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.