The Financial Times reports that one European state has broken ranks with the neo-liberal consensus and started Keynesian policies of extra state spending rather than cuts to deal with the crisis.
It is... the solidly right-wing government in Sweden. It has announced plans to spend SKr23bn to boost growth, and said it will invest more if the downturn gets worse.
Swedish prime minister Fredrik Reinfeldt says he can do it because Sweden’s debt and deficit levels are much lower than others’. But if he’s right (as he is) that extra state spending can help drag capitalist economies out of recession, that truth holds also for more indebted states.
Back in 2010, running for the Labour leadership, Ed Balls was an aggressive Keynesian, arguing that the British government should spend more on economic expansion rather than cutting, or at least rather than cutting as “far and fast” as the Tories.
Since then Balls has rather been proved right. The Tories’ cuts have produced renewed recession and an increase, not a cut, in the budget deficit. But Balls has toned down his “Keynesian” line. He has not made it more strident.
In Sweden the leader of the opposition Social Democrats, Stefan Löfven, responded wretchedly by warning darkly that Reinfeldt’s growth policies could harm Sweden’s budgetary discipline, and moaning that the right had “had stolen many of the left’s ideas”. There are a few differences, he whined: the Social Democrats want to increase benefits, not cut employers’ taxes.
But if Balls would say even that, it would be an advance.