How do you successfully break a mistaken and destructive intellectual consensus? Common sense has it that Britain is a front-line developed country that, as a precondition for a return to growth and full employment, must first succeed in lowering its public and private debts, dramatically and simultaneously.
Every assumption in that sentence is wrong. Britain is not a front-line developed economy. To deleverage simultaneously is to invite protracted depression. The challenge instead is to develop our economy as much as make it grow, and to ensure that overall demand, notwithstanding the overhang of private debt, grows consistently.
However, it is the other nonsense that defines public policy and the terms of our national conversation. It’s a system of thought that needs to be despatched in its entirety to the outer darkness. We should begin thinking in completely different terms and categories. The question is: how?
Paul Krugman, Larry Elliott and Dan Atkinson try to do exactly that in their latest books. Elliott and Atkinson’s thesis is that such epic economic mistakes have been made over the last generation, compounding those of the past 100 years, that the productive sinews of Britain’s economy – and its ability to renew that productive capacity – have shrunk to such a degree that Britain can no longer be considered a developed economy. In all sorts of ways – from its reliance on foreign direct investment to its faddish celebration of empty-headed, if charismatic, leaders – it displays the characteristics of a developing economy. It is wedded to a “no-strategy strategy”, as Elliott and Atkinson put it, followed by a political, financial and business elite that appears to be in denial about the country’s circumstances and needs.