There is a lot of scratchy talk at the moment about spending our way out of recession. Simon Jenkins was at it in the Guardian yesterday. It seems Keynes never went away during the past 30 years of monetarism and “tight” fiscal rules.
His easy way out of the soup: spend, spend, spend, has always been grasped at eagerly by Labour governments to expand their beloved state sector with yet more bureaucrats. They are the economy, said Yvette Cooper during the long years of Gordon Brown’s dominance of the fiscal scene.
Conservatives usually want to cut the “public realm” and transfer the workers into private sector jobs — productive sector would be a better term. The idea is to stop them being a burden on taxpayers and transform them into contributors to the national wealth.
Britain ran the largest empire the world has ever known with 10,000 civil servants. It now employs many millions to perform a similar role in the UK alone.
The current “austerity” is not a mean-spirited reversal of everything Labour did in office, but a macroeconomic transformation of the balance between the payers and the paid. A healthy economy needs nothing less.
In a prudent way, the public spending route can be a useful tweak in times of manageable budget deficits and lowish national debt. That situation no longer applies. Brown ran hefty deficits during the times of plenty, putting nothing away for the recession he denied was coming.
Britain is at the limits of its debt dynamics now, holding off calamity by its good ratings in the bond markets. Another spending spree would unleash a truly momentous perfect storm. Look around Europe and smell the fear.
So we have to stick with the medicine. There is no other option.
Gordon ate all the pies.