This is Judy Sloan stating as clear as you like: Time to get the budget in surplus and pay off debt. What it is really about is how disastrous Keynesian economics is and always has been. I am a month away from finishing my book on how the idiocies of Keynesian economics replaced classical theory that had created the world of wealth we have now all become not just used to, but have come to believe it is all just automatic. It was for a while, but with Keynesian economics at the heart of policy making, we are potentially heading for a very large fall in living standards. The following are Judy’s comments about Keynesian theory and policy from her column today.
I’ve been reading Paul Tilley’s Changing Fortunes: A History of the Australian Treasury and a theme that emerges is the advent after World War II of unquestioned Keynesian thinking among senior officials.
Having seen the economic damage and human suffering the Depression caused — although Australia was less affected than many other economies and recovered more rapidly — consensus emerged that the federal government must seek to manage demand actively to maintain full employment.
There was little questioning whether this approach would work or what any adverse consequences might be. Rather, the politicians of the day meekly accepted Treasury’s advice that monetary and fiscal policy should be used to boost employment when needed and to quell inflationary pressures when required….
The Keynesian salad days came to an abrupt end during the Whitlam years when the stable relationships on which the theory was based — in particular, the inverse relationship between unemployment and inflation — fell apart. In its place, a prolonged period of stagflation ensued in which unemployment rose in the context of high inflation….
Today we observe Treasury as a much diminished institution with plenty of Keynesian devotees still occupying positions at various levels….
In the context of today’s debate about appropriate action to deal with a soft economy, many of the debates of yesteryear are there in the background. The simplistic Keynesian response is that the government must spend more immediately, even though experience says this is costly and largely ineffective….
And let us not forget that the government has been running a budget deficit for more than a decade — a long-running Keynesian experiment — yet we still find ourselves in a relative economic slump.
It’s time to get the budget back into surplus and start repaying the accumulated debt.
Keynesian economic policy has NEVER worked, not a single time, not anywhere, not ever. Let me take you to my own: The Dangerous Persistence of Keynesian Economics where all of this is spelled out in more detail. And I cannot refrain from adding this quote at the front of the article.
Why have the IMF, the OECD, the ILO, the treasuries of every advanced economy, the Treasury in Australia, the business economists around the world, why have they got it so wrong and yet you in your ivory tower at RMIT have got it so right?
—Question to Steven Kates from Senator Doug Cameron, Senate Economic References Committee, September 21, 2009