American economist warns cuts will damage UK economy

I caught on TV this morning (Monday October 25) an interesting analysis comparing American and British responses to the financial crisis. The Obama administration has spent billions to stimulate demand and spur economic recovery. In Britain, as we now know, the Cameron-Clegg ConDem coalition is committed to deep public spending cuts.

"The British idea appears to be if they make cuts in the public sector, the private sector will come along and re-absorb those people, put them back to work," said Professor James K Galbraith of the University of Texas.

"I don't see how that is going to happen," added the Austin-based Professor Galbraith. "The  British have financial problems similar to ours (in the United States) and I suspect that what is going to happen is that they're going to end up with a great many more people on unemployment, on the dole, or simply retired, without any of the benefit of a rebound of the private economy that they appear to be hoping for. 

"So I think they're pursuing a strategy which is really based upon a very fanciful idea about how an economy works and I would be very surprised if it pays off for them."

Professor Galbraith was interviewed on Al Jazeera TV's Counting the Cost. 


Paul Coleman, London, October 2010.