Governments worldwide, still suffering from the global economic collapse of 2008, have made various attempts at implementing austerity.
What is austerity? Basically, it’s governments cutting their budget deficits during collapsing economic times. They implement either drastic spending reductions, tax increases, or both. Republicans in the U.S. Congress have led efforts at austerity. And in Europe, the International Monetary Fund, nations’ lender of last resort, has demanded austerity from European Union nations like Greece and Spain whose economies have dissolved.
But over the last month, authoritative voices have been decrying efforts at austerity. A dramatic turn came in late April when two Harvard professors-often cited by politicians and conservative columnists as the prophets of austerity-published an op-ed in The New York Times, basically saying conservatives had misread them and misused their research. In that piece, Carmen M. Reinhart, a professor of international finance, and Kenneth S. Rogoff, a public policy and economics professor, said:
The politically charged discussion, especially sharp in the past week or so, has falsely equated our finding of a negative association between debt and growth with an unambiguous call for austerity.
We agree that growth is an elusive goal at times of high debt. We know that cutting spending and raising taxes is tough in a slow-growth economy with persistent unemployment. Austerity seldom works without structural reforms – for example, changes in taxes, regulations and labor market policies – and if poorly designed, can disproportionately hit the poor and middle class…
…In short: many countries around the world have extraordinarily high public debts by historical standards, especially when medical and old-age support programs are taken into account. Resolving these debt burdens usually involves a transfer, often painful, from savers to borrowers. This time is no different…
That painful transfer from savers to borrowers has been abusively clear in the US, where the Federal Reserve has addictively continued to artificially keep interest rates low-a torture to regular-citizen savers-while obsessively print more paper money going to banks and Wall Street, the big borrowers and sellers of bonds back to the Fed. Other central banks around the world have also geared up this process.
A week after Reinhart and Rogoff published their op-ed, Robin Bew, the chief economist for the influential London international-affairs news weekly The Economist, flatly said Europe’s effort at austerity “has backfired.” In a May 2 email to subscribers headlined “Europe’s austerity dilemma,” Bew contended:
With the euro zone mired in recession and unemployment at record highs, the debate over the wisdom of fiscal austerity has intensified. Many now believe that the “austerity first” approach has backfired, exacerbating the economic downturn. Could these doubts prompt a shift towards more pro-growth policies? While some modest policy adjustments seem possible at the margins-for example, countries may get more time to reduce their budget deficits-we believe that the extent of any change is likely to be limited. For all the talk about the need to promote economic growth as the cure for Europe’s debt problems, expect the status quo to continue with only a few exceptions.
During the past week, the press has dwelt on a just-released book by two scholars which charges that austerity is literally a killer of humans. David Stuckler, an Oxford senior researcher in the economics of health, and Sanjay Basu, an assistant professor of medicine and epidemiologist at Stanford University, have written The Body Economic: Why Austerity Kills.
The authors’ research examines how financial meltdowns have affected people’s daily lives from the Great Depression of the 1930s, to post-Communist Russia in the ’90s, to the US foreclosure crisis beginning in the late 2000s.
Suicides, Jobs, Homes and Healthcare Loss
Among a wealth of data, the book reveals that the 2008 crisis led to more than 10,000 additional suicides and a million extra cases of depression across the U.S. and Europe since governments started introducing austerity programs. In the US, over five million Americans have lost access to healthcare due to job losses. In the UK alone, austerity has forced 10,000 families into homelessness due to cuts in housing benefits.
Stuckler cites Greece as the most extreme case. In an interview with UK’s newspaper The Guardian, he says:
There [Greece], austerity to meet targets set by the troika is leading to a public-health disaster. Greece has cut its health system by more than 40%. As the health minister said: “These aren’t cuts with a scalpel, they’re cuts with a butcher’s knife.”
[Worse, those cuts have been decided] not by doctors and healthcare professionals, but by economists and financial managers. The plan was simply to get health spending down to 6% of GDP. Where did that number come from? It’s less than the UK, less than Germany, way less than the US.
If The Economist‘s Robin Bew is correct, and the power elite simply continues the status quo, don’t expect anything to change unless average citizens get organized, get educated, and get active. Only that will make their lawmakers break from their current practice of serving the financial industry, the multi-national corporations, and the military-industrial complex that would rather profit from nations involved in endless war rather than serving their citizens by assuring a solid economy that truly encourages jobs, inspires human creativity, and provides caring medical services.