From Paul Krugman's 'The Austerity Delusion' in the Guardian today, echoing familiar themes to readers of this blog:
Cameron is campaigning largely on a spurious claim to have “rescued” the British economy — and promising, if he stays in power, to continue making substantial cuts in the years ahead. Labour, sad to say, are echoing that position. So both major parties are in effect promising a new round of austerity that might well hold back a recovery that has, so far, come nowhere near to making up the ground lost during the recession and the initial phase of austerity.
For whatever the politics, the economics of austerity are no different in Britain from what they are in the rest of the advanced world. Harsh austerity in depressed economies isn't necessary, and does major damage when it is imposed. That was true of Britain five years ago — and it's still true today.
I strongly recommend reading it.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
It’s a top article – and, unlike all the lies, spin and drivel pumped out by the right for the last five years, it’s the truth and deserves the widest possible circulation. Thank goodness the Guardian has, at last, printed something like this. Pity it hasn’t been doing it every day since May 2010 though.
Anyone who’s read any Krugman and/or Klein’s The Shock Doctrine should be able to see the current government for the thieving opoprtunists they are; using a largely imaginary crisis to steal assets for the rich. Again.
I am fervently hoping that, once safely in office on 8th May, Miliband comes straight out and drops austerity as his first act.
Areed 100%, especially regarding N Klein’s work.
As the drugs, liquor and gambling trades are now key economic activities whose effects are little known, as far as the future goes all bets are off.
Krugman is eloquent, but undermines his whole argument by conceding that:
“It’s true that you can’t run big budget deficits for ever”
No, its false and demonstrably so…
The UK government – an entity that can produce money ad-infinitum – is in no way worse off when faced with a piffling ‘deficit’
Infinity – a deficit = Is still Infinity!
The very idea that we ‘have to tackle the deficit’ is absurd and mainstream economists such as Paul Krugman should be ashamed for giving any credence to that false premise whatsoever.
I am afraid I am with Krugman
Tax exists to reclaim money printed into the economy by government
But if not reclaimed printing can seriously unbalance the economy in the case of full employment etc
Borrowing for investment in that case is fine but if you want broad stability you can’t print ad infinitum without taxing it back
But as long as growth has not reached its limits, there is no reason whatsoever to cut the deficit. I agree that money should be taxed out of the economy in order for money to be stable and hold its value, though this should not be the main priority.
Keynesian-style policies pulled the US economy out of the depression, this was BEFORE world war II, by the way, and were chiefly responsible for rebuilding Britain using government borrowing turned on full.
While it is not necessary for a government to borrow, a government can borrow huge amounts with no problem whatsoever.
Spending works. Austerity doesn’t.
I agree that until an economy is working at capacity borrowing makes sense
You are absolutely correct Richard.
It would indeed be irresponsible for the government to use its unlimited spending power without restraint (in extremis to literally buy up every asset in the UK), just as it would be to use its sovereign right to tax without limit (in extremis until no money is left in the economy).
I made the point though to highlight how all progressives (even Krugman, who is obviously a country mile wiser than Labour) seem stuck with the absurd notion that ‘we have to fix the deficit’ – albeit in his case, as a ‘deficit dove’ with the addendum ‘…eventually’.
The upshot is that by doing so progressives like Paul Krugman end up just holing their own (otherwise excellent) arguments right below the waterline.
Meanwhile there are MMT ‘deficit owls’, such as Randy Wray, who beg to differ with Krugman’s mainstream understanding of deficits…
http://www.rooseveltinstitute.org/new-roosevelt/deficits-do-matter-not-way-you-think
MMT has a lot to offer
Is this the same Paul Krugman who in 2010 forecast that UK growth would be zero (GDP has actually increased by 7% in real terms since then) and that unemployment would rise (it has actually fallen substantially since then).
Could the UK economy have performed better since 2010? Probably. But the real question is whether it would have done any better under Krugman’s policies. Given that France (a country which has pursued a course of action much more similar to what Krugman advocated) has only grown by 3% since 2010, I think the answer is “no”.
I would take anything he says with a pinch of salt.
a) France has better productivity
b) Good GDP
c) Lower borrowing costs
And in the range of options available Krugman was vastly more accurate than, say, the OBR
You are as close to wrong as can be in economics
(a) Only because its unemployment is so high
(b) Not as good as GDP growth as the UK
(c) Only because it is in a monetary union whose economic situation is so dire that it has to pay people to borrow money.
France is a basket case compared to the UK. Look at how many French people are coming to the UK compared to how many UK people are going to France. You are living in cloud cuckoo land if you think France is doing better than the UK.
Basket case
Productivity 25% higher than UK?
