From Martin Wolf this morning:
The UK Treasury considers John Maynard Keynes to be an idiot. He famously said that “the boom, not the slump, is the right time for austerity”. The Treasury rejects this view. As so often before, it is wrong.
Keynes was, of course, only a little bit correct. The slump is not the time for austerity. But neither is the boom. There is no time for austerity.
Otherwise Keynes’ dictum would chiefly be a criticism of the fact that we didn’t have austerity during the boom, opting for profligacy instead. That would mean that we should have spent less prior to 2008 to help set aside resources to apply a stimulus during the slump. And that would mean that blame for the depths of this financial crisis lie solely with the Labour government.
Of course that is completely wrong. It is the Coalitions fault entirely.
In actual fact, we should have spent even more than Labour did during its time in office. The Labour government’s failing was not to read my book, State of Courage, and immediately act on it. Then we would have even more debt entering the financial crisis and that can only be a good thing.
But apart from that, Keynes was completely right when he agreed with me on the fact that we should spend more.
One would fairly say that the UK economic debate is just a footnote to that.