From the Guardian. Trouble is, it may be hard to sell the public on this idea, given the pathological fear of deficits that's been drummed into us for the last few decades.
What to do about Britain's national debt and its annual government deficits in the here and now remained less clear. Had deficit spending not been once and for all discredited at the end of the 1970s? Was John Maynard Keynes really about budgetary spending in times of crisis or did he not rather regard fiscal expansion as a secondary tool to be employed, where absolutely necessary, alongside long-term monetary policies (low long-term interest rates) to keep business cycle fluctuations under control?
All true and valid. But for a hands-on perspective on current national debt and government deficits, it is well worth keeping in mind two basic points. First, the current deficit hysteria – to use Samuel Brittan's term – has no historical grounding. Britain's national debt currently runs at about 40% of GDP. Depending on who you believe and what parts of bank debt are counted as national debt, it is predicted to either stay close to 40% or increase to anywhere between 60% and 100% over the next few years. Between 1918 and 1961, UK national debt averaged well above 100%, remaining closer and, at times above, 200% for the best part of this period. What was achieved? Fascism was defeated and the foundations of a modern welfare state were laid. Since the mid-1970s, UK national debt has oscillated between 30% and 40%, at the beginning of the 1990s falling to below 30% for a few years. What was then achieved? Finance-led corporate capitalism rose to power, leaving behind an all but destroyed manufacturing sector in the UK, rising income inequality and, eventually, a financial sector in tatters. And last, not least, wars are being lost.
Monday, December 7, 2009
A fresh take on deficits
We often hear that deficits are getting out of control and that we have to cut spending drastically, regardless of how much need there might be for that spending. But is it really necessary? Stephanie Blankenburg thinks not: