In a speech before Parliament last month, British Prime Minister David Cameron posed a rhetorical question as he harangued the opposition Labour Party: “Is there a single other mainstream party anywhere in Europe who thinks the answer to the debt problem is more spending and more borrowing?”
Cameron was meaning to taunt Europe’s Social Democratic parties, rubbing in the fact that they lack the power to implement the types of programs they’d prefer. But insults aside, it’s clearly not true that Keynesianism has fled the scene amidst the ongoing European financial crisis—it’s just that its greatest champion is based in Washington DC, at the International Monetary Fund. On multiple occasions over the past two years, it forced Europe into taking action, strong-arming Germany into designing bailouts. The IMF has made plenty of enemies, especially in Frankfurt, but it has also managed to help, for now, to forestall catastrophe.
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