It’s cynical, manipulative and hypocritical – and it looks like it is going to work. How often do you hear a sentence like this, to describe a government initiative or economic policy? Not often enough.
The media and a surprisingly high proportion of business leaders, financiers and economic analysts seem to believe that policies which are dishonest, intellectually inconsistent or obviously self-interested in their motivation are ipso facto doomed to fail or to damage the public interest. But this is manifestly untrue. The effectiveness of public policies and their ultimate desirability is in practice judged not by their motivations, but by their results.
Which brings me to the real subject of this column: the improving outlook for the world economy and why many economists and financiers cannot bring themselves to acknowledge it. Let me begin with a striking example anticipated in this column back in March: the boom in house prices and debt-financed consumption that the British government is pumping up in preparation for the general election in May 2015.
In the British budget announced on March 20, George Osborne, the British finance minister, announced a spectacular pre-election giveaway: a program of highly leveraged mortgage lending guaranteed by the government with the stated intention of pumping up British household debt by up to £130 billion. The enormity of this number can be gauged by translating it into an equivalent stimulus relative to the size of the U.S. economy: $1.7 trillion.
Despite this audacious debt plan, the almost unanimous response among British pundits went something like this: