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Rethinking economics


Themes: Economics and policy

Rethinking economicsA highly respected macroeconomist says a regime change in economics is needed to haul the country out of austerity and ensure long-term growth

Macroeconomist Michael Kitson of Cambridge Judge Business School compares the current global recession to the Great Depression of the 1930s and feels that austerity is here for a long time unless there is a change in economic policy, globally, as well as in the UK.

“That may seem a big challenge but what we’ve seen in the past is that major shocks such as a major economic crisis have lead to a rethinking of the way we think economics works and a rethinking of economic policy.”

Similarities between this present recession and the Depression of the 1930s include scale, magnitude and global scope as well as similar economic policies.

“That led to a revision of economic policy – the Keynesian economic policy – which said that government can help capitalism work. The Keynesian revolution kicked in during the1950s and 60s as a response to the Great Depression.

“We had a policy response, we had a change in economics, we had government saying we can help manage the economy and the 50s, 60s and the early 70s were the global age of capitalism. We had rapid growth of the world economy and low levels of unemployment.

“We need to see a regime change in economics and we need to rethink economic policy to get us out of austerity and also to ensure long-term growth for the future.”

Michael Kitson points out that many people are arguing that governments can help to manage the economy, can help to stimulate growth and can help to ensure prosperity.

He concludes: “It’s not as though we’re starting from a blank slate. We have the thought, we have the views developed, we have the policy prescriptions in place. What we need is the political will to put those policies into action.”