Writing in the Huffington Post today, Mark Littlewood analyses the different responses in wake of the financial crash.
The coalition’s policy of “modest fiscal retrenchment” is anathema to orthodox Keynesian economics. This led Keynes’ biographer Professor Robert Skidelsky to comment “if fiscal consolidation proves to be the royal road to recovery and fast growth then we might as well bury Keynes once and for all.”
However, empirical evidence rarely results in unanimity of opinion amongst economists. If the UK economy falters, Keynesians will blame cuts, not the eurozone crisis. If a fiscal stimulus plan fails elsewhere, they will say that not enough was spent.
For Mark, the countries that will recover quickest will not be the ones that spend their way out of overspending, but rather those that make the changes necessary to free up markets and encourage employment.
Mark is the Director General of the IEA. Watch him discuss the deficit here.