Decca Aitkenhead wishes that Paul Krugman's book, End this Depression Now!, were compulsory reading ('I'm sick of being Cassandra. I'd like to win for once', G2, 4 June). A book that should be even more compulsory is The Shock Doctrine, by Naomi Klein. The analysis by Krugman is accurate enough, but leaves out the planned element of neoliberal economics.
Klein sets out, in excruciating detail, the effects of applying Friedmanite, Chicago-school, neoliberal economics to various countries in difficulties. Spearheaded by the IMF and the World Bank, the prescription has been the same in Argentina, Poland, Russia, the UK under Thatcher, etc: cut public spending, discard "red tape" (ie protection for workers), sell off state-owned assets, and turn health, education and social welfare over to the free market.
In each case it has meant rich pickings for capitalists and misery for the bulk of the population. It has led to the erosion or the complete overthrow of democracy. It has resulted in wholesale destruction of economies, from which recovery has been extremely painful and slow. These are the policies now being inflicted on Europe, and in Greece we can see the inevitable outcome. The failure of these policies to regenerate the supply side is because, without demand, there is no incentive to supply.
After the second world war, it was the general improvement in ordinary household incomes arising from full employment and rising wages that fuelled the booming economies of Europe. Increasing incomes at the top creates next to no demand; only by generating prosperity at the bottom of the income scale will we get the economy to start growing again. All the guff we are being fed about the need to "free up capital" is just so much hogwash. Please can we ditch for ever Friedman and all his works. Keynes was right. Get over it and go for it.
Hazel Davies
Notre Dame du Bec, France
• Although some of Keynes's ideas might still be right and Mr Krugman might have the right prescription for our economic problems, the world has moved on. There are no more monetary controls, there is no Glass-Steagall Act, there is no bank regulation. The world is awash with tax havens. Both wealthy individuals and corporations have taken advantage of globalisation to evade tax by transferring funds offshore, depriving nations of tax revenue.
Countries with natural resources are still not benefiting from the rises in commodity and energy prices, as foreign companies reap the benefits. Economic power is shifting away from the west towards Asia. The wealth gap has widened to unsustainable proportions, as boardroom directors pillage corporate funds. Individual nations have no control or power any more, while Europe has too many captains on the bridge arguing over how to steer the vessel. So unless there is a co-ordinated effort by western governments to take over the reins of the financial and corporate sector to redistribute wealth on a massive scale and restore more justice and equality, there can be no long-term solution – just a greater risk of social disorder.
Peter Fieldman
Madrid, Spain
• Paul Krugman's analysis of the failure of policymakers to address effectively the current financial crisis and ongoing economic recession is sadly correct. He rightly condemns the policy of quantitative easing as useless and a victim of the liquidity trap. QE keeps banks liquid and allows politicians to claim that they are "doing something", but does little for the real economy.
For Krugman's policy of fiscal reflation to work requires that the influential advocates of the "casino" model be converted to the merits of regulated capitalism. In addition, other fundamental economic issues need to be addressed. First, "free" markets need to be regulated to ensure prices reflect the true costs of production – this means extensive use of taxes and subsidies, and international agreement about them. Second, international terms of trade need wholesale reform, with regulated exchange rates that reflect purchasing power parity. In addition, saving the euro would require intra-euro-area exchange rates as well. Third, sovereign-bond financing should move largely to undated debt. For this to work effectively would also require extensive international agreement.
Without addressing these fundamental issues, "Keynesianism in one country" is doomed to failure.
Philip Robins
Addingham, West Yorkshire
• One way of kickstarting the economy, as espoused by Professor Krugman, would be to embark on a massive programme of what they used to call "council houses". At least a million homes are needed, and building them would not only kickstart the economy but would provide homes for the poorest, and reduce the enormous drain on housing benefit that worries Cameron so.
Sid Hollands
Maidstone, Kent
• Three things have been puzzling me: the increasingly loud noises about social mobility; the belief that nobody saw the economic crash coming; and the government's claim that there is no alternative to austerity. Then it hit me that they are all based on false premises. The problem is not social mobility at all; it is the obscene economic gap between the top and the bottom. Close the gap and social mobility becomes less important. If I, with nothing better than A-level economics, saw the recession coming some years before it hit us, it beggars belief that the financially more astute didn't see it as well.
And as for deficit-slashing austerity, what better smokescreen could the Tories have for reducing the size of the public sector, something they have wanted to do since the Attlee government lost the 1951 general election, but never had the brass neck to attempt before?
Alan Healey
Milson, Shropshire