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Keynesian cretinism at the London Evening Standard

Like many thousands of other people, I pick up a free copy of the London Evening Standard to try and help minimize the pain of the daily commute home coutesy of South East Trains. Normally, the LES is a good read and time passes quickly. However, every now and again I come across an article that is so completely wrong that I can feel my blood pressure rising while reading it.

There are a few of the regular writers that I can now expect to be highly annoyed by whatever they write (e.g. James Fenton, Chris Blackhurst, Jenni Russell), but one of them stands out: Anthony Hilton, the City Columnist. One of his latest articles appeared last week, “Debt isn’t always bad. We may even learn to love it

Here a few of the (many) paragraphs that got my blood boiling:

In fact, the whole saga shows up our politicians at their worst. Listen to Chancellor George Osborne and you could easily believe government debt was invented by Gordon Brown. In fact, he made a pretty big reduction in the debt levels he inherited from his Conservative predecessor John Major – fixing the roof while the sun was shining, to coin a phrase – until he was knocked hopelessly off course by the financial crisis and the need to bail out banks.

Of course, it is unfair to blame Gordon Brown alone for our current problems – our fiat currency, the policy of the US and most other ‘developed’ countries’ governments to finance ever-increasing state debt via the printing press and permanent inflation (i.e. currency devaluation), and rampant crony capitalism are just some of the systemic Keynesian problems that no UK government has done anything to address for the last century.

However, the major cause of our current problems in the UK at the moment is the structural budget deficit – in other words the amount by which state spending oustrips tax revenue. Far from ‘fixing the roof while the sun was shining’, Gordon Brown spent our money like there was no tomorrow and built up the public sector of the economy to the point where it is now larger than the productive private sector. This is Gordon Brown’s legacy to the nation – had there been no financial crisis or bank bailouts the deficit would still be the same.

On current projections, debt is expected to stabilise at around 70 per cent of GDP or, shedding the jargon, it will be the equivalent of just over two- thirds of all the output generated by the entire nation in one year.

However, if things turned out much worse than that and debt rose to 100 per cent of GDP, the interest would still only be about five per cent or 5p for every £1 earned in the country. Eminently affordable, so why the panic?

Hilton appears to be talking about the UK’s “official” state debt, which helpfully excludes most of our pension liabilities as well as a tranche of other items (e.g. public-private partnerships) that are kept “off the books”. In fact, the UK’s total debt has been forecast to hit £10 trillion by 2015. For an even more frightening example of how much trouble we are all in thanks to Brown et al, have a look at this video – the total US debt is greater than the combined GDP of the whole world economy:

One more paragraph:

It would be wrong to say debt does not matter but we need a sense of proportion – and having made the point, the Government must move on. Talking tough on cuts may keep financial markets onside, but the Government’s priority should be to restore economic growth, not fixate about the deficit. Get growth right and the deficit will take care of itself; but a government which defines itself by cuts stands a very good chance of making things worse.

At the risk of repeating what many independent bloggers have pointed out ad nauseam already, what cuts?? The result of the ‘biggest cuts in a generation’ – you know, the ones that are proceeding “too far, too fast” – is simply a reduction in the rate of increase of our debt. Worth repeating: these cuts constituting the “final solution against the poor” will not even sort out our deficit, let alone start paying off the debt itself.

Hilton would do well to cold turkey himself off his big-state Keynesian theories and perhaps school himself on Austrian free-market economics. Who exactly is going to fuel this growth when those same people are slowly being strangled by red tape and de-incentivised by ever-higher taxes? Once again, who was in power over the last 13 years and did more than any other Chancellor to put these things into place?

Anyway, rant over. Hilton and the legion of others like him is the reason why I – like many others – no longer get my news from the mainstream media. If you want to start thinking for yourself then type ‘libertarian’ or ‘Austrian school of economics’ (or, for any US-based readers, ‘Ron Paul’) into your browser and see where it takes you.

In the meantime, note to self: stop reading Hilton’s articles. He’s not worth it.