There?s plenty of evidence that Keynesian economics makes no sense. That?s why the following Bloomberg Businessweek assessment of U.S. Treasury Secretary Timothy Geithner is so disturbing:
Geithner’s team prepared for the G-20 meeting by dusting off the IMF’s founding document, which includes, as the secretary noted in an Oct. 6 speech in Washington, “a now-obscure paragraph” requiring the Fund to investigate countries with chronic trade surpluses and recommend how to shrink them. Finishing the thought in Gyeongju, he advocated a 4 percent limit on the size of countries’ trade surpluses as a share of their economic output.
In so doing, Geithner was playing a role made famous in the 1940s by the British economist John Maynard Keynes. Geithner warned in Gyeongju, as he has many times before, that global growth will be hindered if indebted nations are forced to bear the full brunt of correcting imbalances. He urged surplus nations to shift “away from export dependence and toward stronger domestic-demand-led growth.” Keynes said the same thing more ornately in 1942, vowing to “offset the contractionist pressure which might otherwise overwhelm in social disorder and disappointment the good hopes of our modern world.”
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Geithner is channeling his inner Keynes, at least on trade matters, for the simple reason that it’s in his nation’s interest to do so.
Roy Cordato would beg to differ that it?s ever in the nation?s interest to follow Keynesian ideas:
