Lefty Resource Library

Posting articles as I go

Tag: GFC

Economic austerity is misguided

‘ Recent experience around the world suggests that austerity can have devastating consequences, and especially so for fragile economies. Government cuts have helped push Britain, Spain and Greece’s economies deeper into recession and led to widespread public misery.’

‘ Proponents of austerity ignore the fact that national debt is only one side of a country’s balance sheet. We have to look at assets – investments – as well as liabilities. Cutting back on high-return investments just to reduce the deficit is misguided. If we are concerned with long-run prosperity, then focusing on debt alone is particularly foolish because the higher growth resulting from these public investments will generate more tax revenue and help to improve the long-term fiscal position.’

Fiscal austerity v. stimulus

‘But Abbott’s policy prescription ignores the lessons of the global financial crisis (GFC). The austerity policies he advocates have led to disaster everywhere they have been applied. The outcomes have been worst in Europe and the UK. Even in the US, where stimulus was quickly replaced by budget cuts and sequestration, median household incomes remain below the 2007 level.

The need for fiscal stimulus as a response to recession is now widely accepted, even by guardians of market orthodoxy like the International Monetary Fund. Australia’s handling of the GFC has been endorsed by the IMF and the OECD, not to mention the majority of Australian economists.’