No Pain, No Gain for Britain?

LONDON – The economic historian Niall Ferguson reminds me of the late Oxford historian A.J.P. Taylor. Though Taylor maintained that he tried to tell the truth in his historical writing, he was quite ready to spin the facts for a good cause. Ferguson, too, is a wonderful historian – but equally ready to spin when he shifts into political gear.

Ferguson’s cause is American neo-conservatism, coupled with a relentless aversion to Keynes and Keynesians. His latest defense of fiscal austerity came immediately after the United Kingdom’s recent election, when he wrote in the Financial Times that, “Labour should blame Keynes for their defeat.”

Ferguson’s argument amounts to that of a brutal disciplinarian who claims vindication for his methods by pointing out that the victim is still alive. In pleading on behalf of British Chancellor of the Exchequer George Osborne, he points out that the UK economy grew by 2.6% last year (the “best performing of the G-7 economies”), but ignores the damage that Osborne inflicted on the economy en route to this recovery.

There is now much agreement about this damage. The Office of Budget Responsibility, the independent agency set up by Osborne to assess the government’s macroeconomic performance, has just concluded that austerity reduced GDP growth by 2% from 2010 to 2012, bringing the cumulative cost of austerity since 2010 to 5% of GDP. Simon Wren-Lewis of Oxford University estimates that the damage might be as high as 15% of GDP. In a recent poll of British economists by the Centre for Macroeconomics, two-thirds agreed that austerity had harmed the UK economy.