London – Economics, it seems, has very little to tell us about the current economic crisis. Indeed, no less a figure than former United States Federal Reserve Chairman Alan Greenspan recently confessed that his entire “intellectual edifice” had been “demolished” by recent events.

At long last, America has decided to stop fighting the Cold War. On 1 December, the US Department of Defence approved a directive calling upon the American military to be ‘as effective in irregular warfare as it is in traditional warfare’. This means that the question of how best to fight ‘asymmetric conflicts’ will henceforth consume America’s military strategists as much as their more traditional preoccupation: planning WW3. This might seem like cause for celebration, but I am not so sure.

John Maynard Keynes has been restored to life. Rusty Keynesian tools – larger budget deficits, tax cuts, accelerated spending programmes and other “economic stimuli” – have been brought back into use the world over to cut off the slide into depression. And they will do the job, if not next year, the year after. But the first Keynesian revolution was not about a rescue operation. Its purpose was to explain how shipwreck might occur; in short, to provide a theoretical basis for better navigation and for steering in seas that were bound to be choppy. Yet, even while the rescue operation is going on, we need to look critically at the economic ...