Let Keynes die
From Stewart Slater Sir: I was touched by Janet Bush's faith ('Bring back Keynes', 15 May) in Keynesian economics as a panacea for recessionary ills.
Here in Japan (where, pace Ms Bush, the government is quite happy to ignore the Americans, at least in matters of economic policy), things look slightly different. Since the end of the bubble in 1989, the government has pumped trillions of yen into public-works projects and, for the last several years, kept interest rates at 0 per cent. The result? A decade of multiple recessions punctured by periods of anaemic growth and the highest public-sector debt to GDP ratio in the industrialised world. The current recovery has been led by the growth in China, and it is still doubtful whether it is self-sustaining.
Perhaps Keynesian remedies can help in relatively shallow, cyclical recessions, but in structural downturns such as that faced by Japan in the last decade (and, dare one say it. America since 2000), all they can do is provide temporary respite before the next decline. 'In the long run, we are all dead,' said Lord Keynes. Perhaps it is time we allowed the view that his theories are a cure-all a graceful demise.
Stewart Slater
Tokyo
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