Harold James: Austerity Politics, Then and Now
[Harold James is Professor of History and International Affairs at Princeton University and Marie Curie Professor of History at the European University Institute, Florence. His most recent book is The Creation and Destruction of Value: The Globalisation Cycle.]
Other countries, such as Greece, needed to have a full-blown crisis in order to prompt such adjustment measures, whereas Britain was acting prudently and preemptively. If Britain, with a relatively low share of public debt to GDP (64.6%) is worried, the implication is that many other countries should be much more concerned.
But drastic attempts at fiscal consolidation immediately evoke memories of the Great Depression. Andrew Mellon, the United States Treasury Secretary at the time, talked about liquidating workers, farmers, stocks, and real estate in order "to purge the rottenness out of the system." In Britain back then, Philip Snowden, a small man with a narrow, pinched face, who needed a cane to walk, seemed to want to remake the British economy in his physical image.
Given these historical analogies, a slew of heavyweight Keynesian critics are warning that the world is about to repeat all the disasters caused by bad fiscal policy in the 1930's. But this interpretation of the Great Depression, common though it is, is misguided.
In the first place, the critics get their history wrong. US President Herbert Hoover's administration did not initially respond to the depression by emphasising the need for fiscal austerity. On the contrary, Hoover and other figures argued in a perfectly modern, Keynesian fashion that large-scale public-works programmes were needed to pull the economy out of the trough....
Read entire article at Mmegi Online
Other countries, such as Greece, needed to have a full-blown crisis in order to prompt such adjustment measures, whereas Britain was acting prudently and preemptively. If Britain, with a relatively low share of public debt to GDP (64.6%) is worried, the implication is that many other countries should be much more concerned.
But drastic attempts at fiscal consolidation immediately evoke memories of the Great Depression. Andrew Mellon, the United States Treasury Secretary at the time, talked about liquidating workers, farmers, stocks, and real estate in order "to purge the rottenness out of the system." In Britain back then, Philip Snowden, a small man with a narrow, pinched face, who needed a cane to walk, seemed to want to remake the British economy in his physical image.
Given these historical analogies, a slew of heavyweight Keynesian critics are warning that the world is about to repeat all the disasters caused by bad fiscal policy in the 1930's. But this interpretation of the Great Depression, common though it is, is misguided.
In the first place, the critics get their history wrong. US President Herbert Hoover's administration did not initially respond to the depression by emphasising the need for fiscal austerity. On the contrary, Hoover and other figures argued in a perfectly modern, Keynesian fashion that large-scale public-works programmes were needed to pull the economy out of the trough....