Crafts, N. F. R. and Mills, T. C. (2015) Self-defeating austerity? Evidence from 1930s' Britain. European Review of Economic History, 19 (2). pp. 109-127. doi:10.1093/ereh/heu024

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Abstract

Self-defeating austerity entails “perverse effects” of fiscal consolidation such that fiscal indicators deteriorate. Inter alia, this depends on the size of the fiscal multiplier as Keynes (1933. The Means to Prosperity. London: Macmillan) underlined. We find that the government-expenditure multiplier was less than 1 in 1930s' Britain. Austerity was not self-defeating in the long run and even its initial impact probably did not raise the public debt-to-GDP ratio. In the later 1930s, there was a “fiscal free lunch” in that deficit-financed government spending would have improved public finances enough to pay for the interest on the extra debt.

Item Type:	Journal Article
Subjects:	D History General and Old World > DA Great Britain H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Depressions --1929 -- Great Britain, Debts, Public -- Great Britain -- 20th century, Government spending policy -- Great Britain -- 20th century, Economic development -- Great Britain -- 20th century
Journal or Publication Title:	European Review of Economic History
Publisher:	Oxford University Press
ISSN:	1361-4916
Official Date:	May 2015
Dates:	Date Event May 2015 Published 4 February 2015 Available 4 June 2015 Accepted
Date of first compliant deposit:	17 August 2016
Volume:	19
Number:	2
Page Range:	pp. 109-127
DOI:	10.1093/ereh/heu024
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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