By Gaius Publius
Sunday, 03 February 2013
Paul Krugman’s recent column looks at the romance between the “austerians” — the promoters of austerity for economically troubled nations — and the need to inflict pain to get economic gain. His bottom line — no country that has tried austerity has seen a major economic benefit.
My bottom line — add “to its people” to the end of Krugman’s bottom line and you’ve got it exactly. There is an obvious economic benefit, but only for a few.
Let’s start with Krugman. He begins (my emphasis):
Looking for Mister Goodpain
Three years ago, a terrible thing happened to economic policy, both here and in Europe. Although the worst of the financial crisis was over, economies on both sides of the Atlantic remained deeply depressed, with very high unemployment. Yet the Western world’s policy elite somehow decided en masse that unemployment was no longer a crucial concern, and that reducing budget deficits should be the overriding priority.
That’s a familiar story, one we’ve detailed before. The answer to economic crisis is always budget cuts and austerity. Then he pivots to austerian attempts to find an example.
In recent columns, I’ve argued that worries about the deficit are, in fact, greatly exaggerated — and have documented the increasingly desperate efforts of the deficit scolds to keep fear alive. Today, however, I’d like to talk about a different but related kind of desperation: the frantic effort to find some example, somewhere, of austerity policies that succeeded. For the advocates of fiscal austerity — the austerians — made promises as well as threats: austerity, they claimed, would both avert crisis and lead to prosperity.
The column is interesting because it lays out that history. First the example was Ireland, which the head of the European Central Bank said in 2010 was “the role model for all of Europe’s debtor nations.” But events proved them wrong; Ireland is worse off today than it was back then. So then the U.K. became the touted model, until it wasn’t. Then little Latvia, which has recovered some, was pushed forward; but Latvia still has 14% unemployment. Hmm.
Continue reading at: http://truth-out.org/news/item/14311-no-austerity-has-helped-the-economy