Keynesian Debt Junkies


Zealous Keynesians (like Martin Wolf and Paul Krugman) defend their indefensible position (huge state debt and massive public spending are just fine, while ‘austerity’ and tax-cuts are a bad idea) with the dogged tenacity of Davy Crocket at the Alamo.

Martin Wolf tries to support his case, in the Financial Times this week, by telling us to look at the industrial revolution. Back then, he says, there was a hefty government debt (from fighting the French), and yet the British economy was able to grow!

But Wolf is as poor a historian as he is an economist. First, he tells us that for years, between 1815 and the middle of the century, government debt interest payments accounted for close to half of all UK public spending.  What he fails to mention (or perhaps doesn’t know) is that general government spending back then was miniscule by today’s standard. 

Wolf also says that it is all the more remarkable that Britain was able to grow its way out of debt because it had ‘a very limited tax-raising capacity’. It is not true that Britain had an especially ‘limited tax raising capacity’. But it IS true that Britain had very, very low taxes (by today’s obscene standard).

Taxes and government spending were considered evils to be avoided as far as possible. In the words of the great historian of the period, J. H. Clapham, the classical liberal political leaders of the day ‘had never seen the least glint of romance in public expenditure.’

As for government borrowing, Clapham points to the ‘ the fearful burden of debt’, which contemporaries believed acted as a severe drag on the prosperity of the country:  “the debt” said Sir Henry Parnell in 1830, was “justly considered as a heavy burden on the industry of the country.” Parnell attacked the parasitic “tax-eaters” who were bleeding the productive economy.

We should be grateful to Martin Wolf for reminding us of those golden times, when governments valued thrift, and taxes were rock bottom.  This (not government debt) was the secret of their success.

This heroic age of British capitalism teaches us a valuable lesson, and it flatly contradicts Wolf and his Keynesian debt-junky chums.  We must slash government spending and cut taxes ferociously. 

P.S. Wolf & Co try to argue that big government debt is the consequence (rather than the cause) of slow economic growth.  Let us be clear, big government debt is the consequence of irresponsible and self-serving politicans pandering to the inexhaustable demands of their friends and relations in the parasitic, tax-consuming state sector.

Comments (3)

Mr Durkin Last night the

Mr Durkin
Last night the Bungling Broadcasting Corporation plumbed the depths on NoNewsnight.
Trying to explain the actions of the murdering monsters inWoolwich.
Of course no mention of the £100 million wasted on some new fangled It scheme. They also seem to forgot the £150 million overspend on their new hq in Portland place. For those that wish to look through the window serried ranks of unmanned computer stations.
Please have a look at Newsnight as I could not believe it.

Martin Wolf has also chosen

Martin Wolf has also chosen one of the few examples of a state paying back it's debt without resorting to outright default or inflation. Let's face it when the likes of Krugman say "high public debt is acceptable because we owe it to ourselves" what they are really saying is that the bondholders will be sc......d one way or another. Unfortunately unlike after WW2 bonds are not held by patriotic grandmothers, when the dam breaks expect the price of bonds to drop pretty quickly as institutions run for the exit. (I know that some feel that the B of E can then purchase 100% of gilts)

To those on the left who like to try and remind us that we had higher debts at the end of WW2. Fighting Nazis was probably a reasonable excuse for building up our debts. Running persistent deficits to ensure we can keep ourselves in flat screen televisions and chipboard furniture from Asia is not.

Even though WW2 debt was partly defaulted on through inflation it was not an easy time to live through, the poverty in the rural South West was comparable to some developing countries today. Yes the NHS was created at this time but the facilities were very basic.

I'm sure today's young are going to be well please when they leave for their summer hols and are told that they can only take £200 per head out of the county as spending money? Capital controls are coming.

Is the CAPTCHA Math question there to stop Keynesians posting?

When the Labour party trumpet

When the Labour party trumpet their 'achievements' they're all connected with a tax and spend culture, that punishes the productive economy, viz:

Minimum wage - no doubt soon to be a 'living wage' if Ed gets the vote in 2015
Benefits/allowances/credits/grants/subsidies - for all
Social services
Plus a host of smaller hand-out initiatives

Not for them the tackling of the enormous debt and deficit - it's too much like hard work having to live within your means. Much easier to spend other people's money and clam the results as 'achievements'!

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