Keynes and his £2trn legacy
Back in 2005, I listened to Gordon Brown make a speech at a private dinner. He mentioned Keynes, asking us to recall the 1920s, when the great economist’s “right-minded ideas” were rejected by politicians of the day. Keynes’s ‘spend your way out of trouble’ policies were so disliked that in the Treasury library there is apparently a copy of his paper, We Can Conquer Unemployment, on which an irate official has scrawled, “inflation, extravagance, bankruptcy”.
Brown made it clear what he thought of this: it showed a lack of open-mindedness, and worse, an unwillingness to turn ideas into action.
Yet if the past few years teach us anything, it is that the anonymous official was right. Regularly spending more money than you have is not a good idea. Once you start with other people’s money, extravagance rapidly comes upon you.
Drop £4bn on a couple of computer systems and it’s not hard to find yourself thinking that it’s perfectly reasonable to pay eight public-sector employees more than £1m and another 800 or so more than £150,000.
And from there it isn’t far to finding yourself, as poor Alistair Darling now does, needing to borrow £178bn, or around 10% of GDP a year, just to get by.
• Read the full editor’s letter here: Keynes and his £2trn legacy