In his autumn statement today the chancellor claimed it was his deficit reduction plan that enabled the British government to borrow money even more cheaply than the Germans, thus saving the taxpayer £21bn in interest rate charges over five years. Ed Balls rejoined that "he still clings to the illiterate fantasy that low long-term interest rates in Britain are a sign of enhanced credibility and not, as they were in Japan in the 1990s or in America today, a sign of stagnant growth in our economy". The intellectual debate between George Osborne and his critics hinges on this single point: what is it that makes a deficit-reduction programme "credible"?

 

Let's start with the theory of the matter. "Look after unemployment," JM Keynes said,

This is the latest in a spate of books provoked by the world economic crisis and one of the best. Jeffrey Sachs calls himself a "clinical economist". In The End of Poverty he applied his clinician's skills to the distempers of Africa; in this book he turns them to the hubristic and wasteful habits of America. The details of the Fall – if by that he means the collapse of the American banking system in 2008 – do not concern him; it is what the Fall tells us about contemporary American capitalism.

 

In structure, the book is a bit like a medical treatise: the symptoms are identified, their causes diagnosed, the cures prescribed. However, the science is a bit of a veneer. Sachs is a very political doctor. This does not mean he has written a

George Osborne expected to inherit a booming economy. In September 2007-the month Northern Rock collapsed – he promised to match Labour’s spending plans for his first three years as Chancellor. He said that because the economy was set to grow faster than projected government spending, this would leave the Conservatives room for tax cuts. It is worth recalling this pledge in the light of the later Conservative charge that Gordon Brown ruined the economy. In 2007 both parties shared the same rosy growth expectations, and differed only on the question of how to divide the medium term spoils between tax cuts and public spending.

 

In fact, George Osborne unexpectedly inherited an economy ruined by the great global contraction which started

We must be in a jittery state for a slowdown in the rate of growth to be hailed as a triumph of recovery. The fact is no firm momentum of recovery exists. Take your pick of the forecasts. We might manage 1.8% this year at best, 1.6% next year. The comprehensive spending review has laid down a path for real-terms cuts in public spending over the four years to 2014-15 and the elimination of deficit over the same period. The capital budget is projected to decline by 46% in real terms. The government is hoping that deficit reduction will by itself "crowd in" private investment that is not there right now. In the meantime we expect the Bank of England to do some more quantitative easing, keeping short run interest rates low.

 

Many are urging

Them and Us: Politics, Greed and Inequality - Why We Need a Fair Society by Will Hutton.

 

In 1996 Will Hutton wrote The State We're In, setting out his vision of Britain's future as the then ascendant Tony Blair prepared to take power. The new dawn didn't break. With Them and Us, he turns his persuasive efforts on the coalition, from whom he has accepted a job to review public sector pay. Here he argues that fairness should not be sacrificed to austerity, and tries to reconcile radical principle with political pragmatism. The result is a tract for our times, passionate, erudite, with much common sense. Hutton is not a socialist, but a progressive liberal. By "fair" he means simply that "good things should happen to good people, and bad