So despite unprecedented spending, borrowing and the printing of money the economy has shrunk by a monumental 2.4% in just the first quarter of this year. 51 years ago, that’s when we last saw that sort of thing.

I tried to do a bit of digging around to see what happened in the 50s that caused that contraction. Turns out most of the information from this period is contained in something called, “books” which means getting off my arse and going to the public library and/or ordering a book from Amazon. I am a victim of ‘analogue exclusion’ aren’t I? I don’t have enough books. They should tax people with books so that I can be given lots of free books. Or something.

There’s one clue: Keynesianism. It always comes back to Keynes, it seems. I found this delightful paragraph on Wikipedia, explaining the “demise” of Keynesian economics:

Through the 1950s, moderate degrees of government demand leading industrial development, and use of fiscal and monetary counter-cyclical policies continued, and reached a peak in the “go go” 1960s, where it seemed to many Keynesians that prosperity was now permanent. In 1971, Republican US President Richard Nixon even proclaimed “we are all Keynesians now.^[5] However, with the oil shock of 1973, and the economic problems of the 1970s, modern liberal economics began to fall out of favor. During this time, many economies experienced high and rising unemployment, coupled with high and rising inflation, contradicting the Phillips curve‘s prediction. This stagflation meant that the simultaneous application of expansionary (anti-recession) and contractionary (anti-inflation) policies appeared to be necessary, a clear impossibility. This dilemma led to the end of the Keynesian near-consensus of the 1960s, and the rise throughout the 1970s of ideas based upon more classical analysis, including monetarism, supply-side economics^[5] and new classical economics. At the same time Keynesians began during the period to reorganize their thinking (some becoming associated with New Keynesian economics); one strategy, utilized also as a critique of the notably high unemployment and potentially disappointing GNP growth rates associated with the latter two theories by the mid-1980s, was to emphasize low unemployment and maximal economic growth at the cost of somewhat higher inflation (its consequences kept in check by indexing and other methods, and its overall rate kept lower and steadier by such potential policies as Martin Weitzman’s share economy)

Keynesians who thought prosperity was now permanent? “We’re all Keynesians now”? Sounds strangely familiar. Even Callaghan had his doubts about Keynesianism during his time as Prime Minister, yet here we are with a Government that thinks they can make it work where everyone else has failed.

The BBC reporter on Radio 4 last night suggested that the figures were probably a good thing. After such a sharp fall, she said, there’s ‘nearly’ only one way it can go. There you have it, nothing to worry about…