His master’s voice
Lord Skidelsky offers Keynesian solutionsThird Quarter 2019
Robert Skidelsky argues that today’s intractable economic and social problems and the failures of austerity require us to turn back to Keynes.
"We live in uncertain times, and the future is dark.” Robert Skidelsky, economic historian or “economic thinker” as he prefers, author of Money and Government: A Challenge to Mainstream Economics and crossbench peer. A decade after the global recession unleashed by the collapse of Lehman Brothers in September 2008, he warns that we have failed to learn its lessons.
Lord Skidelsky is probably best known for his magisterial three-volume biography of John Maynard Keynes and subsequent book on Keynesian theory Keynes: The Return of the Master (2009). He is the great man’s most eminent modern-day disciple. He spoke in front of a portrait of Carlyle Gifford, the principal founder of Baillie Gifford & Co and a co-director with Keynes of the Independent Investment Company in the 1920s, though session chair James Anderson hinted that their formidable intellects were not always in perfect harmony.
After the Great Depression of 1929, Keynes argued that the government should increase spending when private spending was falling. “Keynes made his name,” he says, “by attacking the policy of fiscal austerity in a slump.” “The budget,” he continues approvingly “should be seen as something that balances the economy; government shouldn't be obsessed with balancing the budget itself.” But Keynesianism was repudiated in 1976, Skidelsky notes, tracing the key moment to a line in Prime Minister Jim Callaghan’s speech to the 1976 Labour Party conference: “‘We used to think you could spend your way out of recession and increase employment by boosting government spending. I tell you, in all candour,’” Callaghan said, “‘that that option no longer exists.’”
Since then, despite a few nods in the direction of Keynes, austerity has dominated, often with cross-party support. Tory PM David Cameron argued for it; Chancellor George Osborne said in 2010 that without an austerity programme we will go the way of Greece. “Ludicrous,” Skidelsky says, shaking his head.
Austerity has enacted punishing policies that leave us with a still-anaemic global economy, Skidelsky argues. After ten years of “so-called” recovery, “there wasn't a vigorous bounce back;” there is “stagnation”. During those ten years, there were major cuts in social services in health, education and housing. The insecure recovery from the crash has bred a huge amount of economic and political uncertainty, with the two feeding off each other. “We're all experiencing the consequences,” he says, pointing to global social unrest and rampant populism.
One of his takeaways from 2008, is that ultimately monetary policy doesn’t work: “it did a bit of lifting but not nearly enough lifting to restore anything like what used to be called a healthy rate of growth.” His answer is the return of Keynes; and a reopening of economics to sociology, history, politics and ethics to prevent it, from turning into "a drying reservoir of abstractions." He aims to embolden the next generation of economists to break free from the “conceptual prison of austerity” and afford money and government the “starring roles in the economic drama” that they deserve. Economies function best, he suggests, when they’re stabilised through government intervention. On specifics, he advocates “reinstating fiscal policy somewhere in the system,” approves of a proper investment policy, such as green investment of the sort that the US Democratic Party proposes. And he endorses Bernie Sanders’ job guarantee, which will ‘green’ the economy and is linked to the local community. All of which concludes the session on a lighter note than it began.
Robert Skidelsky was speaking at Baillie Gifford, in a private session during the Edinburgh International Book Festival. Scottish Mortgage Investment Trust sponsors the festival.
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Author: Tiffany Jenkins
Tiffany Jenkins is a writer and broadcaster, whose books include the critically acclaimed Keeping Their Marbles: How Treasures of the Past Ended Up in Museums and Why They Should Stay There (2016). She is an Honorary Fellow in Art History at the University of Edinburgh and a former visiting fellow in the law department of the London School of Economics. She has written and presented programmes on subjects including art and law for BBC Radio 4 and is host of the new arts podcast Behind the Scenes at the Museum.
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