Labour only discovered Keynes when it was too late to do the hard part, when it was too late to put money aside against a rainy day. Labour's policy was, essentially, borrow during the good times, and when the bad times come, borrow even more. In case you doubt me, Labour ran a deficit from about 2001 to 2010, and continues to advocate more borrowing now. Whatever else that is, it's not Keynesian. My admiration for Frank Field - my Favourite Living Politician: charisma-free but scrupulous, far-sighted, and with an intellectual fearlessness Orwell would have admired - went up a further notch yesterday when I heard him say that Labour got the economy wrong, and should apologise, unreservedly, for its misdoings in office.
What's this got to with Labour's growth policy? Well, the Government says, not unreasonably, that it can't pump prime the economy with a Keynesian stimulus because that could only be done by more borrowing; and it would be dangerous to increase borrowing in the febrile atmosphere where countries have been driven by this very course to the brink of default. Only this morning the Torygraph reports James Carrick, economist at Legal & General Investment Management, as saying stimulus spending of the type Balls and Miliband are calling for would help lift growth but hasten a downgrade of Britain's credit rating.
The irony is that if Labour had been reading Keynes in the 2000s, if they had improved Britain's fiscal position, the Government could have done what Ed Miliband is demanding now. In fact it would have been irresponsible for the Government not to do what Labour wants.
It is Labour's failure to act like proper Keynesians when in office which has made it so difficult for the Government to act like Keynesians now. If I were George Osbourne I'd be pretty p'd off at being lectured by Ed Balls, former Chief Secretary to the Treasury. Ed Balls is urging Osborne to eat the cake which he and his former mentor consumed long, long ago.
