Gordon Brown 'has to keep spending for UK to recover'
9 Feb 2010Gordon Brown should forget about reducing the budget deficit and continue spending to speed up Britain's recovery from the credit crunch, a leading economist has said.
Professor Joseph Stiglitz, a former World Bank chief economist and senior adviser to Bill Clinton's administration, urged the Prime Minister to ignore the financial markets and make plans for a further boost to the economy in case Britain relapsed into recession.
The Nobel Laureate dismissed David Cameron's suggestion that the confidence of the financial markets might be regained by comparatively small cuts in public spending and the budget deficit.
He warned that the markets could not be appeased with cuts to public spending.
“You're dealing with a crazy man. You're asking what I can do to placate a crazy man? Having got what he wants he will still kill you.”
He also said that it was “unconscionable” for the ratings agencies to threaten to downgrade Britain's creditworthiness, which would mean the Government would have to pay more to borrow money. “Fiscal fetishism is really dangerous,” he said.
Professor Stiglitz said that given Britain's feeble return to growth, Mr Brown should plan to keep up, or even extend, the fiscal stimulus.
He said: “The likelihood is of a marked slowdown from current growth, which is very weak. Whether that means negative territory or stagnation will depend on what the Government does. If there is a premature withdrawal of stimulus it is more likely that there will be a double dip.
“You want to show a sensitivity towards the deficit but also sensitivity towards the timing [of a withdrawal of stimulus], and the fact is that recovery is not robust.”
Reader views (3)
What is so wrong with having a recession, when the country is in such a mess? We should get real. When it is a case of suffering now or suffering later, we should take our medicine now. We should not be passing on the problems we made to our children. We need to learn that success comes from living within our means, and that wealth is about how much you save, not how much you spend or how much you borrow.
- Oliver Chettle, Bedford, 19/02/2010 03:19
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That is exactly the opposite of what they did in Asia in 1997, when the entire region went into deep recession. They let the banks and the businesses fail, cut spending, and balanced the budgets. Now they have strong economic growth. China even has to cool down the economy by increasing bank reserve requirements.
Stiglitz should read and learn.
- Jimbobfr, paris, 12/02/2010 18:32
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The people of the UK are already more in debt than any other in history. We cannot spend our way out of this debt, neither can our government. We have to earn our way out. Spending maybe ok but only if it is investing in our future. The great economist does not mean Briton should continue to buy what it can never afford.
- Bill G, Slough, 09/02/2010 10:49
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