From The Guardian UK: http://www.guardian.co.uk/business/2013/may/06/paul-krugman-battle-against-austerity
An interview with the Nobel prize-winning economist, whose book roundly attacks the ‘delusional’ deficit-reduction strategy
Phillip Inman, economics correspondent
The Guardian, Monday 6 May 2013
Paul Krugman has just passed the landmark 1 million followers on Twitter. Not bad for an academic economist, albeit one with a Nobel prize under his arm, a prominent position at Princeton University, and a New York Times blog.
His following is a reward for battling the conventional wisdom that austerity can foster a recovery. From the moment Lehman Brothers was allowed to crash, it seemed that only Krugman, his compatriot Joseph Stiglitz, another Nobel prizewinner for the liberal cause, and New York professor Nouriel Roubini, who had loudly predicted the crash, consistently confronted the “austerians” in Washington, Brussels and the UK Treasury.
More than four years on, austerity is being questioned as never before, not least because most countries implementing a deficit-reduction policy have failed to grow. Krugman, his blog and comments on Twitter, have become the focal point for objectors worldwide.
Speaking to the Guardian to publicise the second edition of his book End This Depression Now, he argues that his battle will go on until policymakers realise that their reliance on deficit reduction is a “delusional” misreading of basic economics. But despite his persistent criticism, austerity remains the default position for most western governments.
For such a sophisticated thinker, Krugman’s solution – which upsets some liberal supporters – is straightforward. Asked if he is concerned a splurge of borrowing will trigger a repeat of the financial bubbles that caused the crash and spur inflation as too much money chases too few goods, he is dismissive. “As far as planting the seeds of the next crisis, bear in mind that leverage is still falling, so I don’t see the problem at this point,” he says.
In Krugman’s view, concerns about ageing populations, looming health costs, the changing nature of the workforce in a digital age and competition from Asian economies for jobs, are for another time. “Should we be having more spending? The answer must be yes. Why? Because there is plenty of slack in the labour market and investment needs to increase. To me it is clear that there is plenty of room to increase spending without increasing inflation.
Continue reading at: http://www.guardian.co.uk/business/2013/may/06/paul-krugman-battle-against-austerity
