I am puzzled by commentators who are certain that governments had it all wrong, at every step, in balancing stimulus and stability in the aftermath of the crisis. One often sees claims, for example, that the UK borrowed heavily in the distant past with little ill effect. So today’s leaders were foolish not to engage in even heavier borrowing and stimulus. These people seem to believe everything will be fine when it comes to public debt: like Voltaire’s character Dr Pangloss, they assume “all’s for the best in the best of all possible worlds”.
According to the debt panglossians, UK leaders watched as the economy stagnated, rationing stimulus out of a baseless concern over credit risks. Even though the UK ran one of the largest deficits of any advanced country, the panglossians say it should have borrowed more. Perhaps, but their logic is based on a shallow reading of the evidence – and on amnesia about recent risks to eurozone stability.