Texan4Hillary offers his perspective as a movement progressive activist.
Austerity is a loser. We all lose with it. The politicians lose with it. As the Right in America eye austerity and our conservative Dem President aims to make cuts in t he budget let us look to Europe. And hope America’s government wakes up.
Economist David Blanchflower of Dartmouth makes the clear case Europe’s austerity kick is dooming it to another recession. Can the pendulum in America swing back from the Right to stop the worst of austerity here? That is my only hope right now.
Blanchflower notes austerity idol Margaret Thatcher did not grow the economy via cuts but a stimulus package. Not that Mrs. Thatcher did not wreck Britain in so many ways through privatizing the state and declaring war on unions.
…Claims are often made that there are examples where fiscal austerity has worked. But it turns out that this is generally due to the monetary stimulus that accompanied it, as in the U.K. under Margaret Thatcher in the 1980s. The most frequently cited example is Canada, but it was able to cut interest rates while at the same time benefiting from the Clinton boom of the 1990s.
Recession appears to once again return to key nations in Europe. The mere prospect of austerity in Britain is flatlining the economy and causing panic.
Fiscal austerity has already been started in Greece, Ireland, Spain and Portugal, and this seems to be pushing all of them back into recession. Over the last four quarters, growth in Greece was negative and falling, and bond investors are once more demanding sky-high returns to compensate their risk. The excuse in these countries was that they have little choice because they are stuck in the European monetary union and don’t have the ability to depreciate their exchange rate.
The U.K. may be a purer case of the harm austerity at the wrong time can inflict. Britain now looks as if it is headed back into recession on fear about the damage that will be done by massive spending cuts and tax increases, which haven’t even gone into effect yet. Government ministers with their talk of austerity have already smashed confidence.
The Chancellor of the Exchequer George Osborne has said the economy was “bankrupt” and had “run out of money,” which of course is simply untrue. Prime Minister David Cameron and other ministers made similar unsupported claims, which seem to have had a deleterious effect on animal spirits.
Despite the government’s claims that its intent was to raise confidence, consumer and business confidence tumbled right after the new government took office.
Businesses and consumers know what is coming and have cut back accordingly. Retail spending has flat-lined. The balance of trade is deteriorating. Unemployment is rising, and house prices have started to fall again.
It is maddening to watch this going on and worse for the leaders of this nation to be going so gung ho for this idea of austerity. It does not work on any level. Obama, watch out. And to the GOP now running so many states, watch out also. Look to history. Look to the present in Europe for what austerity does. It is not pretty and brings upheaval. Egypt tried austerity measures at the behest of the IMF. Egypt’s Mubarak sowed his final destruction with the cuts he made to the suffering masses of his country. Beware.