Pull the other one
Douglas-the only French coming over here have been the mega-rich who wanted to avoid the higher tax such was their sense of duty to their country whose infrastructure, education system they had benefited from. See:http://www.spiegel.de/international/europe/wealthy-french-flee-to-london-amid-fear-of-hollande-a-833814.html
Growth in the last quarter of the Labour government was 0.6%, followed by similar rates in the next 2 quarters – by Q4 it was -0.4. Can anyone think of something that happened between 2010 Q1 and Q4?
And by 2011 Q1 it was back to 0.5%. Must have been something in the water then. Or maybe all the snow.
I’ve been anti-austerity for a long time and Krugman’s is a great article (his book about the issue is really good read too) but one of the issues in the electorate is a fear of change of government – that at least the Tories/Libcons are in the hot seat and know what they are doing (yes I know – it’s hard to believe, but it’s what I hear) and new government wouldn’t know where to start.
It could be a case of ‘Better the devil we know’.
Mark, that argument “better the Devil you know”, certainly at least helped, perhaps conclusively, in producing John Major’s 1992 (surprise) win, especially as Neil Kinnock had very few experienced Ministers in his Shadow Cabinet – even Junior ones (same was true of Cameron’s Shadow Cabinet, and look at the mess they have made!).
This time, however, Ed Miliband himself has Cabinet experience, as do others in the Shadow Cabinet, with others having some degree of ministerial experience, so the ” Devil you know” argument is far less persuasive, and hopefully vanishingly so.
Andrew
I hope so – I want a change of government. But as I’ve said, the ‘Better the devil you know’ attitude is really there – even amongst public sector workers – which is crazy really.
I’m not trying to do the opposition down but attitudes that could result in contibuing austerity are there in the electorate.
And I believe that a proper counter narrative to neo-liberalism and austerity is still needed – stuff like this blog and other unheard and sensible voices need to be more mainstream and debated. There is a paucity of proper debate even in the Left.
The shadow/grey economy effect has been ignored – without ‘drug money’ we would be in recession.
Employment stats are bogus. Many so called perm jobs are part time, for example: https://www.jobtrain.co.uk/iceland5/displayjob.aspx?jobid=821&source=JobtrainIndeed
Also a lot of jobs which were public sector in 2010 were reclassified as private sector.
Many public sector council workers etc were made redundant and replaced by private agency temps. Some probably the same person re-employed on a lower wage with an agency.
On top of that the huge growth of zero hours contracts e.g. SportsDirect – many are foreign workers.
And Work Programmes giving employers free workers for 30 hours each week.
3 million people struck from the record of unemployment via benefit sanctions and a further 963,000 young people NEET – not in employment, education or training.
Then finally 8 million economically inactive.
Krugman doesn’t address the fact that societies that aren’t implicitly imposing ‘austerity’ create similar and greater life divisions. A regime could simply end ‘austerity’ by ceasing to cut the amount of money going towards certain provisions and even increase that money but do so in a way that means private profits syphon up that extra money, the burden of taxation and payments being shifted towards the least wealthy citizens. Ending ‘austerity’ on its own will do little within a rabidly market led world; money has to go the right people, at the right time, in the right places via truly democratic means
. If that cannot or will not be done then that is proof that money is not a resource but merely a tool of control which manifests the mindset and will of a psychopathic minority.
I hope his article is the truth. Why is it then why a read the comments related to that article do some totally discredit what he writes
Because some want to destroy the role of government in the economy and society
That is the real battle going on
Well then lets win the battle, as I would rather have, however poor they are at times, an elected government over what would be a regression back to medieval times
For the first time ever I am considering voting Conservative, because despite
the (many) imperfections in their Economic policies, I just can not trust the present Labour economic leadership many of whom were around from the last “no money left” Labour Government. But those of us in the tax industry should rub their hands in glee at whatever party comes to power because all the proposed tax policy programmes will throw up so many contentious situations we will be knee deep in work. Which is a pity because I would rather intellectual effort was spent elsewhere.
Liam Byrne’s “no money left” joke has done huge harm.
It’s as asinine a comment as the previous FA chairman leaving a message to Greg Dyke that there’s “no points left” for the coming football season.
For BOTH situations such a comment is quite insane.
Credit where credit is due. Krugman said in the same Gaurdian artcle..
“It is impossible for countries such as the US and the UK, which borrow in their own currencies, to experience Greek-style crises, because they cannot run out of money”
Pure MMT, well done Paul!
Pity the Guardian’s own Larry Elliot blogged the very same day this drivel…
“there is no magic money tree”
http://www.theguardian.com/business/2015/apr/28/ifs-politicians-voters-social-security-tax-cuts-election
I have to say Larry is wrong