I’ve been reading about how crises, like war, severe economy recession and and pandemic often brings changes to the way we live our lives.
Prior to the beginning of the war in the USA, Roosevelt has introduced the “new deal” plan. Keynesian economics were utilised to bring about a swift recovery from the 1929 crash, and although resisted by the republicans and more conservative Politicians proved so successful that it kept the democrats in office for decades.
In Britain, the same Keynesian economics were employed by the incoming Labour government, post WW2 to provide growth on a scale the U.K. had never before experienced, and which lasted for nearly 2 decades. There was wholesale social restructuring with the welfare state, nationalisation of some industries and increased taxation.
The national debt incurred by the end of the war exceeded 230% GDP but in the following decades this reduced considerably primarily through economic growth. Opportunities were distributed much more fairly and overall the standard of living was increased to a level never previously thought possible.
All this both here and the USA was done without any reliance on austerity or belief that debt was something you needed to pay back, to balance the books. Those governments were much wiser.
My argument is that for success in our future, a form of Keynesian economics need to be deployed once again. To grow our way out of the recession and debt. How we grow is another issue. We have choices. But grow we must. There must be absolutely no return to austerity, which will choke off any seeds of growth. It would be disastrous and delay and weaken any recovery, with the real cost being even more damaging to our public services health and education. Britain can’t afford another period of austerity.
But of course the right will resist this just as they did in the 1930s and post war. They argue the now familiar refrain. “Governments must only spend what they have”
But this is as history has taught us entirely incorrect.
“The state is the last remaining pillar of the economy when households or businesses cannot or will not spend. If government also retrenched, there is no way to stop the spiral downwards. But - if government spends, others are much more likely to do so. It doesn’t crowd out private initiative or spending, it encourages it.
It is the way to our future.
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