COMMENT
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Robert Skidelsky
Published: June 16 2010 23:47 | Last updated: June 16 2010 23:47
In 1974, Edward Heath asked: "Who governs "“ government or trade unions?" Five years later British voters delivered a final verdict by electing Margaret Thatcher. The equivalent today would be: "Who governs "“ government or financial markets?" No clear answer has yet been given, but the question may well define the political battleground for the next five years.
In one sense, next week's emergency Budget is simply the logical working out of an intellectual theorem. The implicit premise of the coming retrenchment is that market economies are always at, or rapidly return to, full employment. It follows that a stimulus, whether fiscal or monetary, cannot improve on the existing situation. All that increased government spending does is to withdraw money from the private sector; all that printing money does is to cause inflation.
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