View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. Politics
17 January 2011

Keynes and the coalition: the great economic debate

Vince Cable’s claim that Keynes would have backed the coalition has enabled a more honest debate.

By George Eaton

Vince Cable’s attempt to reclaim Keynes for the coalition is the subject of both a Guardian editorial and Larry Elliott’s economics column today. In his essay (which you can read in the current issue of the NS), Cable argues that the Master would have sided with the coalition, not Labour, on the critical question of deficit reduction.

Cable, as Elliott notes, is right to demolish the myth that Keynes believed governments should run deficits as a matter of course. Rather, he argued that governments should run surpluses in times of plenty in order to allow them to increase spending in times of want. As he succinctly put it: “The boom, not the slump, is the right time for austerity at the Treasury.”

Keynes would not have approved of the 2-3 per cent structural deficit with which Labour entered the crisis, a fact the left should not feel uncomfortable about. It was New Labour’s failure to make the honest case for higher taxation that meant spending first galloped ahead of revenue. There is a left-wing, as well as a right-wing, critique of excessive deficit spending. (None of which should be used to obscure the fact that the record deficit was caused largely by a collapse in tax receipts and higher welfare spending due to increased unemployment.)

But in other areas, most notably employment, Cable’s Keynesian defence of the coalition’s austerity drive looks shakier. Were he alive today, Keynes’s principal concern would be the effect on demand of high unemployment (2.5 million at the last count).

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

As Elliott writes:

[W]ould Keynes really be standing shoulder to shoulder with Cable and Osborne if he were alive today? More likely he would say that Britain has an unemployment problem rather than a deficit problem; that the impact of monetary policy is impaired by the problems of the banks; that the squeeze on consumer spending from tax increases and spending cuts will choke off private investment; and that the lesson of the US in the 1930s is that premature efforts at balancing the budget risk a double-dip recession.

Yet the merit of Cable’s essay, as the Guardian’s editorial notes, is that it elevates debate above the cynical falsehoods and clichés (“maxing out the nation’s credit card”) employed by David Cameron and George Osborne. The Business Secretary’s piece is the only serious intellectual contribution any cabinet minister has made to economic discussion.

Keynes’s biographer Robert Skidelsky and David Blanchflower will respond to Cable’s essay (itself a response to Skidelsky’s original critique of the coalition’s fiscal retrenchment) in the next issue of the NS.

Content from our partners
The promise of prevention
How Labour hopes to make the UK a leader in green energy
Is now the time to rethink health and care for older people? With Age UK

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU