Never the twain shall meet.
I wonder if the BCC realise just how crass that comment is? They’re asking the government to carry on with its cuts that are sucking money out of the economy at a record rate. And at the same time they’re saying the government must deliver growth in demand and new jobs.
The BCC can have cuts or growth, but not both.
Surely they realise that by now?
And if not, shouldn’t they take a course in economics? Not neoliberal economics – but the economics of Keynes that got us out of recession in the 30s and are the only thing that could do so again now.
The economics of Keynes that Ritchie is referring to is of course the idea that there should be fiscal stimulus, government borrowing to spend in the economy so as to pump prime growth.
It\’s a lovely idea of course and it is exactly what the theory itself says we should do and should happen.
It\’s just that, with reference to the UK and the 1930s, there\’s no actual evidence of it working. The reason being that in the 1930s that isn\’t what the UK actually did.
You see, 1930s Britain did not run large deficits. They ran virtually no deficits at all (that\’s what did for Ramsey MacDonald you see?), did not increase public spending and even the national debt only rose 5% (5% of the national debt that is) and that was more of an effect of screamingly high interest rates to protect the gold standard than anything else.
What the UK actually did at this time was to come off the gold standard and allow the declining exchange rate to boost exports.
So, the lesson of the 1930s for us here in the UK is that the effects of a recession can be ameliorated not by splurging with borrowing and spending but by cutting the exchange rate.
No, I don\’t insist that this is the only way that things can be done: only that that is what we did in the 1930s and that it is true that the UK rebounded much more quickly than did the US which went the other way. We were back to peak GDP per capita by 1934, two years after the currency decline.
Might I therefore suggest a little economics course for Ritchie?
A tad of economic history perhaps? For if you\’re going to use the UK\’s 1930s experiences as your guide to what we should do now it would help if you actually knew what the UK\’s 1930\’s experience actually was.