The Austerity Trap … It Doesn’t Work

By June 17, 2013Business News, The Net

Mike Archer. Amidst all of the calls in the corporate conservative media for government austerity, no one is mentioning that every time it has been tried in history … it has failed.

I’ll admit you have to be in the mood to watch this one-hour documentary, and ready to back the tape up occasionally since you are watching an economics lecture.

However; as economic lecturers go, Mark Blythe is both down to earth, humourous and poignant in his description our modern economic circumstances, just exactly who put us here and why the arguments being made that those without money should be paying the debts of those with money through austerity are bunk.

As we’ve learned under politicians like Stephen Harper and John Smith, lack of money is only used as an excuse to get rid of or prevent programs with which they don’t agree.

Here’s what Cory Doctorow had to say about the video on Boing Boing:

*The video is at the bottom of the post.

Cory Doctorow

Cory Doctorow

Austerity: the greatest bait-and-switch in history

Cory Doctorow on

Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts–austerity–to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from.

Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.

Professor Mark Blythe

Professor Mark Blythe

That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget.

The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea.

First of all, it doesn’t work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment.

As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us.

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