Paul Krugman has a soft spot for Gordon Brown. Basically he thinks that Gordon Brown should get more credit for managing the economic crisis. But the moment that becomes being mystified at Gordon’s lack of electoral bounce, it gets rather puzzling.Â A couple of months ago —
Itâ€™s not far-fetched to imagine that Britain will soon be experiencing at least a modest recovery, even as its neighbors languish.Â Yet that possibility doesnâ€™t seem to factor into any of the political discussion.
And he followed up yesterday noting the recent signs of turnaround (the phrase “green shoots” already seems to have been laughed out of contention):
Definitely an easing crisis, though probably not enough to save Gordon Brown.
But why should it?Â There are better examples of economic management out there.Â Like Australia.Â Australia had no GDP decline in the 1st quarter of 2009, jobs were actually added in July, and there’s been no housing crash.
And although Australia’s fiscal stimulus got a lot of negative attention from Kevin Rudd’s conservative critics, it wasn’t that large by global standards.Â Â Take a look at page 27 in this IMF paper comparing the size of stimulus in G20 countries.Â Australian deficits for 2009 and 2010 are large, but nowhere near as big as the UK, and that includes some discretionary stimulus in 2010 by contrast to the UK which has none.Â Essentially because Alistair Darling knows that they can’t afford it.
Finally, Australia has achieved all this without much help from the exchange rate.Â Like many currencies, the Australiian dollar depreciated against USD late last year, but has been steady or rising since then.Â So its growth success is a case of well managed but moderate stimulus achieving a lot.
So what’s the point?Â It’s an obvious one.Â Gordon Brown didn’t just find himself in a situation of someone else’s making in September 2007.Â He was present at the creation.Â Better macroeconomic management before the crisis made its impact less severe and left room to design some careful interventions to mitigate what impact there was.Â Instead of trying to make the case for Gordon Brown, shouldn’t we be getting a tip of the cap to Kevin Rudd and, yes, John Howard?