Quite an amazing story, Living standards at a standstill for five years: report. The peak was reached in 2009, at which moment those Keynesian incompetents decided that what was needed was a Keynesian stimulus, and the results are now there for anyone to see. They won’t believe that they caused it, of course. Economists across the world will be united in the belief that things would have been even worse had they not taken the actions they took. Nothing can be proven, but there was, of course, my own forecast from February 2009.
Just as the causes of this downturn cannot be charted through a Keynesian demand-deficiency model, neither can the solution. The world’s economies are not suffering from a lack of demand, and the right policy response is not a demand stimulus. Increased public sector spending will only add to the market confusions that already exist.
What is potentially catastrophic would be to try to spend our way to recovery. The recession that will follow will be deep, prolonged and potentially take years to overcome.
Every classical economist understood this. Now only a handful do. But if you won’t take my word for it, how about listening to Sir Winston Churchill in his budget speech from 1929.
“Churchill pointed to recent government expenditure on public works such as housing, roads, telephones, electricity supply, and agricultural development, and concluded that, although expenditure for these purposes had been justified:
‘For the purposes of curing unemployment the results have certainly been disappointing. They are, in fact, so meagre as to lend considerable colour to the orthodox Treasury doctrine which has been steadfastly held that, whatever might be the political or social advantages, very little additional employment and no permanent additional employment can in fact and as a general rule be created by State borrowing and State expenditure.’”
And I emphasise that this was in 1929 before the Great Depression had even begun. The world is heading towards a disastrous downturn, and in spite of everything, we still only have Keynesian clowns stationed in every major economic post across the globe. Yet I am encouraged by our Treasurer, who gets this exactly right:
Mr Morrison said the key to raising household incomes was to improve productivity and this required business investment.
“You don’t get that from taxing and spending as Labor proposes; you get it from encouraging enterprises to innovate,” he said.
You also don’t get it by building massively loss-making very fast trains, which are really very fast drains on our productive capabilities. It should be no mystery why the Treasurer doesn’t get on with his PM, who still thinks the NBN was a great success.