There is nothing magic about this Keynesian fad

Mr Brown’s bank recapitalisation exercise has been portrayed in the British media as a financial and political coup. The Financial Times has been particularly enthusiastic, describing it as ‘a global template’. Mr Brown’s admirers apparently believe that the British government’s programme is both intellectually original and a real-world success, and is therefore being copied in other leading nations.

The truth is very different. The government’s policy is not intellectually original, it will not be fully implemented in practice and, to the extent that it is implemented, it will be a disaster. Further, no other country is copying Brown’s plan or behaving as vindictively as Britain towards its financial system.

Admittedly, the Treasury has acted over the last month with a decisiveness that was sadly lacking in the Northern Rock affair. This may explain — although it does not excuse — the widespread readiness to applaud the plan as new and clever. The key elements have been widely reported.