Paul Krugman on How the Big Lies Told by the Powerful Have Come to Rule the World

It may come as small consolation to Americans that Paul Krugman thinks that Britain may be in even worse shape than the U.S. The proof in this Yorkshire pudding is that the very conservative government which has perpetuated demonstrably terrible economic ideas was just re-elected. "One thing we’ve learned in the years since the financial crisis is that seriously bad ideas," Krugman opens Friday's column, "by which I mean bad ideas that appeal to the prejudices of Very Serious People — have remarkable staying power. No matter how much contrary evidence comes in, no matter how often and how badly predictions based on those ideas are proved wrong, the bad ideas just keep coming back. And they retain the power to warp policy.

In Krugman's analysis, the qualifications for a "seriously bad idea" involve sounding serious, explaining big events, and absolving "corporate interests and the wealthy from responsibility," all the while calling for sacrifices on the part of the little guy.

Krugman hammers home the fact that the worldwide economic crisis was caused by the failure to regulate the financial industry, and was prolonged by austerity policies. The ultimate bad idea, he writes, was blaming government spending on the poor. "In the United States, I’m happy to say, this idea seems to be on the ropes, at least for now," he writes, although no one seems to have told, say, Paul Ryan or Sam Brownback of Kansas. "Here in Britain, however, it still reigns supreme. In particular, one important factor in the recent Conservative election triumph was the way Britain’s news media told voters, again and again, that excessive government spending under Labour caused the financial crisis."

Aaarggh, would probably best encapsulate the proper response to this folly. But Krugman more or less calmly points out the absurdity of pinning housing busts in farflung Spain and Florida on profligate spending by Labour's Gordon Brown, and adds in a swipe at the British media for reporting conservative propaganda as fact.

Things are getting worse in Britain, Krugman warns. Tory George Osborne, "the chancellor of the Exchequer and the architect of the government’s austerity policies, announced his intention to make these policies permanent."

It’s a remarkable proposal, and I mean that in the worst way. Mr. Osborne isn’t offering the wrong answer to Britain’s problems; he’s offering an answer to problems Britain doesn’t have, while ignoring and exacerbating the problems it does.

For Britain does not have a public debt problem. Yes, debt rose in the wake of economic crisis, but it’s still not high by historical standards, and borrowing costs have rarely been lower. In fact, interest rates adjusted for inflation are negative, even on very long-term borrowing. Investors, in other words, are willing to pay the British government to make use of part of their wealth.


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