Paul Krugman has termed the new policy shift of UK’s Chancellor of the Exchequer, George Osborne, as the crony Keynesianism. UK government is trying to build a euro crisis shield and is trying to find an alternative way to ease the pressure on it to do something constructive.
But Chancellor George Osborne in particular remains under pressure to spend money directly on infrastructure to create jobs as many companies and households lack the confidence to borrow for investment or consumption.
But, doing something like that will be admitting a failure of government’s austerity policies, hence it doing it through loan guarantee – this is what Krugman calls crony Keynesianism’.
So why funnel the money to private corporations via loan guarantees rather than simply doing the obvious and restoring the huge cuts that have recently taken place in public investment?
One answer, of course, would be that doing that would be an implicit admission that the Cameron government has just wasted two years doing exactly the wrong thing. It has, of course, and apparently realizes its mistake; but presumably the government hopes that privatizing the process will confuse enough people that it can escape blame.