Trinity Papers No. 34 - 'Who’s Afraid of John Maynard Keynes? '

Who’s Afraid of John Maynard Keynes?

by Alex Millmow1

‘We have reached a critical point. We can… see clearly the gulf to which our present path is leading… We must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what ultimate outcome we cannot predict’ J.M. Keynes, March 1933

Introduction

Keynes made this rather ominous prophecy not long before the World Economic Conference in London in June 1933. He was warning what would happen if Europe and America could not come to some form of co‐ordinated action. With the G20 meeting in London this week there are hopes that the leaders of these nations can agree on a co‐ ordinated fiscal stimulus plan and devise a means to regulate the international capital flows and eschew any return to protectionism. The 1933 Conference proved a miserable failure with nations going their own ways. You would think the lessons of history would prevent a rerun. We have already seen industrialized nations resorting to fiscal stimulus and gratitude for that must go to Keynes. Indeed the stimulus packages that both Britain and the United States are embarking upon are nothing Keynes would have seen except of course for the war years. Despite the renewal of interest in Keynes the short answer to the title of my paper is, well, quite a few. But before we come to those neo‐ conservatives, New Deal revisionists and recondite neoclassicists let us rejoice that Keynes is back. As his biographer, Robert Skidelsky once said ‘Keynes’s ideas will live so long as the world has need of them’. Right now Keynes ideas are needed and he is back in the limelight. Whatever the economists at the Chicago School might think of him 1

Alex Millmow is a senior lecturer in economics at the University of Ballarat and is also the President of the History of Economic Thought Society of Australia

Keynes was a great role model for economics. He always struck me as such an irresistible, attractive character, certainly to those studying economics for the first time.

With the economic storm still raging these are exciting days for economics and Post‐ Keynesian economists in particular; as Paul Krugman puts it ‘The Keynesian moment’ has arrived. The young, it is hoped, will take up an interest in economics just as the Great Depression inspired a brilliant generation of scholars to turn their minds to economics to discover what caused their fathers to lose their jobs or business. L.F. Giblin, the first Ritchie Research professor of economics at Melbourne University believed the Great Depression was ‘a great opportunity to bring home economic thought to the Australian people’.2 The Cambridge economist, Joan Robinson always insisted that economics was not ‘a game’ but a serious intellectual endeavour. As a young woman economist in the 1930s she was concerned with the social relevance of the discipline and attached great importance to the seriousness and integrity of an economist rather than his or her ability to untangle intellectual puzzles. One of Robinson’s counterparts, the Oxford economist John Hicks noted ‘There is so much of economic theory which is pursued for no better reason than its intellectual attraction; it is a good game’. The game is to show how clever one is and get work published in first rank journals. The same goes today but Keynes was a rare exception to it.

As the President for the History of Economic Thought Society of Australia I am gratified to see people visiting the repository of economic ideas and discover the works of characters like Hyman Minsky, Joseph Schumpeter, Irving Fisher and Freidrich von Hayek. Of course, the shrine everyone is visiting today is Keynes and in this short paper I wish to discuss his enduring legacy and, in the last part of the paper, why his thought provokes so much acrimony and distaste in some quarters.

Keynes Redux

While we are now facing an economic storm that has been called the Great Recession less than two years ago central bankers and mainstream economists were gloating about what was called the Great Moderation. It was the idea that capitalist economies were enjoying high growth, subdued market volatility and low inflation. The business cycle was pronounced dead. The Governor of the Bank of England, Mervyn King described the era as a nice decade; that’s nice for Non Inflationary Continuously Expansionary economies.3 After August 2007 however the global economy began to shudder as the subprime problem in America, compounded by securitization, cheap money and a bubble economy that had gone on too long began to unravel. Risk had been underpriced and rank uncertainty reduced to a probability. Fear infected market sentiment for the first time in many a year. Mania went quickly to panic. There has since been volatility in stockmarkets, toxic assets that no one wants and the subsequent freezing over of credit channels the like of which we have not seen since the Great 2 3

Cited in W. Coleman, S. Cornish and A. Haggar (2006) Giblin’s Platoon Canberra: ANU Epress.

Some say the NICE acronym has been replaced by DICE - that is Deflation in Contracting Economies.

Depression. The pigeons were coming home to roost. It was time to call in Keynes. As one opinion piece in the Australian Financial Review put it ‘In a global crisis, call Keynes’.4 Incidentally, that article had been published a decade ago when the Asian Economic Crisis was unfolding. The simple point here is that whenever the global economy is facing meltdown we resort to Keynes. So when the subprime crisis developed into a full blown global deflationary shock sending economies into a marked slowdown there has been an avalanche of press articles calling for the return of Keynes.

Invoking Keynes in a crisis, though, does mean that pundits will accept his teachings.

Robert Lucas Jr., the Chicago economist who pioneered rational expectations theory, including the policy ineffectiveness postulate, and had made plenty of disparaging remarks about Keynesianism said recently that ‘In a fox‐hole, everyone is a Keynesian’.

The version of Keynes that some new‐found followers adopt though is a Krispy Kreme one ‐ all confected, light and fluffy. They will dispense with him and his more fundamental insights about why the market system is so ridden by volatility and uncertainty as soon as the global economy gets out of the slump.

Like Joan Robinson, Keynes was, despite his myriad of public activities, a serious scholar trying to solve a major operational defect in a market‐based, monetary economy that he had first detected in the twenties. He had discovered that the economic mechanism could jam, that unemployment and under‐employment would persist even though the classical economic doctrine held this could not be maintained. The problem was not capitalism per se but the failure to regulate it effectively, not the market system per se but the lack of proper functioning markets. Capitalism had to be regulated by a form of social control, a public sector to take up the slack in aggregate demand.

When Keynes settled down to write his great book he abandoned his economic journalism and surrounded himself with a group of young Cambridge economists to get to the nub of what he had failed to say in his last book, The Treatise on Money. It took 5 long years of mental struggle to write The General Theory of Employment, Interest and Money. He seemed fairly pleased with the end result but insisted upon debate, trusting that 'time, experience and the collaboration of many minds will discover the best way of expressing the ideas' ‐ ideas which Keynes (1936, xxxii) held to be 'extremely simple and should be obvious'. And what was that message?

The key message implicit within the General Theory was that aggregate demand, that is consumption and investment spending, governed the level of output and economic activity. The level of that expenditure, supplemented by public works, could be either too much or too deficient a level in terms of employing resources. The powerhouse variable of investment spending, determined by the interplay of marginal efficiency of capital and interest rates, was also subject to rank uncertainty. Interest rates were determined by the interaction of liquidity preference and the supply of money. The economy’s self‐corrective properties were not as effective as classical economists believed: full employment was rarely the natural state for market capitalism, rather it 4

C. Ryan ‘In a global crisis, call Keynes’, the Australian Financial Review June 27, 1998

was under‐employment. Therefore, aggregate demand had to be manipulated to ensure full employment and price stability. This could be achieved, not by planning or arbitrary controls but by the discrete but subtle use of fiscal and monetary policy by the authorities. These instruments could be used not just to rectify economic disturbances but also to maintain equilibrium and economic stability. When Keynes wrote a reprise of the book in a journal article in 1937 as a way of addressing his critics he strongly emphasized the other key message of his model, namely, the role of fundamental uncertainty in economic life, particularly with regard to investment and the problematic role of money. In Keynes’s schema, the simple act of production and consumption involved risk in that entrepreneurs produced what they expect to sell. Entrepreneurs’ expectations, however, need not always be fulfilled. Nor was there was no reason to presume, however, that the sum of all these production decisions would be consistent with the full employment level of output. To correct this, a new source of demand to ensure the level of demand corresponds to the full employment level of output. Since Keynes held that productive capacity would always be tending to outstrip total consumption ‘a somewhat socialization of investment will prove the only means of securing an approximation to full employment’. He added ‘I expect the state, which is in a position to calculate the marginal efficiency of capital of goods on long views and on the basis of general social advantage, taking an ever greater responsibility for directly organising investment’. In 1939 Keynes further articulated his new society of ‘liberal socialism’ a middle way if you like. It would be a more compassionate capitalism with private enterprise preserved and full employment, economic growth and income equality could be pursued. Hayek was alarmed that Keynes’s vision of a new order would increase the power of the state and extinguish the bourgeois freedoms Keynes adored. Keynes nonchalantly dismissed these concerns believing that well‐intentioned officials or mandarins would never abuse their power and status. He might have changed his mind on this since he was never hidebound, nor dogmatic, but of a flexible disposition, skeptical and prepared to change his mind when the circumstances had changed. According to John Vaizey, Keynes exhibited ‘a genius for the unexpected’.5 This is an exceedingly important point when we try and figure out what Keynes would recommend to get out of the current crisis. We cannot just go for the mechanical ‘Keynesian’ approach. As a political economist per excellence, Keynes was always insistent upon getting the character of the age right before committing himself to policy advice. Vigilant observation was what he called it. Just to confound the difficult art of economic policymaking, one of Keynes’ closest associates Richard Kahn recalls that towards the end of his life Keynes would say that the ‘one thing, and only one thing, was certain and that was that the problems which we should be faced with would be strange ones and not familiar ones’.6 In another place he surmised ‘We do not know what the

