Nobel prize-winning economist says austerity policy is failing and coalition should be increasing spending instead of cutting it
Nobel prize-winning economist Paul Krugman has attacked the government’s austerity policy as “deeply destructive”.
Speaking on Radio 4’s Today programme, he said the coalition’s plan was “failing dismally”. Instead of cutting spending the government should be increasing it by 2% of GDP, he added.
“It is deeply destructive to pursue austerity in a depression,” said Krugman. “Give me a stronger economy and I’ll turn into a fiscal hawk. But not now.”
The American economist gave a lecture at the London School of Economics on Tuesday titled Austerity thy Name is Vanity.
He argued that David Cameron’s government had made a terrible mistake by going for austerity, and could not change course now because to do so would be to admit its mistake.
On his New York Times blog, he cites Martin Wolf of the Financial Times: “It may be humiliating for the government to offer such a speech now. But there is no reason why the people of the UK should suffer for its mistake, indefinitely.”
Krugman adds: “But there is a reason, of course: the ambition and vanity of politicians. Hello, Mr Clegg.”
He said the UK had now entered a depression with almost 30% of unemployed people having been out of work for 52 weeks or more, compared with 9.5% in 2008.
On Europe, Krugman advised the Irish to vote against the fiscal compact, which will involve tighter, EU-imposed budget controls, in a referendum on Thursday. “European currency union was a mistake since the day the Maastricht treaty was signed,” he said.