Tuesday, April 12, 2011

Literally Never

The model of responding to economic downturn with austerity measures has a perfect record... of utter failure. It has literally NEVER worked. Freidmanites sneer at 'spending your way out of recession' but the countries that do it thrive and the countries that start slashing at spending end up like Ireland with their economies in tatters.
Even more spectacular than the failure of Ireland’s “efficient business regulations” and “competitive tax rates” is the failure of its austerity measures in what seems like record time. Not only did Ireland become the first Eurozone country to enter recession, it also became the first to test its status as a petri dish for conservative policy by becoming the first country to respond to the economic critics by enacting severe austerity measures.
The government’s 2008 emergency budget was the kind of economic medicine that even now conservatives are clamoring for here in the U.S. — a package of cuts in social programs from education to medical care, combined with a bailout of the country’s banks. The idea was that making such severe cuts would increase confidence and produce growth by assuring investors that Ireland was serious about it’s economic problems.
Ireland’s austerity measures were an “epic fail” on two fronts. The country was rewarded with shrinking economy, and a sharper downturn than if the government had spent more to keep people working. The suffering that austerity measures brought the Irish people sparked a series of public demonstrations in 2008, 2009, and 2010.
But austerity did not inspire confidence nor deliver the growth its proponents promised. Fiscal austerity failed to reassure the markets, and Ireland’s credit rating was lowered. Most recently, the country found itself in need of a bailout from the E.U. to make up for the economic grown not delivered by earlier austerity measures. The size of the bailout keeps growing, but recent reports said that it may amount to €85 billion ($145 billion).
The Irish people were left alone and unled, in a way that laid bare the cost of austerity in Ireland, exacted from the working and middle class taxpayers made to finance the bank bailout.
You'd think the media would report that when the wise 'serious' thinkers confidently state that the only option is to cut and cut and cut some more, that such a program HAS NEVER WORKED.  That wherever it is tried it leads to short term misery for the poor (to pay for the wild unregulated parties of the rich) and long term stagnation for the economy as a whole.

But the mainstream media is marked by an almost unbroken consensus of pro-business neo-liberalism that believes deficits are morally wrong and making people suffer in the name of fiscal probity is morally right.  From the elite point of view, making the public pay for your excesses resulting in a nice big recession that lets them bring the fear of unemployment to the negotiating table and slash away at wages and benefits is the only highlight of an economic downturn.

A challenge:  Find one unalloyed, incontrovertible example of austerity measures doing anything but making the economy worse.  Expect to be looking for a long time.

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