Name: Austerity
Rating: 4.3 (45 reviews)
Author: Mark Blyth

What’s in it for me? Find out why austerity programs for countries in crisis are bound to fail.

In the aftermath of the global financial crisis of 2007/2008, a debt crisis hit the eurozone, a crisis that was supposedly caused by massive government overspending in countries like Greece and Spain. Newspapers reported on Greece’s ballooning public administration and told outrageous stories of mass fraud – for instance, that legions of people had pretended to be blind so that they could receive benefits.

And, though painful, the solution looked simple enough: these profligate countries needed to whittle down their administrative apparatus, cut benefits where they could, raise taxes and so forth, until they were in a position to pay back their debts.

But, actually, this advice is wrong on several levels. It misplaces the blame, penalizes the wrong people and – laughably enough – doesn’t even work.

These blinks explain why.

They also discuss

why a “swap derivative” is a dangerous thing;
why it’s sometimes best for a country to let its banks go bust; and
the link between Hitler and austerity.

Austerity weakens a country’s economy and it hits the lower classes hardest.

The recent financial crisis, which began in the United States back in 2007, hit Europe hard. Many nations are still struggling to recover, and there are some who think they know the best policy for getting the European economy back on track. This policy is called austerity.

Austerity, however, isn’t a one-size-fits-all solution. Though often effective when a single institution finds itself in crisis, it’s a dangerous policy when applied to a nation.

Austerity is the process of reducing spending by issuing budget cuts, the goal being to boost an economy’s competitiveness and inspire confidence in its businesses.

But we can already see evidence that austerity on a national level fails and weakens the economy, especially when it’s applied to multiple countries at once. Spain, Portugal, Greece, Italy and Ireland are all cases in point.

To understand why this is so harmful, imagine that your family has gone over budget. In such a situation, it makes sense to cut back on spending until things return to normal. But imagine that every household in the state did this at the same time. Money would cease flowing into local businesses, and stores and employers – burdened with expenses of their own – would begin to suffer.

To weather the tough times, businesses would need to take out loans and lines of credit, creating even more debt – debt that they’d be unable to pay off until the households in the state begin spending money again.

As you can see, this situation benefits no one – and it’s exactly the situation that austerity applied on a national level gives rise to: citizens spend less, the economy shrinks and debt grows.

Furthermore, it’s the members of the lower classes who get hit the hardest.

When budgets are cut, it invariably hurts welfare programs, unemployment benefits and the people who rely on social programs to get by.

In times of austerity, the average struggling worker always suffers more than the banker who caused the crisis.

There’s a long history showing that austerity fails to heal the economy.

It’s commonsensical to tighten your budgetary belt and reduce spending when times are tough; however, when a national budget is slashed across the board, the results are never good.

A quick review of the historical record shows that austerity has routinely failed to restore economic growth.

Ireland has struggled under austerity, but Iceland has thrived after letting its banks go bust.

Many economists have held up Ireland as a model of how Greece might recover through austerity. But a closer look reveals that Ireland isn’t in enviable economic health.

After Ireland spent €70 billion on bailing out its banks, it embarked on an austerity program that cut public-sector salaries by nearly 20 percent and drastically reduced welfare and other social benefits.

There are viable alternatives to austerity that help the majority at the expense of the few.

Rather than looking to countries like Ireland, and singing the praises of austerity’s healing abilities, we should look to what real signs of recovery can tell us.

As we saw in the case of Iceland, the first step to helping a nation in the grips of a banking crisis is to let the banks go bust and loosen their control over the economy.

Kernaussagen in Austerity

Worum geht es in Austerity?

Austerity (2013) cuts through the confusion behind our recent financial crises and reveals what really happens when economists call for a policy of austerity to be implemented. This is when budgets are cut, public funding is slashed and working-class families suffer so that banks can be saved and continue to make billions. Find out what’s really going on and who’s really being protected when your country gets pushed into austerity.