Keynesians said austerity would cut output growth. Austerity hit the economy, and by hitting the economy, it worsened the fiscal balance
As a historian, Ferguson must know that it is growth, not austerity, that is most conducive to reducing the national debt as a share of GDP
Quite simply, with inflation rising faster than nominal wages, average real wages have fallen, and employment has grown, as standard theory would lead one to expect. The combination of tight fiscal policy and loose monetary policy failed, until 2013, to produce a recovery in output. It did, however, lower the unemployment cost of reduced output – though not entirely: if the rise in involuntary part-time work is included in the cost, and as David Bell and David Blanchflower have done with their “underemployment index,” the UK government’s employment record is worse than Ferguson claims.
Keynes never thought that an economy, felled by a shock, would remain on the floor. There would always be some rebound, regardless of government policy. What he emphasized was the “time-element” in the cycle. With depressed profit expectations, an economy could remain in a semi-slump for years. There would be alternating periods of recovery and collapse, but this oscillation would occur around an anemic average level of activity
Demand-side policies should be coupled with supply-side measures to improve skills, infrastructure, and access to finance,
According to the TUC, “the reduction in growth has been met (almost) entirely by lower earnings growth rather than lower employment growth
Ferguson is more interested in making political points than in developing properly grounded arguments. Until he tells us why he thinks that austerity was a good thing, his critics will be forgiven for seeing his economic pronouncements as nothing more than political propaganda.http://www.project-syndicate.org/commentary/niall-ferguson-british-austerity-by-robert-skidelsky-2015-05