The execrable Caldwell: so pathetic, if well read:
The high point in The Gallery of Antiquities, Balzac’s great novel of debt, comes when gendarmes are arresting the young Count d’Esgrignons for a forgery committed to cover his borrowing. The loyal notary Chesnel, attached to the d’Esgrignons family by generations of service, has already spent his own modest fortune to get the young count out of such scrapes, but he is at the end of his resources. “If I don’t manage to smother this story,” he tells the count matter-of-factly, “you’ll have to kill yourself before the indictment is read out.” The count realises in a flash that people have lent him money not because they have more than they know what to do with, or because he’s a nice guy, or because his privileges are the natural order of things. They have lent him money because they have made certain assumptions about his honour – misplaced assumptions, as it turns out.
The great irony of Caldwell's literary allusion is that - while evidently trying to impress with his grasp of eternal truths about debt and honour (or something like that) - he succeeds only in impressing us with his utter cluelessness about any economic history that might be considered actually relevant to the dire situation facing us now. More telling, perhaps, is the fact that he has looked to an unrepentant reactionary and royalist (Balzac) for inspiration.
Sadly, Caldwell's brand of simple-mindedness is holding policy-making sway in Washington and London.
Will Hutton, in today's Observer, is distraught, and rightly so:
In Washington, a resurgent Republican party took the American government to within two hours of being closed down for lack of politically authorised funds as it battled for swingeing cuts in federal spending. Across the Atlantic, an army of hedge funds and investment banks forced a lame-duck Portuguese government to turn to the IMF and European Union for a multibillion euro bail out. In Britain, George Osborne championed the breathtaking speed of his budget reduction plan by saying he would not play Russian roulette with British economic sovereignty. Everywhere are the echoes of the language Keynes tried to dispel at Bretton Woods.
Keynes: he always looms large in times like these. As Hutton observes, it is the spectre of Keynes who should be haunting us now, not some count in a Balzac novel.
At this critical juncture, it is worth remembering that
today's red-faced crusaders for fiscal austerity were yesterday's sudden converts to Keynes (albeit without bothering trying to grasp what Keynes had actually intended) when Bush busily squandered U.S. budget surpluses on tax cuts and wars. These are many of the same people who are now (conveniently) rounding on America's supposedly bloated entitlements programs as the main deficit culprits. Keeping this kind of a scorecard is helpful when trying to decide who should be taken seriously when the chips are down, and who should not be.
This is not to say, of course, that long-term fiscal imbalances need not be redressed. Of course they do. The question is when, and how.
William Keegan explains:
. . . having worked at a central bank myself, I am aware of that institutional desire to act "pre-emptively", in the words of a former head of the US Federal Reserve (not Alan Greenspan); that it is important to take the punchbowl away once the party gets going.
But the party has not got going in the UK.
The same might be said of the U.S. The current mess is a classic Keynes moment. Now is when we should be dusting off the manual, not talking about Balzac. Keegan points out:
Every day we read of the consequences of excessive austerity in countries such as Greece, Ireland and Portugal.
These would be the consequences that Keynes was trying to avoid. The fact that we seem to need to repeat past mistakes, including in the U.S. and the UK, is somewhat depressing.
Hutton concludes:
Economists and business leaders should not let the chancellor get away with Tea party-style statements about Britain risking bankruptcy and having no choices but to suffer. Keynes dedicated his life to challenge that thinking and for some years kept it at bay. The bad news is that it may only be disasters, like the one Keynes lived through, that will make people change their minds. The good news is that there are a lot of a very good and iconoclastic economists – many here – from many countries who want to take up the fight again. It's a race against conventional thinking – and time.
