Jeremy Corbyn believes he has been vindicated by the Government’s ability to respond to the corona virus emergency by spending eye-watering sums of money, which are comparable to the amounts that he was derided for proposing during the general election campaign.
The difference is this. Mr Corbyn was proposing to spend these sums, to build a socialist economy, when we were already at full employment; they would have resulted in crowding-out private productive investment, enormous inflationary pressures, and a ballooning trade deficit.
The Government’s response is at the other end of an economic cycle which has turned dramatically due to the virus: The purpose is to stave off a massive deflation and unemployment. This response is borne of necessity and the focus is on income replacement – what economists used to call the ‘automatic stabilisers’, to prevent the complete collapse of demand within the economy. It’s Pure Keynesian economics.
In one sense, I suppose, they are the same. All Government expenditure, however motivated, ends in the same way: The Government’s borrowing will have to be repaid; and we will all be repaying it in our taxes for a very long time.
John Maynard Keynes, when asked about the impact of his prescriptions in the long run, retorted that ‘in the long run we are all dead anyway’.
BUT the whole purpose of our policy is to survive, beat the virus, and live longer. As I said last week, it will certainly seem longer.
Sir Desmond Swayne TD
