of statistics.
I quote from the Statesman:
“In the past month, the Work and Pensions Secretary has claimed that 878,000 people dropped their claims for sickness benefits rather than face a new medical assessment; that thousands deliberately registered for the Disability Living Allowance before it was replaced with the more “rigorous” Personal Independence Payment; and that 8,000 people moved into work as a result of the introduction of the coalition’s benefit cap. Not one of these assertions was supported by the official statistics.” http://www.newstatesman.com/politics/2013/05/duncan-smith-face-grilling-mps-over-misuse-statistics
Change.org garnered 96,271 signatures asking him to be called to account. Thankfully someone has listened, though they should know it already. Mr Iain Duncan-Smith is a thoroughly irresponsible man. He obviously ought to be given the sack for this.
He won’t get it though. Because as so often noted, we currently have a thoroughly irresponsible Government.