Britain has sunk back into recession, its first double-dip downturn since the 1970s, piling pressure on the government to soften its austerity drive.
The shock downturn piles further pressure on the government to step up its efforts to boost the economy, and highlight the challenges it faces in reducing Britain's debt from record levels. The fall back into recession will also heighten calls for the chancellor to ease up on his deficit-cutting plans. However, George Osborne stuck to his guns on Wednesday morning.
"It's a very tough economic situation. It's taking longer than anyone hoped to recover from the biggest debt crisis our lifetime. The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt," said the chancellor.
It’s important to understand that what we’re seeing isn’t a failure of orthodox economics. Standard economics in this case — that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks — was the Keynesian position. The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite.
And now the results are in: Keynesians have been completely right, Austerians utterly wrong — at vast human cost.
Not that anything will change; the question are our Betters evil or stupid is tilting evermore towards evil (although the two are not necessarily mutually exclusive).