5

J.E. Vaizey (1977) ’Keynes and Cambridge’, in R. Skidelsky (ed.) The End of the Keynesian Era London: Macmillan, pg 17.

6 R.F. Kahn (1971) ‘Keynes and contemporary problems’, in Essays on Employment and Growth Cambridge University Press, pg. 112.

future will bring except that it will be different from any future we could predict’.7 Certainly the subprime problem and subsequent credit meltdown is a new phenomenon which surprised many before it took the traditional outcome of developing into a full‐ blown economic crisis. Keynes would have supported the rescue of the world’s banking system but be unsettled by the uncertainty and the scale of the operation.

In that regard Keynes would have been speechless how western governments and central banks in the 1980s had been seduced by liberalism to progressively let their money and financial markets become deregulated on the premise that they were both self‐regulating and stable. He knew the menace uncontrolled finance could get up to. He would be astounded at how the financial and money market with mathematical whiz kids, aided and abetted by the latest in economic theory, had factored uncertainty out of investment behaviour and made, so it seemed, getting into debt a riskless venture.

The Chairman of the Federal Reserve, Alan Greenspan held that risk in financial markets, including derivative markets, would be regulated by the private partners themselves. In other words financial markets should be left to their own devices. Central bankers were also guilty of assuming that credit markets and asset bubbles were basically benign and that it was natural for citizens to assume more debt.

While we commonly link Keynes’s name with the idea of fiscal stimulus he was, in fact, rather conservative in matters of public spending and even pump‐priming. He expected there to be a budgetary balance over the lifetime of an economic cycle. Fiscal and monetary policy had to be tailored to keep the level of economic activity in semi‐boom.

Prevention was better than cure. As a consummate player in the financial markets, Keynes knew that sometimes these fragile markets could be spooked by excessive government spending. Given all that, it could now be argued that the economic circumstances today warrant a full‐barrelled Keynesian solution. Fiddling around with interest rates might help but this expedient is weakened when business expectations have been demoralised and ‘animal spirits’ are dimmed. Nor will inflation stir. Indeed, deflation is on the cards meaning that deficit financing should not be a problem as willing investors buy government bonds. Compare this with the seventies when the Keynesian demand management became unstuck because of stagflation and the break‐ down of the simple‐minded Phillips curve. It was implied by the Phillips curve that you could not have inflation and rising unemployment occurring at the same time. According to Keynes’s colleague and confidante, Richard Kahn it was trade union militancy, coupled with real wage resistance that destroyed the Keynesian consensus then. It was also the case perhaps that hubris and a sense of omnipotence had gripped the mind of economic policymakers. In 1976 a British Labour Party Prime Minister, James Callahan administered the last rites announcing at the annual Party congress ‘We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting govt spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by 7

Cited in ‘John Maynard Keynes: Can the Great Economist Save the World?’ The Independent 8 November

injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step’.8 Australia, at this time too was suffering from stagflation and the Liberal Party leader, Billy Snedden lamented once ‘We needed a new Keynes’ to solve the conundrum. The old one, however, still fits nicely.

