Nancynomics
Sir: Nancy Dell’Olio’s article about Keynes (‘I will always defend a big spender like J.M. Keyes’, 29 November) gave an amusing take on why some support Keynes’s ideas. But she fell into a trap that has recently ensnared many, including Messrs Darling and Osborne. They all seem to believe that Keynes’s remedies were only aimed at healing recessions, primarily by infrastructure spending.
In reality, Keynesian policies, from the first peace-time Keynesian Budget in November 1947 until 1979, were aimed chiefly at countering inflation, a besetting problem of the UK economy while Keynesian policies ruled.
The UK was only in recession for a very short spell during the whole period, though it hovered on the edge once or twice. Nor did we experience a banking crisis on the present scale. So we do not know how Keynesian policies, if that is what we are going to have, will deal with a recession of any length.
In tackling our present problems, it will be a good while before we know whether Keynesian solutions are a saviour, a chimera or a zombie.
Dr Craig Pickering
(Formerly of HM Treasury) London W4
Sir: Miss Dell’Olio is mistaken to defend J.M. Keynes. Capital investment may stimulate spending, but it simply staves off recession rather than solving it. Any government project designed to create jobs is almost inevitably inefficient because it does not respond to people’s market activity.
Indeed, one can only stave off recession if one constantly prevents the market from correcting itself. Unless we return to the dark days of economic regulation from the 1970s, this will obviously not work. Miss Dell’Olio has failed to appreciate the implications of Keynes’s ideas, or that his ideas are historically bound to the cultural and economic assumptions of the first half of the 20th century.
But even if we take Miss Dell’Olio’s assertions at face value, those who accepted Keynes tended to believe that his spending plans could only work if one had saved during the good times. Current spending plans may stave off recession, but only in the short term, and the borrowing will have to be paid back.
A simplistic understanding of Keynes is not only preventing a market correction, but future growth too.
James Sharpe
Fitzwilliam College, Cambridge
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