Finding a way out of the economic crisis
NEW YORK: What do you call a group of economists? "A contradiction"? Or, perhaps at times like these, "a gloom" might seem more appropriate. Not though if you're Gordon Brown. For him a group of economists represents a night well spent in New York. Last night at the Waldorf Astoria the prime minister gathered a half dozen of them to give him advice on the eve of the global economic summit.
One whose advice will have been listened to particularly closely is Professor Paul Krugman - the man who in the week he won the Nobel Prize for economics described Mr Brown as the saviour of the global economy. It's a plaudit that the prime minister is understandably fond of. Only this week at the Lord Mayor's banquet he claimed that Britain was leading the world in the search for a way out of the current economic crisis. In the same speech he invited comparisons with President Roosevelt - the man credited with spending America's way out of the Great Depression.
Not so, says Professor Krugman, who argues that FDR was, in fact, too timid and that it was World War II that actually revived the economy.
Why, you may wonder, does this historical argument matter? The reason is that Krugman is not merely an admirer of Gordon Brown's, he's a cheerleader for President-elect Obama and he's urging him to spend big to kickstart the American economy.
Nobel Prize-winning economists don't trifle with the sort of numbers bandied about on Budget days - a billion here to there. They talk instead in terms of a share of national income. He wants Obama to spend 4% of America's GDP on a fiscal stimulus. That, to you and me, is $600bn - that's a six and 11 noughts. If Gordon Brown were to want a fiscal stimulus that would mean spending an unthinkably large £60bn - or the entire budget for state pensions.
Now, of course, President-elect Obama has not signed up to anything on this scale nor has or could Gordon Brown. It is, though, an indication of how economists and politicians are beginning to think the previously unthinkable.
The prime minister will argue at this weekend's G20 summit for an internationally co-ordinated stimulus. He will encourage others to follow the plans already unveiled by China, Germany and Japan.
Now, none of these countries have Britain's problem - a massive budget deficit. No matter, he says, we can and should borrow to pump prime the economy at this time. And he now has an answer to those who say that the very idea is a betrayal of his old friend Prudence, to risk higher interest rates and a run on the pound. The governor of the Bank of England himself gave backing to the idea earlier this week. He did, however, add two important caveats that borrowing for spending increases or tax cuts must be temporary and that there must be a credible plan to pay the money back.
Now, for every prof who believes in a stimulus there is another who argues that, at best, it would have no effect or, at worst, a malign one. Posed against Gordon Brown are both the Conservative and Liberal Democrats.
Some believe that Gordon Brown's motive this weekend is not just to plot our economic recovery but to get political cover for the fact that his government has let borrowing get out of control.
It's another 10 days before the government has to unveil the size of its fiscal stimulus. The debate in Whitehall is still ongoing. It may well though have been influenced by drinks and canapes last night at the Waldorf in Manhattan.
This was the script of my report on the Today programme
NB. Here's what Paul Krugman had to say when I spoke to him about the economic challenges facing world leaders.
And here's his column from today's New York Times.