Johann,trying to head his head around the rights and wrongs of economic intervention spoke to this year's Nobel Prize-winning economist, Professor Paul Krugman.
and he continues
He told me he was "shocked" by hearing David Cameron's economic statements in favour of "tightening the government's belt" in a recession. "It's pure Herbert Hoover," he says. "In fact, it reminds me of Andrew Mellon [Hoover's Secretary of the Treasury], who said the [government] response to the Depression should be to 'liquidate labor, liquidate stocks, and liquidate farmers'."
Many of Cameron's statements are "just wrong", Krugman says. For example, Cameron says Britain can't afford a fiscal stimulus because we are going into the recession with the highest debt of any developed country. "But that's not true. Britain is at the lower end of the middle of developed countries [when it comes to national debt]. Less than the US, much less than Japan or Germany or Italy." He is worried by the incorrect lessons Cameron has drawn from the 1930s. "Renouncing a fiscal stimulus when private spending is contracting is strange. Governments have very few tools at their disposal, and Cameron wants to not use them." So are you saying our recession will be much worse if we follow Cameron's advice? "Yes. For sure.
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