Friday, March 25, 2011

Charles Kennedy is not a Keynesian

Talking about public spending and the deficit on Andrew Neil's This Week last night, Charles Kennedy said he was "on the unreconstructed Keynesian end of the argument".

Except that he isn't.

Charles's leadership of the Liberal Democrats broadly coincided with the years in which things the economy was going well. In such circumstances a consistent Keynesian would have been calling on the government to run a surplus and pay off debt.

But Charles did nothing of the sort. Like the rest of the Liberal Democrats, he spent the early Blair years demanding higher public spending. In particular, at the 2001 general election we were very critical of Labour for not having spent more on education.

The point of this post is not to have a go at Charles. It is to ask whether counter-cyclical Keynesian spending polices are politically possible.

Because when the economy is doing well the clamour for higher spending will always be hard for governments to resist. Blair and Brown managed it for a while, but when the former's foreign policy adventures threatened his re-election he succumbed the pressure and hugely increased spending.

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dougf said...

You are precisely correct which is why Keynesian spending polices must be viewed as inherently dysfunctional and in the long-term catastrophic.
It's ALWAYS spend, spend, spend and NEVER save, save, save and that gets us to exactly where we are.

Keynes would never support the perversion of his theories that modern Western States have adopted as the 'norm'. I don't know what the final answer is, but more spending isn't it. More spending (of BORROWED MONEY) is why we are in such a mess.

Chris Jenkinson said...

On the other hand, we were calling for extra taxation to pay for it.

Malcolm Todd said...

As Chris Jenkinson points out, the Lib Dem demand for more spending was based on a clear statement of how it would be paid for - tax, not borrowing; and back in 2001, the budget actually was in surplus. The 'bad borrowing' (running a deficit in prosperity) didn't start until about 2003, I think.