A blog by Luke Akehurst about politics, elections, and the Labour Party - With subtitles for the Hard of Left. Just for the record: all the views expressed here are entirely personal and do not necessarily represent the positions of any organisations I am a member of.

Sunday, February 01, 2009

Nobel prize-winner slams Cameron's economic policy

I don't normally bother reading the Independent, but yesterday it had a great interview of Paul Krugman by Johann Hari.

In it, Professor Krugman, the Nobel prize-winner for Economics, lays into David Cameron's laissez-faire policy:

"he was "shocked" by hearing David Cameron's economic statements in favour of "tightening the government's belt" in a recession. "It's pure Herbert Hoover," he says. "In fact, it reminds me of Andrew Mellon [Hoover's Secretary of the Treasury], who said the [government] response to the Depression should be to 'liquidate labor, liquidate stocks, and liquidate farmers'."

Many of Cameron's statements are "just wrong", Krugman says. For example, Cameron says Britain can't afford a fiscal stimulus because we are going into the recession with the highest debt of any developed country. "But that's not true. Britain is at the lower end of the middle of developed countries [when it comes to national debt]. Less than the US, much less than Japan or Germany or Italy." He is worried by the incorrect lessons Cameron has drawn from the 1930s. "Renouncing a fiscal stimulus when private spending is contracting is strange. Governments have very few tools at their disposal, and Cameron wants to not use them." So are you saying our recession will be much worse if we follow Cameron's advice? "Yes. For sure.""

Hari concludes with a quote from FDR:

"Better the occasional faults of a government that lives in a spirit of charity than the constant omission of a government frozen in the ice of its own indifference".


Anonymous Anonymous said...

winning a nobel prize in itself isnt something we should admire, its been given to some nasty pieces of work

7:55 pm, February 01, 2009

Anonymous Anonymous said...

Nobel prize winner, what the hell does he know. Its people like him that have caused this mess....some expert.

Luke you don't have a case when your own party has caused a mess so bad that the UK is going to be the worst hit economy in Europe if not the world. The Germans are laughing at us, we are the weakest economy in Western Europe.

Brown built the whole economy on credit and risk taking. In fact it was Brown who hailed the disgraced RBS boss as a one one man economic wonder.

Immigration at crisis point with millions of British jobs being off shored and taken by imports.

We are in a right mess. Pensions plundered, unemployment rocketing and the UK still has a lot worse to come. How on earth could Cameron do any worse?


8:09 pm, February 01, 2009

Anonymous Anonymous said...

I agree. There is myth going around that 1933, when FDR took over was the worst year of the depression. Rubbish GDP growth started in 1933 in the USA. After 4 consecutive years of economic decline. The depression started in 1929 not 1933. Unemployment started to fall in 1933 after FDR was elected and Hoover had finally started to reverse his free market polices in 1932. how can the be classified as the worst year?

In 1929 Hoover cuts taxes for the rich the 70 % rates to 20 % rates. Then a depression happened.
In 1932 the tax cuts were reversed and the economy started growing again.

Rich you are a right wing facist.

10:43 pm, February 01, 2009

Blogger Andreas Paterson said...

Rich, Krugman is an academic economist and newspaper columnist. As far as I know he's had little involvement with the world of finance. The following is a column he wrote in 2005 warning of the dangers of a housing bubble.

Despite Brown's failings, there can be no doubt that his economic prescription is far better than Cameron's.

Luke, I await your considered opinion on exchange controls.

10:51 pm, February 01, 2009

Blogger Ravi Gopaul said...

In response to Rich, though I disagree with his stance on Globalisation and free markets, he critcised Greenspan's reluctance to regualte the subprime market.

I'm surprised Luke likes someone with obvious Keynesian sympathies

11:14 pm, February 01, 2009

Anonymous Anonymous said...

"Nobel prize winner, what the hell does he know. Its people like him that have caused this mess....some expert."

Funny I thought it was people like Osborne and Cameron, Thatcherite city banker types, who got us into this mess...

9:32 am, February 02, 2009

Anonymous Anonymous said...

Pity. Cameron has never taken the policy positions ascribed by Krugman.

Any bloody fool with an O level in economics - even you - knows the Keynsian prescription for dealing with downturn.

And wasn't it Brown who argued for "prudent" fiscal rules including not letting public spending as a proportion of GDP rise above 40%.

If Brown - and presumably Krugman - thought it wasn't prudent then to push public spending above 40% why is it prudent now.

One thing Brown won't do is buck the market. Perhaps, when the markets refuse to swallow government debt or the Bank of England defaults or the IMF turns up on our doorstep, Brown might accept responsibility.

No one's holding their breath.

11:26 am, February 02, 2009

Blogger Unknown said...

I find it difficult to understand the tories economic strategy. They say they will cut spending, then rule out all of the big spending departments and then announce lots of new spending plans - I would be surprised if it all added up.

4:03 pm, February 02, 2009

Anonymous Anonymous said...

Why are people so angry about being inconvenienced by a bit of snow. We hardly get any and when we do surely it's great that it makes everything stop for a bit. bloody hell people get out there enjoy it because it will be probably be gone in the morning.

8:36 pm, February 02, 2009

Blogger Mark Still News said...

The Tories have no substance or policies adequate enough to address the economic crisis, it was the Tories that laid down the NLP economic policy foundations.

Gordon Brown not unlike his Tory critics, failed to sustain the Housing market when he was Chancellor!

Astronomical housing inflation made it really bad for people long before the credit crunch!

Working class people can't rent or buy a decent home and are stuck in squalid overcrowded accommodation.

Housing inflation makes us uncompetitive. in the global economy and is eally a nasty evil

Housing inflation wiped out any gains made in our living standards since 1997.

Gordon wants to rescue the housing market and is hoping it will start inflating again.

Its time for a new approach-NLP really need to get on the correct track!

11:48 pm, February 02, 2009

Anonymous Anonymous said...

FDR didn't save the US economy in the depths of the recession...the Second World War did...

Krugman for all his 'Nobel Prize' winning credentials has never had an applicable economics position. He's an academic who's theories may win him acclaim from the champagne elites...but does government spending won't get us out of this hole...tax cuts (real and significant) promoting the paying down of private debt and consumer spending...that will help the economy...public spending will have the effect of distorting markets where they are still working, make the private sector less competitive and lumber future generations of tax payers with huge amounts of national debt.

This is chickens coming home to roost time - for years (Tories and Nu-Lab) have said "Yes you can have your cake and eat it" with private wealth accumulation and public service spending...

Unfortunately you can't have both...there should be an equilibrium to be struck but with Labour in hock to the public services, the Tories in hock to the City it's impossible to have a sensible economic discussion with anything bordering intelligent people. This is why Krugman's intervention is so absurd...

10:51 am, February 03, 2009

Anonymous Kishore said...

Hi to everybody, this is kishore. I want to share details of Nobel Prize. For the information on Nobel Prize history, prize money, winners by year, winners by category, winning countries list, list of Noble prize winners, list of countries, winners photos and etc details are available on “Altiusdirectory.com”.


12:47 pm, July 29, 2009


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