Krugman: British Fashion Victims

In the spring of 2010, fiscal austerity became fashionable. I use the term advisedly: the sudden consensus among Very Serious People that everyone must balance budgets now now now wasn’t based on any kind of careful analysis. It was more like a fad, something everyone professed to believe because that was what the in-crowd was saying.

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No widespread fad ever passes, however, without leaving some fashion victims in its wake. In this case, the victims are the people of Britain, who have the misfortune to be ruled by a government that took office at the height of the austerity fad and won’t admit that it was wrong.

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Both the new British budget announced on Wednesday and the rhetoric that accompanied the announcement might have come straight from the desk of Andrew Mellon, the Treasury secretary who told President Herbert Hoover to fight the Depression by liquidating the farmers, liquidating the workers, and driving down wages. Or if you prefer more British precedents, it echoes the Snowden budget of 1931, which tried to restore confidence but ended up deepening the economic crisis.

http://www.nytimes.com/2010/10/22/opinion/22krugman.html?_r=1&ref=opinion&nl=opinion&emc=tyb1

Much more at the link. Krugman is an astute economic historian among other things.

"Krugman is an astute economic historian among other things."

As an 'astute economic historian' he would know that the claimed statement by Mellon was written by Hoover in Hoover's memoir, and that Hoover highlighted that statement because he (and the actions of his administration) refuted it.

Hoover raised spending by the government, exhorted businesses not to adjust wages, and even raised taxes substantially. Things like the RFC were started by Hoover, and still the Depression deepened and unemployment worsened throughout his presidency

Read the NYT's story: _http://www.time.com/time/printout/0,8816,738193,00.html_ from the time period.

(sorry you'll have to cut and paste, I can't make a url right for some reason)

This is from Hoover's nomination acceptance speech, when he ran and lost against FDR:

"...three years ago came retribution by the inevitable worldwide slump in the consumption of goods, in prices, and employment. At that juncture it was the normal penalty for a reckless boom such as we have witnessed a score of times in our national history. Through such depressions we have always passed safely after a relatively short period of losses, of hardship, and of adjustment. We have adopted policies in the Government which were fitting to the situation. Gradually the country began to right itself. Eighteen months ago there was a solid basis for hope that recovery was in sight.

Then, there came to us a new calamity, a blow from abroad of such dangerous character as to strike at the very safety of the Republic. The countries of Europe proved unable to withstand the stress of the depression... Governments were fallaciously seeking to build back by enlarged borrowing, by subsidizing industry and employment from taxes that slowly sapped the savings upon which industry and rejuvenated commerce must be built. Under these strains the financial systems of foreign countries crashed one by one.

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Two courses were open to us. We might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to private business and to the Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put that program in action.

Our measures have repelled these attacks of fear and panic. We have maintained the financial integrity of the Government. We have cooperated to restore and stabilize the situation abroad. As a nation we have paid every dollar demanded of us. We have used the credit of the Government to aid and protect our institutions, both public and private. We have provided methods and assurances that none suffer from hunger or cold amongst our people. We have instituted measures to assist our farmers and our homeowners. We have created vast agencies for employment. Above all, we have maintained the sanctity of the principles upon which this Republic has grown great."


Hoover had his own version of TARP, the bailouts and the stimulus spending. It didn't work, things just got worse, and people like Krugman should know better. Seriously, read it yourself: _http://americanhistory.about.com/library/docs/blhooverspeech1932.htm_

Krugman would deny reality, and contend it is austerity.