Today the discipline of macroeconomics which Keynes pioneered has became something of a backwater in mainstream economics – something you teach the first year students. Gregory Mankiw’s principles textbook, for instance, placed Keynesian short term fluctuations at the rear end of the text. According to Mankiw, Keynes’s General Theory ‘is an obscure book …it is an outdated book…We are in a much better position than Keynes was to figure out how the economy works…few macro economists take such a dim view of classical economics as Keynes did…Classical economics is right in the long‐run. Moreover, economists today are more interested in the long‐run equilibrium. There is widespread acceptance of classical economics’.9 In the post war era mainstream economists reduced Keynes’s theory to ‘a special case’ of the classical theory where money wages were ‘sticky’. In the new classical macroeconomics there is no room for Keynes’s insights simply because there was no role for money, nor liquidity preference, animal spirits, uncertainty or anything like that. Any unemployment is voluntary or a transitory phenomenon. The new classical macroeconomics consensus on economic policy emphasizes a pre‐Keynesian sound finance rather than functional finance.10 Monetary policy, orchestrated by an independent central bank, is all about anchoring inflation at low stable rates but turning a blind eye to asset price bubbles and the stability of the financial system. New Classical macroeconomics held that in the absence of ‘egregious government interference’ market economies would gravitate to full employment and higher growth rates’.11 Events like the Great Depression were explained by Robert Lucas Jr. as a case of a mass labour‐leisure trade‐off. Workers walked off their jobs en masse because they figured their real wages were inadequate. Frank Hahn, by no means a Keynesian economist, once remarked that he hoped Lucas could experience a bout of involuntarily unemployment so that he might know what the concept was all about’.12 Now with the worst global recession since the Second World War economists might face some pressure from their students to bring back into the syllabus how markets can malfunction and result in effective demand failures and involuntary unemployment. It was in this context that we might note Janet Yellen of the Federal Reserve Bank of San Francisco disconcerting remark at the 2009 annual meeting of the American Economic Association ‘The new enthusiasm for fiscal stimulus, and particularly government spending, represents a huge evolution in mainstream thinking’.13 This comment reflects 8

K, Morgan (1997) Callaghan : a life Oxford University Press, pg. 535.

G Mankiw 1992 Principles of Economics Harcourt Brace: New York pp. 560-1.

10 J.E. King (2008) ‘Heterodox Macroeconomics: What, exactly, are we against’, in L. Randall Wray and M. Forstater (eds.) Keynes and Macroeconomics after Seventy Years Edward Elgar: Cheltenham, pg. 14.

11 R. Reich (1999), ‘What will come next?’ Time Magazine September 16.

12 A. P. Thirlwall (1993),‘The Renaissance of Keynesian economics’, in S. Sharma (ed.) John Maynard Keynes: Keynesianism into the twenty-first century, Edward Elgar: Cheltenham, pg 24.

13 P. Cohen (2009) ‘Ivory Tower Unswayed by Crashing Economy’, New York Times March 3.

9

just how distant the doctrines of Keynes have become to some quarters within the American economic profession.

The ghost and spirit of Keynes is being summoned by most politicians but by no means all of the intelligentsia. As Krugman put it ‘Come back, Lord Keynes, all is forgiven’. And come back he has in an avalanche of commentary pieces on the web which in itself is a new and useful form of dissemination to the young. Robert Skidelsky who showed how Keynes could never really be typecast as a ‘Keynesian’ is writing a sequel to his best selling biography. It will be entitled Keynes, the Return of the Maestro. Meanwhile, the world’s most renowned economist, Paul Krugman has just reissued The Return of Depression Economics and a few years ago issued his own textbook which placed the standard Keynesian model of income determination front and centre of the analysis.

Last year Krugman secured an almighty platform for his economic journalism by winning the Nobel Prize for his theoretical work on economic geography.14 In an inspired piece of timing the Royal Economic Society put out in 2007 a new edition of Keynes’s General Theory with an introduction by Krugman who gave an excellent rendition of its abiding themes.

While, then, we have in every macroeconomic crisis Keynes recurring it does not mean his disciples are storming the citadels of university departments. While it normally takes at least a decade for to be a paradigm shift heterodox economists likes James K Galbraith and Robert Shiller see little signs of change within the academy in the United States. Now that the conventional view is financial deregulation and neoliberalism led to this global crisis it will be interesting to see how political attitudes, economic philosophy and economic policy change. Skidelsky, amongst others, makes the interesting point that there has been more market turbulence and economic fluctuation in the period of deregulation and liberalisation that began in the 1980s than was the case in the immediate Post World War Two era.15 This latest episode was caused of course by ructions and flaws within the financial system and according to the IMF recovery from it will be protracted.

