Jeremy Warner, assistant editor of The Daily Telegraph and prominent British economics journalist, has a message for liberal economist Paul Krugman: Please shut up. The occasion for the remark — and come on, we’ve all been thinking it — was Krugman’s recent and wholly unsolicited criticism of Britain’s deficit reduction plan.
Professor Krugman suggests that Britain has nothing to fear from excessive public debt, which is still as things stand below its long run historical average. He’s technically right about this, but like a lot of statistics used to support a particular, ideological position, it’s completely meaningless. Looking at the path of UK public debt as a percentage of GDP, there have indeed been quite long periods when it has been much higher than it is now, but these periods mainly coincided with prolonged and all embracing war — first the Napoleonic wars, then later the Boer war and the first world war. Britain had barely recovered from the financial consequences of the first world war by the time the second world war hit.
The big point missed by those who think elevated public debt doesn’t matter is that these periods of excessive debt utterly crippled the UK economy. Indeed, Britain’s decline through the twentieth century as an economic superpower directly correlates with increased indebtedness.
While it may not matter to his fans (or the Nobel Committee), Krugman doesn’t have the best track record on economic matters. He’s fine fodder for comedy, though:
[My thanks to the gods of Reddit for the image.]