By Jonathan Isaby
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I am alerted by the beady eyes of the Tory press office via their Twitter feed to this article in the Guardian today by the Labour peer and economics professor, Lord Desai – currently a candidate for Lord Speaker.
Replying to an earlier article by self-confessed Keynesian Lord Skidlelsky, Desai is very straight about the cause of the recent recession:
"Unlike previous recessions, which were caused by lack of effective demand – the standard Keynesian case – it was due to overspending on the part of households and governments."
That would of course be the Blair and Brown governments.
He also debunks several of Labour's myths about how the Coalition Government is supposedly taking money out of the economy and cutting spending:
"Skidelsky contrasts former chancellor Alistair Darling's budget, which would have "taken out" £73bn from the economy, as against Osborne's budget whichwould take out £83bn over five years. But these numbers are hypothetical. Each represents a difference between what the pre-recession projection of the economy showed for 2010-15, and what in light of the recession and the debt situation each chancellor thought should be the revised path. No money has been taken out or will be from the economy.
"Osborne has frozen public spending, as planned by Darling for 2010-11, in real terms for five years. So public spending is not "cut": it has been prevented from rising, as normally happens in a growing economy. Where would the £83bn that Osborne has decided not to spend have come from if he did wish to spend it? Since households are in debt, as is the government, the money would be lent by the business sector. If Osborne does not spend, he does not borrow. So the money stays back in the business sector's balance. There is no question of 'transferring money to the private sector'. It is of not removing it in the first place."
Read the full piece here.