Nick Clegg's economic philosophy switched from Keynesian to deficit hawk in early May. He completed the conversion today by using Thatcher's flawed household debt metaphor.
At some point in early May, Nick Clegg’s economic philosophy switched from Keynesian to that of a deficit hawk. Today he completed the conversion by reiterating Margaret Thatcher’s flawed household debt metaphor.
During his speech today, Nick Clegg said:
“It’s the same as a family with earnings of £26,000 a year who are spending £32,000 a year. Even though they’re already £40,000 in debt. Imagine if that was you. You’d be crippled by the interest payments. You’d set yourself a budget. And you’d try to spend less. That is what this government is doing.”
The argument was first used by Margaret Thatcher in 1976 when she told Thames TV’s ‘This Week’:
“I think you’re tackling public expenditure from the wrong end, if I might say so. Why don’t you look at it as any housewife has to look at it? She has to look at her expenditure every week or every month, according to what she can afford to spend, and if she overspends one week or month, she’s got to economise the next.
“Now governments really ought to look at it from the viewpoint of ‘What can we afford to spend?’ They’ve already put up taxes, and yet the taxes they collect are not enough for the tremendous amount they’re spending. They’re having to borrow to a greater extent than ever before, and future generations will have to repay.”
But this line has been thoroughly debunked in recent times by The Times’ Anatole Kaletsky and New York Times’ Paul Krugman as well as by Keynes himself. Of course, until his Damascene conversion, Nick Clegg knew this. On Saturday May 1, he told Reuters that:
“My eight-year-old ought to be able to work this out – you shouldn’t start slamming on the brakes when the economy is barely growing. If you do that you create more joblessness, you create heavier costs on the state, the deficit goes up even further and the pain with dealing with it is even greater. So it is completely irrational.”
Lib Dem members tend to share this older view. A YouGov poll today found that only 29% of party members fully agree with the government’s policy of cutting spending to reduce government borrowing. An identical proportion of Lib Dem voters share Clegg’s position.
At some unknown point after the Reuters statement but before he spoke to Mervyn King, Clegg changed his mind. With his conversion complete, the Liberal John Maynard Keynes will be turning in his grave.
UPDATE 21/9:
The theme of this blog post was picked by a couple of commentators today. Matthew Engel in the Financial Times called Clegg’s metaphor, “the usual simplistic nonsense of comparing a governmental deficit with household debt”. Polly Toynbee in the Guardian calls it “that disreputable old populist fallacy”.
82 Responses to “Clegg completes Thatcherite conversion with Maggie metaphor”
Philip Walker
On the other hand, the Liberal Gladstone is probably smiling. One of the benefits of being a very old party is the ability to claim a genuine intellectual forebear for almost any policy position!
I rather think that proclaiming retrenchment to be “thoroughly debunked” is putting it a little strongly. Economics is not exactly famed for its clarity, or scientific testability.
InBirmingham
Clegg completes Thatcherite transition http://tinyurl.com/3x9zunb
Mr. Sensible
Will, just remember what Clegg said to Nick Robbinson in August.
“I changed my mind earlier than that [the Coaltion negotiations] … firstly remember between March and the actual general election … a financial earthquake occurred in on our European doorstep.”
“… to be fair we were all … reacting to very, very fast-moving economic events.”
https://www.leftfootforward.org/2010/07/now-clegg-claims-he-changed-mind-on-deficit-before-the-election/
trevors den
Don’t make me laugh.
Interest payments on debt are £30 billion this year. Next year it will be £43 billion; the year after … you get the message.
Well actually of course you don’t.
Was Keynes advocating debt interest payments which would surpass the education budget and the defence budget combined?
Was Keynes advocating debt interest payments which would amount to half the NHS budget?
And that is just interest payments; what about repaying debt? Yes in your dreams.
In fact whilst Keynes proposed that governments should indeed expand public expenditure to counteract the effects of economic contraction, but when in times when the economy was growing strongly Keynes said the government should reduce demand and, in effect, save up for a rainy day.
Since you are a fan of Keynes you should remember that after the war he negotiated a loan of £55 billion in todays money. It took 60 years to pay off. Our current national debt is heading for £1.4 trillion.
Oh sorry – these are figures and money. Do move on.
John James McArdle
RT @leftfootfwd: Clegg completes Thatcherite conversion with Maggie metaphor http://is.gd/fjJDX