Economics Questions

Re: Why did the UK national debt stop falling after classical Keynesianism was abandoned?

Consumariat — Thu, 01 Mar 2012 01:45:42 GMT

I'm referring to the abandonment of full employment as a government target, and the adoption of inflation targeting instead. Also, the privatisation of publicly owned industries from the 1980's onwards (and the related focus on competition policy instead of industrial policy), the deregulation of the financial markets from '86 onwards, and the demutualisation of the building societies.

Re: Why did the UK national debt stop falling after classical Keynesianism was abandoned?

John James — Thu, 01 Mar 2012 01:25:47 GMT

Consumariat:
I often hear how Keynesianism is responsible for the debt crisis.

I don't know where you heard this or if you just heard it wrong, but that's a very crude way of putting it that is kind of misleading. The bottom line is "debt crisis" comes from having too much debt.

This always puzzles me because the UK has since 1979 adopted Neo-Classical (and for a while, Monetarist) policies. The following graph shows quite clearly how the UK national debt was falling steadily all the way through the post-war Keynesian consensus. So why did this trend stop with its abandonment?

Simply claiming a country adopted "[insert economic school of thought] policies" is again misleading. Perhaps you can point out exactly what these policies you're talking about were, and when they were enacted and for how long. (And if you could, how they qualify as policies of that particular school of thought).

Why did the UK national debt stop falling after classical Keynesianism was abandoned?

Consumariat — Thu, 01 Mar 2012 01:10:41 GMT

I often hear how Keynesianism is responsible for the debt crisis. This always puzzles me because the UK has since 1979 adopted Neo-Classical (and for a while, Monetarist) policies. The following graph shows quite clearly how the UK national debt was falling steadily all the way through the post-war Keynesian consensus. So why did this trend stop with its abandonment?