Friday, November 25, 2011

Steve Keen on Hardtalk

Steve Keen was interviewed on the BBC’s Hardtalk on 24th November, 2011. The video is below. Skip forward to 2.40 for the beginning of the interview.

Some points:
(1) Technically speaking, many nations are not in depression, but have positive real GDP growth. What is happening is high unemployment, low growth, and economic malaise caused by deleveraging and an over-indebted private sector. This is more akin to Japan’s lost decade (as Keen later says). Serious austerity will cause a relapse into recession or perhaps even depression.

(2) I think Keen is wrong is say that Japan’s lost decade lasted “two decades.” The return to essentially average real GDP growth rates in Japan more or less in line with OECD averages happened from 2002–2003 (although admittedly positive credit growth did not return until 2006), as deleveraging ended (especially by corporations). Without radical action, private deleveraging in the West will probably keep going until 2020 or even beyond that.

(3) For analysis of 1930’s Germany, see here:
“Fiscal Stimulus in Germany 1933–1936,” September 3, 2011.
(4) To Keen’s list of heterodox economists (from 24.38) add Post Walrasians/coordination Keynesians and (old) American Institutionalists. Keen also gives the Austrians too much credit: the key to the analysis of current problems is Minsky’s Financial Instability Hypothesis (FIH), not Hayek’s nonsense ABCT.

See here for some interesting remarks by Bill Mitchell on Japan’s lost decade:
Bill Mitchell, “Austerity Begets Austerity,” Billy Blog, November 25, 2011.
See the section at the end called “Interesting Graph for Today.”
Bill Mitchell points out that the turn to austerity in Japan in 1996–1997 under Prime Minister Ryutaro Hashimoto caused a severe recession that lasted from June quarter 1997 until the September quarter 1999, prolonging the lost decade.


  1. To his credit, Keen says "I'm actually standing on the shoulders of giants. In my case, Hyman Minsky".

  2. There is a bit of delay between the audio and the video. Any way to correct this ?

  3. Okay ...further to my previous comment ... found how to synchronize audio and video.

    Use the Firefox extension DownloadHelper and download the video from YouTube.

    Use VLC to view the downloaded video and advance audio by 0.500s

  4. Given that there can be some degree of political popularity for austerity when voters get desperate (as happened in Japan), I wonder if political leaders can ever say the following:

    "I am not going to legislate as per voter's whims, but as per national interest. I am an interpreter of the public's fate, and not a blind executor of their demands."