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Keynes

On 18 Jul 2012 at 10:35am Clifford wrote:

An interesting piece of news today: 'The announcement by George Osborne that the government will underwrite £50bn of infrastructure investment is a belated admission that, in times of recession, the state must intervene to stimulate growth. The delusion that the coalition's spending cuts would increase consumer confidence and produce a self-sustaining private-sector-led recovery has been abandoned after Osborne's "expansionary fiscal contraction" turned out to be, well, contractionary. Whisper it, but Keynesianism is back.'

Any word from our local austerity supporters?

On 18 Jul 2012 at 11:08am Mr Forks wrote:

Come on then Boris trot out your usual right wing mantra!

On 18 Jul 2012 at 11:28am Deelite wrote:

Delicious. Yet another Tory U turn.

On 18 Jul 2012 at 12:32pm Mr Forks wrote:

Boris, Boris, Boris, BORIS!!!!!!!!!!! Where are you fella????!

On 18 Jul 2012 at 1:41pm Annette Curtin-Twitcher wrote:

It may turn out to be more Horsted Keynes than Maynard, though.

On 18 Jul 2012 at 8:29pm expat two wrote:

Who do you suppose is doing all the down-voting?.

On 21 Jul 2012 at 3:43pm Ed Can Do wrote:

I wouldn't call that a return to Keynesianism so much as an admission that as the biggest single driver of both supply and demand in the country, it is only natural that you need to increase government spending to drive up Aggregate demand. That in itself is basic Keynesian theory but I think where Osbourne et al got it wrong is that they were relying on Keynesian demand-side growth models but following capitalist, almost Hayek-esque supply-side policies.

Increasing aggregate supply is a far more reliable way to grow your economy but requires a much longer-term solution that is achievable through increased aggregate demand. The problem we really have in this country and will probably always have is that our parliament term is more or less half of our economy's natural business cycle. It takes about ten years for the UK economy to correct itself from bust to boom but halfway through that there's a general election. No party is ever going to campaign on the basis that everything is rubbish now but in five years time life will be peachy, all that will get you is voted out and the opposition will ride high five years later on the crest of the improvements you're making now.

That's basically how Tony Blair stayed in power so long. Labour got in at the height of a downturn (Depth maybe?) then had to very little work to generate a boom five years later, most of the groundwork for which was laid by the previous Tory government. They then kept demand artificially high by relying on huge over-spending in government and a crazy property bubble and carried that on until the whole thing collapsed, Tony Blair being smart enough to jump ship before it all really came apart leaving Gordon Brown to pick up the pieces and usher in the current bunch of idiots.

So long as we have a largely bi-partisan political system and politicians who prioritise re-election and personal gain over the good fo the country, we are destined to bounce back and forth aimlessly between crippling recession and occasional, accidental boom periods.

On 21 Jul 2012 at 4:56pm Southover Queen wrote:

Another great and informative post, Ed! Thank you.

I know nuffink about economic theory but I have long felt that political short-termism was deeply unhelpful. There are a lot of issues which can only be addressed by people who can look beyond the next election, and of course it's not just economic cycles, is it? Climate change is probably the most intractable of all, because while continuing as we do now will eventually destroy the planet, taking measures to change our behaviour will be uncomfortable, particularly for petrochemical and other big businesses, so they will do almost anything to avoid them. Add to that the inevitability of the democratic cycle as well and you're totally stuck and so we continue our march to extinction.