by Dirk Ehnts
I have been going through my books recently to search for economic insights from times long ago. After ear-marking Alvin Hansen’s Fiscal Policy and Business Cycles as the Xmas break reading (1941), I turned to the shorter The Problem of Full Employment by Joan Robinson (1903-83), a British economist teaching in Cambridge. The text was first published in 1943. On page 33-34 my 1955 edition reads:
9. SOME FALLACIES
1. The ‘Treasury View’ During the great slump it was the official view that Government investment cannot increase employment. The argument ran: there is a certain amount of saving going on at any time, and if more savings are invested by the Government, less will be available for private enterprise. This overlooks the fact that if there is more investment there will be a higher level of activity and of incomes and consequently more saving. The argument is so childish that it would deceive anyone who had not a strong wish to believe it. Nevertheless, it was for many years the basis of Government policy, and was set out in a famous White Paper in 1929.
The National Government which was formed in 1931 went in for a great economy campaign. Local authorities were compelled to cease work on building schemes, roads, den drainage, and so forth. An emergency budget was introduced, increasing taxation, cutting unemployment allowances and reducing pay of public servants, such as teachers and the armed forces. Private citizens felt it was patriotic to spend less. […] Nowadays there is considerably more understanding of how things work and it is unlikely that such a complete idiotic policy will be tried again.
3. The burden of the National Debt
The National Debt is often brought forward as an argument against public spending to create employment. There is a good deal of confusion between the National Debt and the debt of an individual. An individual who is in debt has to pay interest to someone else, and will be obliged to return the sum borrowed to the lender. A nation which is in debt has to pay interest to its own citizens (a foreign debt is a different story and is much more like a private debt). That is to say, the Government has to raise taxes from Peter and Paul and pay interest to Paul and Peter. Taking the country as a whole, there is no burden of the debt. Moreover, the debt need never be repaid. As one lot of bonds fall due to be redeemed a fresh lot can be sold to the public. […]
There should be a 2011 edition.