A few weeks ago, This Writer had a conversation on Twitter with a rather uncouth gentleman who claimed that Keynesianism was rubbish because it had been tried in the US by Obama and had failed.
Here, Simon Wren-Lewis shows us a graph with US growth outstripping austerity-prone Blighty – so if Obama was working on a Keynesian model, then my disputant was inaccurate about its efficacy.
However, the Professor also states that fiscal austerity post-2013 was weaker here than in the US, implying that Obama was not using a Keynesian model.
Either way, it seems the other person was wrong. Can any economists out there cast light on this?
In 2011 and 2012 the UK flatlined, and only started recovering when the drag imposed by austerity came to an end. This is entirely consistent with my and the OBR’s analysis. (For the record, I also said three years ago that we would see a recovery in subsequent years.) Anti-Keynesians like to point to UK growth from 2013 onwards being healthy compared to other countries, but this is also entirely consistent with Keynesian analysis, because if you look at underlying primary balances UK fiscal austerity was much weaker in those years than in the US or the Eurozone.
In a way Ferguson acknowledges all this, because he lists other potential reasons why UK growth might have been weak in those early years. Fair enough, except that his central claim is that the numbers show the Keynesian analysis of austerity is wrong. But his chart shows that the numbers are in fact completely consistent with the Keynesian story. That does not prove the Keynesian story is right, but it sure does not show it is wrong!