Another voice: Against austerity

Here’s the latest in our Another Voice series of posts, which give prominence to viewpoints outside the normal Coffee House fold:

You can’t help but notice that the UK economy isn’t doing too well. Part of this is down to international developments, sure. But part – as Mervyn King said in “http://www.bankofengland.co.uk/monetarypolicy/pdf/govletter111006.pdf”>his letterto George Osborne last week – is the result of “fiscal consolidation”, aka spending cuts. The IMF’s assessment, published a few days ago, shows both why debt has risen (lower tax revenues) and what is happening now (sharp contraction):

And there’s much more contraction to come:

So why keep on contracting if it is affecting economic growth? Clearly, the Prime Minister thinks that this is exactly what is needed. Yet, in doing so, he shows that he as learnt nothing from the history of the Great Depression. That history, and conventional economic wisdom, tells us exactly what we should be doing – and it is not what Martin Wolf “http://www.ft.com/cms/s/0/045aab84-e61c-11e0-960c-00144feabdc0.html#axzz1Zu0ayAI7”>describes