Thoughts on 'keynesian'

Every so often there is a word that comes to pre-eminence in the public's mind. Sometimes it is a brand name such as 'google', which can be both a noun and a verb. Twitter is going the same way, which is why you hear: 'Please twitter me with that info'. Perhaps it will catch on; perhaps it will die out.

Sometimes it is a word that catches the zeitgeist. 'subprime' was added to the OED last year. This is timely; after all, is there a better word to sum up the economic problems that we have at the moment?

And sometimes it is an old word that circumstance propels to new heights. Such is the current popularity of 'keynesian'. After thirty years of only being of interest to dry academics, historians or economists, it is now mentioned widely. Politicians appear to be increasingly eager to hang their hats on the coat-tails of Keynesian economics.

The problem is that although the word has been thrown about ever-increasingly over the last few months, nowhere in the media have I seen a decent explanation of what it actually means. Not on the BBC (broadcast, at least), nor in the Economist, nor in the Guardian. I freely admit that I may have missed it, but explanations are far less common than the actual usage of the word. It is almost as though 'Keynesian' has become a sound bite for politicians and media alike, and one that they know the public will not really understand.

It is being used as an insult, as a promise, as a threat. Some see it as the only way out of the current crisis, whilst others see it as a grave threat to the free market. Indeed, the old 'monetarism versus Keynesian' debate has been thoroughly reignited.

This is not the case for that other 'new' term, quantitative easing. This has been explained ad nauseum on many media sources. Perhaps this is because quantitative easing is a tools, whereas keynesian describes a philosophy.

I believed that I had a reasonable idea of what 'Keynesian' meant. However, when I found a link about John Maynard Keynes on the BBC Website, it turned out that I had some of the details wrong. (At least I hope that I've got it wrong, and that the BBC has it right).

This is a bad sign. The hard economic times that we find ourselves in requires clarity; after all, it was a fundamental lack of clarity and understanding that has led us into this mess. The public deserve clarity. If politicians want to spend their way out of recession, they should say so. If they want the free market to sort it out (although the free market - and a lack of regulation - got us into this mess), then they should say so, and give us the hideous details. We're adults, and we can handle it.

For one thing, I doubt any pre-existing solution will work. Keynes came up with his ideas in response to the Great Depression (and made a great deal of money in the process); the more free-market monetarism was dreamt up by Friedman in the 1960's. Both have been proved to be wrong, and both do not account for the globalised nature of the industrial and financial markets that has developed in the last twenty-five years. Already there are fears that much of the money we are injecting into our economy via quantitative easing is actually going abroad (the Independent).

What we need are solutions tailored to our current situation. Unfortunately, there is a possibility that the solution will not become obvious until after the crisis is over. The situation in any one country is tied up with those of many others - which is exactly why Germany has been so severely hit by the recession, despite having followed much more sensible fiscal policies than us over the last decade.

Hiding behind buzz-words (even ones the best part of a century old) is somewhat akin to hiding risk on the balance books. You may fool some people by using such terms; the danger is that you may also end up fooling yourself.