________________________________ From: Doug Henwood <dhenwood at panix.com> To: lbo-talk at lbo-talk.org Sent: Fri, October 22, 2010 8:41:31 AM Subject: Re: [lbo-talk] a question on cameron-clegg (james?)
On Oct 21, 2010, at 8:03 PM, SA wrote:
> A basic Keynesian analysis would say that Cameron-Clegg's proposed cuts will
>depress the British economy. On the other hand, the coalition's publicly stated
>view, I gather, is the standard pro-austerity position: cuts will give
>confidence to the markets, and somehow that will help the economy recover. My
>question is: what do Cameron/Clegg really believe? Do they privately accept the
>likelihood that the cuts will depress the economy but think they can ride it out
>and make gains through their bold leadership or something? Or are they true
>believers in austerity who expect the cuts to help and will therefore be
>surprised if the opposite happens?
That's a very good question. In Ian Gilmour's memoir of his time as a Thatcher advisor, Dancing With Dogma, he said that Milton Friedman had advised the Iron Lady that a monetary tightening could bring down inflation without a recession, which turned out to be nonsense. Clearly the Brits need not look any further than across the Irish Sea to see what happens when you cut the budget deeply - you get a severe recession that leaves you with a deficit as big as the one you started with. But they probably think there will be some "pain" - borne by others, many of whom vote Labour anyway - but not enough to damage the economy severely or their re-election prospects.
Doug ___________________________________ http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk