keynes

Economic arguments are, by their nature, complex and abstract. Few more so than the question of whether massive government spending helps or hurts the economy. That’s why there’s been so much attention paid to the divergent paths the U.S. and U.K. took after the Great Recession. Under Prime Minister David Cameron the U.K. pursued hard-nosed austerity to tackle the country’s deficits, while the U.S. resisted all such moves and instead opted for more stimulus.  Here we had a massive lab experiment pitting two economic theories against each other, playing out in real time on the world stage. Back in January Maclean’s delved into the battle in our story Which Country is Right.

This letter was sent to U.S. President Franklin D.  Roosevelt in 1933 by John Maynard Keynes.  Much of it (advice on ‘recovery and reform’) reads as if it could have been written last month. “Individuals must be induced to spend more out of their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees,” he urges.