I’m going on vacation for a couple of weeks, but, before I leave, a word or three about the latest news from Blighty, where George Osborne, arguably the worst Chancellor in modern U.K. history (it’s a tough contest) has just reaffirmed his commitment to austerity policies. Delivering an annual financial review to Parliament on Wednesday, Osborne promised yet another round of spending cuts, this one beginning in April, 2015, which is roughly when the next general election is set to take place.

To be sure, the Chancellor leavened his message by promising to divert some money from welfare programs and local government to infrastructure projects, such as new roads and railways, but his over-all message was the same one he’s delivered since taking office, in May, 2010: Cut! Cut! Cut! Taking all the government departments together, there is no rise in public spending on investment planned for 2015-2016 but, instead, a reduction of close to two per cent.

At this stage, when even the International Monetary Fund has turned against Osborne and called upon him to reverse course, I won’t bother retreading the arguments against austerity. Suffice it to say that compared with the behavior of the U.S. economy, which until recently was benefitting from a Keynesian fiscal stimulus, the U.K. economy has been performing dismally. The British G.D.P. is still almost four per cent smaller than it was at the start of the 2008-09 financial crisis. Confirming that Osborne’s obsession with deficit reduction has proved self-defeating, the U.K. budget deficit is about eight per cent of the G.D.P., which is roughly twice the size of the U.S. deficit.

Despite this sorry record, Osborne hasn’t been run out of office. Recently, in fact, he’s gotten something of his old smirk back. The most interesting—and depressing—aspect of his latest pronouncement is how little outrage it provoked. In the country of Keynes’s birth, it’s almost as if he never existed. Despite the example of the United States, many Britons have lost faith in the government’s capacity to borrow and spend its way out of a recession. Even with interest rates at record lows, they worry about the consequences of taking on more debt. When Osborne said, “If we abandon our deficit plan, Britain would be back in intensive care,” many people believed him.

It’s reached the stage where even the Labour Party has adopted the language of austerity. Rather than laughing at Osborne’s discredited economic projections and pledging to reverse his cuts, Ed Balls, Labour’s senior economic official, has promised to keep in place the government’s spending plans after the next general election. Ed Miliband, the Labour leader, ruled out more borrowing to finance day-to-day spending. (He left himself a little wiggle room on capital spending.)

How did things get to this sad state? The answer has more to do with recent history, and the lessons that people take from it, than it does with economic theory. In Britain, as in the United States, conservative economists remain on the defensive: Keynesianism is struggling not in the Academy but, rather, in pubs and sitting rooms.

Coming out of the financial crisis that plunged Britain into its deepest recession since the nineteen-thirties, the message that ordinary Britons should have taken was that building an economy on a deregulated financial-services sector and a housing bubble is asking for trouble. Instead, many people accepted the interpretation, peddled enthusiastically by the conservatives and their supporters in the media, that the real problem was excessive borrowing by the Labour governments of Tony Blair and Gordon Brown.

It’s true that Blair and Brown did let the deficit rise in the later years of Labour rule, but not to dangerous levels. Even in 2007, the deficit was still below three per cent of the G.D.P. When the Great Recession hit and tax revenues collapsed, it rose to more than ten per cent of the G.D.P. As in the United States, what ballooned the deficit was the recession. And the government’s prior borrowing didn’t cause that recession: the financial crisis and the bursting of the housing bubble were the culprits.

Still, though, many voters hold Labour’s profligacy responsible for all the misery inflicted on their country. That’s why Miliband and Balls are talking like Republicans. “The task of opposition parties is to win voters’ trust step by step, and we are not there yet,” Balls conceded last month. “Labour must start planning now for what will be a very tough inheritance in 2015. It will require us to govern in a very different way with less money around. We will need an iron discipline.”

If you know a bit of British history, you might be chuckling (or crying) to yourself. Britain’s original “Iron Chancellor” was also a Labour man, Philip Snowden, who responded to the global recession that began in 1929 by cutting spending and trying to balance the budget. Let’s just say that things didn’t work out very well.

It may be too much to claim that history is repeating itself: 2013 isn’t 1929, and Balls isn’t Snowden. But with both major parties now committed to austerity, Britain faces the grim prospect that, whoever wins the next election, its lost half decade will turn into a lost decade. And largely because of a faulty analysis of the past.

On this, as on many things, Henry Ford was wrong: history isn’t bunk. The past is a vital, living thing, and it affects everything. We can’t escape from it. But we can try to avoid being trapped by how it gets interpreted, reinterpreted, and distorted. And, in fact, it’s imperative that we do so.

Above: George Osborne and Chief Secretary to the Treasury Danny Alexander. Photograph by Stefan Rousseau/WPA-Pool/Getty.