The developed economies around the world are experiencing the economics and politics of austerity, which is based on creating space for the private sector to grow these economies at the expense of the public sector. In many of these economies a high level of private corporate saving, the inability to export their way to recovery means that government expenditure is the only game in town. Just as central banks are the lenders of last resort for the banking system, the public sector is the guarantor of last resort of real demand and investment in the economy, for example, high-speed train systems and aerospace. Moreover, much of the private sector relies on government contracts and demand for its goods and services. The bottom line is that a mixed economy privileging the private sector over the public sector is an irrational response if you want to increase output, income and employment.
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