Douglas Carswell's Blog

The economic orthodoxy will crumble

Jeremy Warner has a ground breaking piece in today’s Telegraph – I strongly recommend you read it.     

Why ground breaking? Because it is one of the first examples of a leading economic pundit beginning to break with the Establishment orthodoxy on the economy. More will follow. 

Slightly misleadingly, the title to Jeremy’s piece declares that the Conservatives have got it right on the economy. Reading the article it is clear that what he means is that all three parties have got it wrong – but that Ed “more debt” Balls is even more hopelessly wrong than the rest.

So far, Jeremy seems to be saying, the Gordon Brown / Continuity Brown view has been that we need to “get the money moving again with repeated rounds of monetary and fiscal stimulus”. All this stimulus would mean growth, and – hey presto – all would be well.

As regular readers of this blog will know, it won’t work. The stimulus approach will not work.  George Osborne is testing monetary stimulus to destruction today the way Ted Heath's Chancellor tested fiscal stimulus to destruction in the 1970s.

Warner – perhaps influenced Raghuram Rajan – has clocked that it was fiscal stimulus and easy credit that landed us in this mess in the first place. 

Western governments aren’t running deficits and credit easing to deal with the financial crisis. We're in a financial crisis because of years of deficits and credit easing.   

How long before other pundits start to say that we have had chronic malinvestment? Is the Austrian analysis about to go mainstream? Post-monetarism, anyone?

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