Keynes and his Modern Day Detractors

There has been a huge tide of reaction to people reaching for their old dog‐eared copies of Keynes’s General Theory. Opponents to the revival of Keynes and the advocacy of fiscal stimulus have responded by attacking the worth and efficacy of Keynesian policies.

One historical case in vogue with the new President in Washington is to revisit the Great Depression in America. This ‘new deal’ revisionism posits the view that Roosevelt public works and public stimulus was fairly modest and hardly inspired by Keynes When Roosevelt met Keynes he came away bamboozled telling a staffer that that the visitor seemed more a mathematician than a political economist’. Roosevelt was always pestered by business and lobby groups about the need to balance the budget. In 1937 14

Last October Greg Mankiw ran his usual betting circle on his web page upon who might win the 2008 Nobel Prize in economic science. The betting was on Eugene Fama who helped pioneer the efficient market hypothesis.

15 R. Skidelsky (2006) ‘What will come first’, The New York Sun September 16.

however he cut government spending and it squarely put America back into recession.

The recession was subsequently named after him. Roosevelt had learnt his lesson telling the American public ‘We suffer primarily from a failure of consumer demand because of a lack of buying power. It was to government then to ‘create and economic upturn’ by making ‘additions to the purchasing power of the nation’.16 Recently the Chair of the Council of Economic Advisers in the United States, Christina Romer noted that ‘Taking the wrong turn in 1937 effectively added two years to the Depression’.

In America some libertarian economists oppose the government bail‐out packages to troubled American banks and companies and the public stimulus on the basis that the private sector is being denuded of resources. When President‐elect Obama stated in January that ‘There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy’ it drew an outcry from some 350 American economists, including three Nobel laureates. In a petition to the new President they disputed the idea that more public spending is a way to improve economic performance’. The petition, organized and circulated by the libertarian think tank, the Cato Institute, went on: ‘More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s lost decade in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.’ In short, the economists do not agree with the mantra ‘We are all Keynesians now’! More government spending, they insist will only worsen the problem. Their approach is similar to the one that the New Zealand government is adopting, eschewing spending their way out of a recession.

One of the signatories to the petition, Peter Leeson of George Mason University pooh‐ poohed the idea of government spending, making the point that what is more likely to happen ‘is that a dollar the government takes out of the private sector is a dollar the private sector doesn’t have to spend anymore’.17 The notion is that deficits and bailouts funded by issuing more government debt will use up savings which would automatically have gone to investment. This mentality harkens back to Say’s Law, that decisions to increase spending, whether they come from the private sector or the public sector, cannot increase economic activity because demand must be created by supply. However in a Keynesian world a decision to save is a decision to not consume. Nor will the savings automatically used up. This means, in turn, lower demand for future output and this will reduce the incentive for employers to commit funds to hire workers to produce output.

Contrary to what Leeson thinks, these resources will not be used elsewhere, they will simply lie idle. By the same token, calls for governments not to increase spending means reduced consumption spending, meaning in turn, that entrepreneurs have a reduced incentive to employ labor in order to produce output. The released resources, again, will 16 17

Reich, op cit.

J. Stosel and A. Kirell (2009) ‘Is the government bailout just dollars and nonsense?’ ABC News March 13

lie idle. Another variant of the anti‐stimulus argument is that pump priming by governments merely adds to the level of the debt when it was a debt‐fuelled bubble economy that got us into the mess in the first case. Careless spending in the private sector will now be augmented by careless public spending. This argument has some appeal especially in bailing out badly‐run companies and financial institutions but can governments seriously sit on their hands and let the markets go through a painful, purgative, correction? Keynes felt that one could not adopt this high moral tone when there was economic retrenchment going on. Here he became, as it were, ‘an immoralist’, rejecting puritan thinking because he was impatient that ordinary folk ‘enjoy life in the here and now’.18 He did not want people to be so oppressed by economic concerns. In fact, in an essay entitled ‘Economic Possibilities of our Grandchildren’ poignantly published in 1930 Keynes looked forward to the day when economics concerns would be banished with the arrival of utopia in harmony with nature and where economists were reduced to mere technicians.

