After the 2008 crash the debate was around whether the deficit would be best sorted by cutting public expenditure; or would it be better to stimulate economic activity so as to generate surpluses and jobs, thus reducing necessary benefits payments. In other words: austerity or stimulus?
Despite pouring billions into ‘quantitative easing’ to support the financial sector, the establishment has argued fervently in favour of austerity for the rest of us. That establishment (referred to elsewhere as the self-perpetuating industrial, financial, media, academic and political establishment – the SPIFMAPE) has proved so powerful, it has effectively buried the stimulus word and replaced it with ‘borrowing’. The establishment’s offer is now “Balance the books or borrow?” as Martin Kettle puts it [Guardian, 25.9.15 p39].
But the establishment is wrong. Stimulus is still the most effective option.
Continue reading The Solution to Austerity