Paul Krugman is wrong about the UK and borrowing
Paul Krugman once did something or other quite good on the economics of trade, winning him the Nobel Prize. He also wrote some rather good stuff in the 1990s about the euro and about how Japan might escape its then-malaise. Quite a lot of orthodox economists were (and remain) fans of his writings on these topics. But regarding his analysis of government deficit reduction programmes and the options European governments in particular have had – and more specifically about how, regardless of how much they might have been borrowing they should always borrow more…not so much.
Krugman’s latest sally into European politico-economics is to bewail the state of “Britain’s Terrible, No-Good Economic Discourse” in the run-up to the General Election. He tells his unfortunate American readers that “economic discourse in Britain is dominated by a misleading fixation on budget deficits” and that “media organizations routinely present as fact propositions that are contentious if not just plain wrong”.
US readers should be aware that his “analysis” drifts between being contrary to the facts and being nonsense. Let’s start with the stuff he says that is contrary to the facts. Setting aside for now whether such a fixation would be “misleading”, economic discourse in Britain simply isn’t dominated by a fixation with government budget deficits.
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