“We are not a household. We are an economy. Your spending is my income, and my spending is your income.”
With this comment, Paul Krugman, a Nobel Laureate in Economics, firmly demolished the analogy raised by the Tory MP, Andrea Leadsom, that an economy is like a household. Mr Krugman went on to explain the problems caused by the lack of demand that plague Western economies today. This exchange, which appeared on Newsnight in May 2012, left many observers in awe, as Krugman firmly refuted the claims of Ms Leadsom and the private equity mogul, John Moulton, that the devastating economic crisis has been caused by purely structural problems and thus requires painful long-term solutions. Those scratching their heads at the possibility of a quick and painless recovery need only to delve into Mr Krugman’s latest book, End This Depression Now! to find not only the components of such a recovery, but a viable alternative to the self-destructive, ‘belt-tightening’, fiscal-austerity policies that are currently in place.