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Skidelsky on the Crisis
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on 11 November 2012
Skidelsky, like his eminent hero Maynard Keynes, advocates in these pages a practical and common sense solution to the financial crisis. In times of depression the worst governments can do is not spend. That was a clear lesson of the 1930s, and it was only when a more intelligent and enlightened statesman in the United States experimented with Keynes' ideas that the depression began to recede. Here, Professor Lord Skidelsky argues in numerous papers which are combined in this volume, that there is a better way to deal with the financial crisis. Austerity is no more an answer than it was in the 30s. Like the 30s the current Coalition's policy is reducing demand and deepening the crisis; production is weak, and exports are weak. British taxpayer's money is still subsidising foreign production at the expense of British jobs. There is little global demand. There are too many producers chasing phantom markets as there were when international trade collapsed before. People are deluded by economists and politicians who glibly talk about globalisation, a meaningless term in an age of austerity. As in the 30s the complacent public is again oblivious to the trend. A trend that can collapse very suddenly at any time. Skidelsky rightly judges the results. Either disintegration of markets or co-ordination. We already see turmoil in Europe and a slackening in China. Skidelsky raises concern about the banks. They fear regulation. It seems as if they feel they are above the law, as does the market. They think they can do as they like: self regulation. The crash of 2008 proved how flawed that idea was. We do not need another reminder.
In simple terms unless there is an international accord on growth, stricter banking regulation to prevent excess and risky lending, and measures to boost world trade this crisis will continue and probably get worse despite minor improvements. What we may see is a mirror of the 30s in more extreme form. Does the world drift to what Skidelsky calls bloc economics of the 30s, or does it move to a more stable global equilibrium of balanced trade? Time will tell, but if the 30s are an authoritative indicator my impression from Skidelsky's critical analysis is that time is not on our side.
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