In his New York Times column today, Paul Krugman blames Britain’s economic woes on the British government’s alleged policy of “austerity.” Yet he offers no evidence that Her Majesty’s government is actually pursuing such a policy.
Fortunately, Scott Sumner checked some relevant facts. From data on the 44 major world economies listed in The Economist‘s “Economic and Financial indicators” section, we learn that only two governments had 2011 budget deficits larger (as a percentage of GDP) than Britain’s: Egypt and Greece.
As for actual spending amounts, I logged a few minutes on the Internet to discover that British-government spending – adjusted for inflation – has risen every year since the start of the financial crisis. This spending in 2011 was 16 percent higher than it was in 2007, and is projected to be even higher in 2012.
Krugman might argue that the U.K.’s budget deficit and government spending should be even higher. But he’s wrong to write as if it’s beyond doubt that the policy pursued today by the British government is indeed one of austerity.
As Scott suggests in his post, that a policy of austerity is being pursued cannot legitimately be inferred from the continuation of an economic slump, for any such inference assumes the correctness of the theory (here, Keynesianism) whose validity is at issue. Krugman comes awfully close to committing this scientific gaff.