“The results are in: Keynesians have been completely right, Austerians utterly wrong - at vast human cost” - so wrote Nobel laureate Paul Krugman today.
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“The results are in: Keynesians have been completely right, Austerians utterly wrong – at vast human cost” – so wrote Nobel prize winning economist Paul Krugman in the New York Times following yesterday’s announcement Britain is in a double-dip recession.
He is, of course, absolutely right; for starters, compare our own austerity-driven failure to the fate of the US economy. As Left Foot Forward reported yesterday, the US economy is now 0.8 per cent above its pre-crisis peak, while the UK economy is 4.3 per cent below, as Graph 1 shows.
Graph 1:
Krugman adds:
“It’s important to understand that what we’re seeing isn’t a failure of orthodox economics. Standard economics in this case – that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks – was the Keynesian position.
“The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite…
“I wish I could believe that this would really be enough for us to move on and consider what can be done, now that we know that the ideas behind recent policy were all wrong. But that’s wishful thinking, I suppose.
“Nobody ever admits that they were wrong, and Austerian ideas clearly have an emotional and political appeal that is resilient to any and all evidence.”
• Krugman savages the “austerity debacle” 30 Jan 2012
• Krugman: Coalition is “bleeding” Britain dry 1 Dec 2011
• Obama/Cameron love-in comes unstuck over cuts 25 May 2011
• Krugman joins chorus for Tobin tax 30 Nov 2009
• Krugman: balanced budget would be “worst thing for future generations” 29 Sep 2011
And it’s not just progressive economists saying so – some on the right are finally coming round to recognising the insanity of extreme austerity.
The Daily Beast’s Andrew Sullivan writes:
“If austerity kills growth and thereby revenues, the debt problem can worsen. And Britain, remember, isn’t in the eurozone; it has some currency flexibility to ride some of the shocks. Even so, the passage this ship has to pass through to growth and lower debt is getting narrower and the rocks and tides more treacherous.
“The goal of structural fiscal balance within one five-year parliament has already been abandoned in the face of reality.
“As I’ve said before, I have a long record of fiscal hawkishness. I’m a Tory and want them to succeed. But the one time I worry about fiscal retrenchment is in a period of global recession, where premature austerity can hurt, not help.
“The key is to stimulate enough to get the economy moving on its own momentum and then phase in serious long term structural budget cuts and tax reform.”
134 Responses to “Krugman: “Keynesians have been completely right, Austerians utterly wrong””
Anonymous
No, Labour “chose” nothing of the sort. It takes a long time to repair that sort of damage, but private sector growth in the years leading up to the recession was finally taking off!
“You can’t criticise a Tory Chancellor ”
And yet I have. Because you’re criticising Labour for the same. I’m no Labourite, but your double standard…
Anonymous
Yes, that’s right, I don’t count ceasing to provide a proper service as “reform”. That you count beans rather than the quality of the service provided is entirely typical.
YOU are working very hard on ending the NHS and public schools. And it’s working. The University system is already in a shambles thanks to your policy. You admit that if your 1% can get a better deal from the private sector, screw the 99%.
Evil is evil.
Anonymous
Yes, let’s. Oh look, austerity has nothing to do with pork-barrel and emergency spending. It has to do with the very real and devastating cuts being made to vital services.
But hey, they’re only to the 99%, not real people.
Anonymous
Absolutely, if you have absolutely no sense beyond “IR 1%” and can’t comprehend that “cuts” which cost money are not good for the country.
Because those are your cuts.
Anonymous
It’s LordBlagger, Albert, evidence is to him a one-way instrument.
And It’s not a tinfoil hat hypothesis at all, it’s a quite reasonable one given the current state of affairs. That Labour have explicitly signed on to the cuts…