The Keynesian Option

Friday, 24 October 2008 14:45

During the Great Depression, a programme of public works was initiated by President Roosevelt as a means of relieving unemployement. Will the same thing be needed again?

Public works programmes paid for out of budget deficits are is usually referred to as a "Keynsian" policy. There is no shortage of potential projects in Britain. The difficulties are that such schemes often have a long lead time between conception and commencement on the ground, and may also call for specialists who are either in short supply or need to be trained to do the job. Subject to that proviso, there is a long list of infrastructure projects that the country needs, which would lay in the foundations for continued prosperity in the future. Amongst the possibilities which could be initiated at relatively short notice are
At the local level, there is a backlog of repairs which needs to be made good. Before the cuts of the 1980s, highways were maintained to a much higher standard than they are today. Uneven pavements and potholed carriageways were unusual. There is infinite scope to deal with this, absorbing people and manufacturing capacity made idle due to the shrinking of the building industry. Moreover, the unemployment relief can be given to local authorities in the areas worst affected.

What should not happen is that the spending to reduce unemployment is squandered in worthless job creation schemes. There is no need to "create" jobs. The work is there to be done, and if it is, then real wealth will be created.

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