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Rudd's Utterly False Theology
letter published in The Australian, 3 August 2009

Your editorial ("some brief notes on a global crisis" 1-2/8) rightly criticises Kevin Rudd's latest epistle on neo-liberalism on many important points. However it overlooks the fallacious starting point he used to justify the government's stimulatory (sic) policies.

In Rudd's epistle he claims these policies reflect lessons his government has learnt from the past. His sermon then pronounces that "the alternatives were to do nothing or, worse, effectively replicate the Premiers Plan of 1931 when governments cut expenditure" resulting in "an economic rout, appalling unemployment and a decade of negligible growth through the 1930s".

But this sermon is based on an utterly false theology. Following the Premiers Plan in 1931,which acted on the advice of seven prominent economists and was praised by John Maynard Keynes, real GDP per head increased at a rate of 2.7 per cent per annum (average) right through the remainder of the 1930s. If Rudd can match that performance he will be doing very well indeed.

During the Great Depression Australia performed much better than the United States. Franklin Roosevelt's New Deal involved a large increase in government spending but deterred private investment and brought much lower growth in living standards..

The lesson for the congregation  should be that stimulatory spending policies do not necessarily ensure recovery. Let us hope the Reverend Rudd has learned it.

Des Moore
South Yarra

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