Nobel economist accuses Tories of ‘scaremongering’

15.02.10

Nobel Prize-winning economist Joseph Stiglitz has accused the Conservative leadership of "scaremongering" over their calls for massive cuts to public spending.

In an interview in this week's edition of the New Statesman, Mr Stiglitz commented: "Incredulous ... We [Keynesians] had a victory for a year and then back come the Hooverites."

In response to Tory claims that Britain could face a Greek-style crisis, he added: "I think it's fear-mongering," adding that "it seems outrageous ...that we should show deference to the judgement of good economic policy" of the agencies that were spreading such fear, but which had been highly involved in causing the economic crisis in the first place.

Mr Stiglitz went on to describe shadow chancellor George Osborne's suggestion that Britain is at risk of default as: "Crazy. Economically you clearly have the capacity to pay. The debt situation has been worse in other countries at other times.

"This is all scaremongering, perhaps linked to politics, perhaps rigged to an economic agenda, but it's out of touch with reality. One of the advantages that you have is that you have your own central bank that can buy some of these bonds to stabilise their price."

And if a Tory government were to expand monetary policy, he concluded: "I don't think there is much scope for monetary expansion ... without engaging in new risks for the economy ... So under the current framework it would almost certainly lead to higher unemployment."