LETTER: No silver bullet plan for economic recovery

Readers' letters | Published:

A reader questions the government's plan for economic recovery.

Rishi Sunak.

This is not The New Deal and Keynesian economics is not a silver bullet

Boris's latest plan for the economy, though to some extent to be applauded is not as his propagandists (this smells very much of Dominic) would have us believe, the British equivalent of Roosevelt's New Deal.It is on a much reduced scale and is reliant upon the economic theories of John Maynard Keynes.

In simple terms, Keynes argued that if you pay a man to dig a hole (and fill it in), his wages will be spent, thereby giving income to another recipient who in turn will also spend and so on. This is known as 'The multiplier theory' and it is claimed that for every pound paid, economic activity is created many times over.

We must not accept this idea without question.

1. We cannot assess how much of the American recovery was due to the New Deal and how much was due to preparation for war

2. The international nature of trade now far exceeds that when Keynes developed this and the multinational nature of companies together with immigrants passing earnings back to countries of origin could mean that the multiplier does indeed happen but not in UK

3. The theory presupposes that the money will actually be spent on goods and services whereas it is possible that the current levels of fear and uncertainty may result in people saving rather than spending.

4. Vast inputs of money could result in an explosion in levels of inflation not seen this century.The Bank of England's mandate is to control inflation and it would therefore increase interest rates, making national borrowing expensive


5. Unfortunately, governments are notoriously poor when deciding where money should go in order to start the process. I would be fearful that many billions would indeed disappear down that hole which Keynes talks about and with no reward.

Yes the policy is right but there are many elephant traps on the way to recovery.

Alan M Etheridge, Dudley

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