In the run-up to the government's 'emergency budget', the overwhelming political consensus, parroted each day by the BBC’s economic correspondents, is that ’balancing the budget’ and ’slashing the deficit’ is now a national priority.
Together with my mentor Professor Victoria Chick, Emeritus Professor of Economics at University College, London, I am particularly alarmed because this analysis, based as it is on micro-economic reasoning, has dire macro-economic consequences.
These consequences appear not to be understood by European Union and US politicians and policy-makers at the OECD, the ECB and the IMF. As a result the world now faces the terrifying prospect of globally synchronised austerity.
I have long argued that Britain needs to ’spend away the debt’, and on my blog Debtonation (http://www.debtonation.org/) I have, among other things, demonstrated the consequences of the 1945 Labour government’s post-war spending: namely, a steady reduction in government debt.
Professor Chick and I have been digging deeper into the numbers, and have produced the attached paper on the evidence that fiscal consolidation increases, rather than ’slashes’ the debt. It is a more academic document, but riveting all the same, I trust.
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