Gordon Brown thinks he's saved the world, but not everyone agrees. Take Peer Steinbruck, the social democrat German finance minister. In a wonderfully un-diplomatic interview with Newsweek magazine, he said:
The speed at which proposals are put together under pressure that do not even pass an economic test is breathtaking and depressing. Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain's debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn't this the same mistake everyone is suddenly making again, under all the public pressure?
Err.... Yes, pretty much. He continues:
We have a bidding war where everyone in politics believes they have to top up every spending program that has been put to discussion. I say we should be honest to our citizens. Policies can take some of the sharpness out of it, but no matter how much any government does, the recession we are in now is unavoidable. When I look at the chaotic and volatile debate right now, both in Germany and around the world, my impression and concern is that the daily barrage of proposals and political statements is making markets and consumers even more nervous.
Again, that's about right. Nick Bosanquet calls this 'Toxic Keynesianism'. Rather than raising confidence and increasing demand, the expectation of constant change can cause a crisis of confidence and exacerbate the economy's downward spiral. Yet politicians insist that 'something must be done', regardless of the consequences. Back to Steinbruck for the final word:
It is the yearning for the Great Rescue Plan. It doesn't exist. It doesn't exist!