It was ironic that Keynes always felt America would prove an economic laboratory by which to test his new doctrine and that it would be the world’s economic engine to lead the recovery. However, as Thirlwall reminds us, much of the anti‐Keynesian movement found its feet there essentially because it was a society ideologically hostile to the idea of public intervention and infringing upon individual self‐interest.19 In an essay entitled ‘The End of Laissez‐Faire’ (1924) Keynes wrote ‘It is a not a correct deduction from the principles of economics that enlightened self‐interest always operates in the public interest. Nor is it true that self‐interest is enlightened…’. Sometimes Keynes’s prose was downright misleading. For instance, his statement in the General Theory about ‘a somewhat comprehensive socialization of investment’ did not go down too well in America. What Keynes meant by that was the idea after a floor of remedial public investment to combat a slump and the threat of market based economies facing a propensity towards underemployment but there was ‘no obvious case is made out for a system of state socialism which would embrace most of the economic life in the community’. In short, Keynes was an abiding liberal and fiscally rather modest. He wanted well‐behaved markets to have free play in guiding resource use provided the economy was at a tolerable level of activity.

Much of the anti‐Keynes sentiment and vitriol hails from the Chicago School. While Keynesianism took hold in the USA after the Second World War there were always pockets of resistance to Keynes in Chicago where the validity of his work was never accepted. One key member of the Chicago School, Frank Knight was damning of ‘the new economics’ of Keynes because of its ‘fallacious doctrine and pernicious consequences and…for carrying economic thinking well back to the Dark Age’. Another Chicago reviewer, Henry Simons wrote that Keynes may ‘succeed in bringing back the academic idol of our worst cranks and charlatans ‐ not to mention the possibilities of the book as the economic bible of a fascist movement’.20 Milton Friedman, the Chicago 18

R Skidelsky (1977) ‘The Revolt Against the Victorians’ in The End of the Keynesian Era London: Macmillan, Pg.8 19 Thirlwall (1993) pg. 23.

20 J. Van Overtveldt (2007) The Chicago School Agate Press: Chicago Pg. 87.

School’s greatest salesman and the father of modern monetarism echoed Simons’ point that Keynes had given vent to the idea of governments getting bigger and the notion ‘that all will be well if only good men are in power’.21 In Australia much of the hostility to Keynes’s ideas has come from two free‐market or libertarian thinktanks, namely the Melbourne‐Based Institute of Public Affairs and the Sydney‐based Centre for Independent Studies. A fair part of their diatribe and rebuttals of Keynesian ideas have appeared in the popular press, particular the opinion pages of The Australian. It might be that their objections are primary based on something resembling the relative deprivation syndrome which politicians suffer from when they lose office. Similarly, free market thinktanks now facing a hostile reaction to their ideas and philosophies have to up the ante since their very reason of existence is now under considerable challenge. Another explanation for their diehard fiscal conservatism against any form of public stimulus for recession‐laden economies is to consider and invert the novelist Upton Sinclair’s line ‘It is difficult to get a man understand something, when his salary or his ideology depends upon his not understanding it’.

Robert Carling, a senior research fellow at the CIS recently issued a paper entitled ‘Are we all Keynesians again?’ which listed the stock neoclassical arguments against contra‐ cyclical fiscal stimulus.22 They included issues like the timing of the policy action, the tendency towards a larger public sector, the effect of greater public spending upon resource allocation, the crowding‐out that occurs with deficit budgets and the Ricardian equivalence doctrine. Carling also pours doubt on the efficacy of the expenditure multiplier but he does not take into account how public spending can sets off an expectations multiplier that can fire up the ‘animal spirits’ of economic agents. While Carling’s other critique of fiscal policy have some validity the question to ask fiscal conservatives is what exactly do they recommend in its place to counter the global slump? Usually, it is to invoke personal and business tax cuts, cut red tape upon business and lower interest rates. It’s barely enough. Thirty years after Margaret Thatcher introduced the acronym we have reached the economics of TINA. There Is No Alternative to fiscal stimulus. There is no alternative to Keynes.

21 22

Ibid.

R. Carling (2008), ‘Are we all Keynesians again?’, CIS Research Paper No.106, February.