The Return of the Master
To push against the crisis or let it rip; to borrow and spend or balance the books - these are questions that will shape the outcome of the financial crisis - and the next election.
Looming over the debate is the shadow of a 20th Century giant: John Maynard Keynes.
I've been reading Robert Skidelsky's new book "Keynes - The Return of the Master" and it's an eye-opener. Skidelsky's three volume biography of Keynes was a landmark of the last decade and his latest book takes a completely unexpected turn.
Instead of a potted biography it is mainly a deep-Keynesian polemic against the freemarket economics that led up to this crisis, and the market-guided policy responses, and the failure of mainstream economics including the so-called New Keynesianism that emerged once the doctrine went mainstream in the 1960s.
It also contains a highly coherent account of the events of September-April, all the clearer for his decision to stop reading the newspapers while he was writing it. If you're doing Economics at GCSE or A-Level, this one chapter is a good reason to read the book.
We've got Lord Skidelsky on Newsnight tonight to discuss what Keynes might have done in this crisis; how he would have judged those who're using his tactics but still don't agree with his strategy and philosophy. He'll be facing one of his critics - my old opposite number and now venture capitalist Liam Halligan.
What is certain is that Keynes is back - in policy if not in philosophy. The quantitative easing strategy adopted here and in America was first advocated by Keynes in 1932; using the state spending to boost demand - well that's been done to a the tune of five trillion dollars worldwide. In the space of 12 months, all over the world, state rescued the market.
At the end of the 1920s economists believed capitalism was inherently stable; markets inherently efficient; recessions necessary. Then came the Depression: US GDP halved, the stock market lost 80% of its value; one if four of the workforce was unemployed.
Keynes concluded capitalism was unstable and needed state intervention to make it stable. Keynes went on not just to write a general theory of unstable capitalism, but to prescribe remedies that actually worked, and quickly.
Keynes was an economist who refused to believe that past data predicts the future; he based his theories on uncertainty and his prescriptions on morality. On the eve of last year's meltdown had almost no followers in Wall Street and few in academia. Mind you there are a few more now...