The answer to Covid economic crisis

columnist

Keynes, without doubt, was the greatest economist of the last century. What Keynes taught was counterintuitive- that in a time of an economic downturn the answer was to prime the pump. Spend more. (The opposite of what a family should do when in debt.) That would revive an economy and increase the growth rate. The increased growth would provide more tax revenue which could be spent on aid for the poor, new infrastructure and the health services etc. As an economy grows the deficits many politicians say they worry about (although the Republicans only do when they are out of power) would become relatively smaller. In short, the debt would remain a constant figure while the size of the economy as a whole would increase. In other words, the total debt possessed by a country, relative to a country’s growing total income, would lessen. The percentage of debt would go down. Indeed, with interest rates as low as they are, these days it costs a government very little to borrow. As some economists have said it’s almost “free money”. Keynesian economics, intellectually derided by the Chicago school, in particular by the Nobel prize winning economist, Milton Friedman, and politically rubbished by Margaret Thatcher and Ronald Reagan, needs a comeback.

The answer to Covid economic crisis

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