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Friday, October 23, 2015

Paul Krugman: Keynes Comes to Canada

Al we are saying, is give Keynes a chance:

Keynes Comes to Canada, by Paul Krugman Commentary, NY Times: ...On Monday, Canadian voters swept the ruling Conservatives out of power, delivering a stunning victory to the center-left Liberals. And while there are many interesting things about the Liberal platform, what strikes me most is its clear rejection of the deficit-obsessed austerity orthodoxy that has dominated political discourse across the Western world. The Liberals ran on a frankly, openly Keynesian vision, and won big. ...
Here’s what the Liberal Party of Canada platform had to say...: “Interest rates are at historic lows, our current infrastructure is aging rapidly, and our economy is stuck in neutral. Now is the time to invest.”
Does that sound reasonable? It should, because it is. ... Strange to say, however, that hasn’t been happening. ... Since 2010 public investment has been falling as a share of G.D.P. in both Europe and the United States, and it’s now well below pre-crisis levels. Why?
The answer is that in 2010 elite opinion somehow coalesced around the view that deficits, not high unemployment and weak growth, were the great problem facing policy makers. There was never any evidence for this view... But never mind — it was what all the important people were saying...
Most notably, those who should have stood up for public spending suffered a striking failure of nerve. Britain’s Labour Party, in particular... Even President Obama temporarily began echoing Republican rhetoric about the need to tighten the government’s belt.
And having bought into deficit panic, center-left parties found themselves in an extremely weak position. Austerity rhetoric comes naturally to right-wing politicians, who are always arguing that we can’t afford to help the poor and unlucky (although somehow we’re able to afford tax cuts for the rich.) Center-left politicians who endorse austerity, however, find themselves reduced to arguing that they won’t inflict quite as much pain. It’s a losing proposition, politically as well as economically.
Now come Justin Trudeau’s Liberals, who are finally willing to say what sensible economists (even at places like the International Monetary Fund) have been saying all along. And they weren’t punished politically...
So will the Liberals put their platform into practice? They should. ... Canada is probably facing an extended period of weak private demand, thanks to low oil prices and the likely deflation of a housing bubble.
Let’s hope, then, that Mr. Trudeau stays with the program. He has an opportunity to show the world what truly responsible fiscal policy looks like.

    Posted by on Friday, October 23, 2015 at 01:08 AM Permalink  Comments (185)


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