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Public investment key to escaping crisis: Summers

Larry Summers told the BBC that central banks are going to become "less relevant", as interest rates are going to be near zero for much of the time.

"Fiscal policies are going to be more important in supporting economic expansion," he said.

"And public investment policies are going to play a larger part."

Mr Summers, who is now an economic adviser to Joe Biden's presidential campaign, told Radio 4's The World This Weekend programme that "for those with an agenda around infrastructure, there's huge opportunity in this moment".

Without a doubt, there will be voices right now raising warnings of the political dangers and tax implications of such a growth in state intervention, but none of the economists The World This Weekend spoke to were among them.

Gerard Lyons, chief economist to Boris Johnson when he was Mayor of London and a high profile supporter of Brexit, said such spending is affordable: "Clearly, there is a need at some stage to bring government debt down, in terms of the size of its economy, as we did after the Second World War. But the key thing is that low inflation, low rates and low yields allows the government to sustain a much higher

For some on the left, the inevitability of more government spending - on both benefits and big job-creating projects - is an opportunity.

The prospect has certainly cheered up the markets, with a recent rally on Wall Street.

But Professor Mariana Mazzucato, Director of the Institute for Innovation and Public Purpose at University College London (UCL), says it is vital that any public spending project is well-focused.
Government has the 'upper hand'

"If we keep just arriving to the problem once the problem presents itself, so from one crisis to another - the financial crisis, the climate crisis, the health crisis - we're not going to get out of this constant crisis mode," she said.

"Most of what governments are currently doing worldwide, the trillions that are being thrown at the problem globally, is really just correcting for a problem."

Instead, she says, we should "structure that immediate short-term remedy with a long-run kind of vision" of what kind of economy we would like to create afterwards.

"This is the moment for government to do that, because it has the upper hand," she added

Public investment key to escaping crisis: Summers