The domestic exile of John Maynard Keynes.

THE LAST FOUR YEARS have created what economists call a “natural experiment” in economic policy. As a consequence of deregulation and globalization, Britain and the United States experienced the financial crisis of 2008 in much the same way. Large parts of the banking system collapsed and had to be rescued; the real economy went into a nosedive and had to be stimulated. But after 2010, the United States continued to stimulate its economy, while Britain chose the stonier path of austerity.

The British are no more wedded to the idea of fiscal austerity than are the Americans. The Victorian aim of an annual budgetary surplus (in order to allow for the repayment of debt) has long since vanished. Both countries experienced only occasional surpluses in the postwar years associated with exceptional booms. The divergence of the two countries lies not in underlying attitudes but in political and institutional circumstances.

First, the British entered the crisis with a largely discredited Labour government; the Americans with a largely discredited Republican administration. The political swing gave power to the traditional spenders in the United States and the traditional budget-cutters in Britain. Second, despite their small-government rhetoric, Republicans have actually always accepted, and indeed promoted, large deficits in the name of national security. Third, whereas the U.S. Treasury is simply an agency of government, the British Treasury has always assumed that it should control, not facilitate, government spending. Finally, Britain, with European examples in mind, was concerned that foreign bondholders would take fright at the growth of the national debt—at least, this became the grand rationalization of austerity policy after the Greek crisis flared up in 2010.

These factors help explain the differing fortunes of John Maynard Keynes in the two countries. Homegrown in Britain, Keynesian policy was enthusiastically embraced by British governments immediately after the war. In the United States, full-blooded Keynesianism started only with John F. Kennedy and Lyndon Johnson in the 1960s. The United States under Ronald Reagan and Britain under Margaret Thatcher abandoned official Keynesianism in the 1980s, but the taxcutting, defense-boosting commitments of the Republican Party kept unofficial Keynesianism alive in the United States long after it had been relinquished in Keynes’s own country. When George W. Bush, in announcing his stimulus measures of 2001, declared that budget deficits were justified by war, a recession, or a national emergency, Milton Friedman deplored the fact that “crude Keynesianism has risen from the dead.” Paradoxically, Keynesianism, unacknowledged and often reviled, chimed in with some constants in U.S. political life better than it did in Britain, where it is still customary to pay homage to the master while ignoring his teaching.

SO WHAT DOES the experiment in economic policy tell us? At the start of the crisis, leading economic indicators in the United States and Britain were broadly similar: a government deficit of around 2.7 percent of gross domestic