Back in 1930, a policy pamphlet was published, one either inspired or even written by John Maynard Keynes. Its title: We Can Conquer Unemployment. We mobilised for war. Let us now mobilise for prosperity! Why is this relevant?
My friend and colleague Tony Aspromourgos, of Sydney University, just sent me a photocopy from Peter Clarke’s excellent little book entitled Keynes: the Rise, Fall, and Return of the 20th Century’s Most Influential Economist (New York: Bloomsbury, 2009) of p.122 on which the author, P. Clarke, reproduced the said pamphlet’s title page of a copy that was held in His Majesty’s Treasury. Clearly, some official there, at the Treasury (whose views were identical to the official austerian approach that dominates, currently, EU ‘elite’ thinking) had scribbled on the title page three words that expressed his/her view of Keynes’ proposals: Extravagance, Inflation, Bankruptcy.
On Monday 5th September, the German Finance Minister, Mr Schauble wrote an article in the Financial Times which used up 865 words to say that which the anonymous Treasury official said in three: That the Keynesian critique of austerity in the midst of a recession brought on by a financial crisis must be rejected as false and as an extravagant precursor to inflation and bankruptcy.
History proved the Treasury official tragically wrong and vindicated Mr Keynes. It will surely prove Mr Schauble wrong for precisely the same reasons. Hopefully the human cost will be lower this time around.