The Keynesians applauded Gordon Brown when in 2007 and 2008, at the start of his premiership, he gave a big boost to public spending; they continued through 2009 to endorse his government's vast budget deficit. So Osborne's commitment in mid-2010 to an eventual balancing of the budget came under sharp attack. Keynes' biographer, Lord Skidelsky, was very much to the fore in the ensuing intellectual battles. (Skidelsky and I held a debate on these issues, under the title "What would Keynes say now?", in the December 2009 issue of Standpoint.) 

Economics commentary in the Financial Times has veered all over the place in recent decades. In the 1970s Sir Samuel Brittan, who might be described as the George Orwell of financial journalism, became its most acclaimed contributor, and was widely regarded as a champion of the free market and a trumpet-blower for monetarism. (His weekly column defended the 1981 Budget.) But in 1996 Martin Wolf was appointed chief economic commentator. Wolf has changed the paper's direction, and in the financial crisis of recent years the Financial Times has been firmly left-of-centre and Keynesian. Skidelsky and Summers have been given a lot of space.

In April 2011, a few weeks after Osborne's second Budget, Wolf criticized its deficit-reduction plans in frankly Keynesian terms. In his view the Conservative government's apparent determination to lower the deficit year by year was "a huge gamble". Just like the 364 three decades earlier, Wolf believed that the consequence would be a withdrawal of demand in each and every year that the deficit was being cut. That could lead to a deflationary disaster since the economy had been weak "even before the fiscal squeeze". Wolf sided with the arch-Keynesian Larry Summers, who had just said at an academic conference in Bretton Woods that the UK had embarked on an "experiment" that "is not going to work out well".

One puzzle about the revival of Keynesian fiscalism in the Great Recession is that its advocates seem not to have noticed the lessons of recent economic history. Perhaps Summers can be excused his seeming ignorance of the 1981 Budget debate since it did not take place in his own country, but Wolf must have heard about the letter from the 364 and the subsequent polemics. He had also been on the Financial Times in the mid-1990s, when a fiscal retrenchment similar to that of the early 1980s had been accompanied by a healthy economic recovery.

Given that ample evidence to demonstrate that deficit cutbacks could be combined with above-trend advances in demand and output, Summers's labelling of Osborne's programme as an "experiment" and Wolf's characterisation of it as "a huge gamble" must be described as strange. The counter-argument is simple, that reductions in public spending can be offset by increases in private spending, leading to strong net growth. Of course, increases in private spending do require a benign macroeconomic environment, but experience suggests that the crucial conditions for that are steady growth of the quantity of money and a supportive banking system. The stance of fiscal policy is neither here nor there.