Overrated: Paul Krugman
July/August 2012
From his perch in the New York Times he says one ridiculous thing after another. In the British context Krugman's risible thesis is that the economy is struggling because the government isn't spending enough money, that austerity is driving us back into recession, and that the solution to our debt crisis is to borrow and spend even more money.
But there is no austerity. British government spending has fallen from record highs by only about 1 per cent since the coalition took office. This has tipped us back into recession? Most private sector companies could save that by switching to cheaper copier paper.
Krugman argues that we need vast government spending to get us out of the recession. But Britain is running a budget deficit of more than 8 per cent of GDP, one of the highest in the developed world. The government is spending more than 400 million borrowed pounds every day; the national debt is increasing by more than £5,000 every second.
And yet, with all this extra borrowing and all this spending Britain's economy is still tanking. Perhaps this suggests that massive deficit spending isn't the answer. That's one interpretation. Not for Krugman. To him the problem is that even the record levels of borrowing which will see Britain's national debt increase by 60 per cent, from £1 trillion to £1.6 trillion, by the next election, are not enough. We need to borrow more. That, he claims, would solve our debt crisis.
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