Austerity fails

While it’s been poorly covered here, recent European elections have shown a distinct trend in favour of good, old Keynesianism.

And why not?  Austerity isn’t working.  In fact, it’s harming the recovery.

Two weeks ago economists made it official.  The Cameron Tories in Britain have led Great Britain  into a double dip recession, with the accompanying unemployment, closed shops and falling businesses because there is no demand.  Anywhere.

Shortly after in this year’s round of local elections, Ed Miliband’s Labour party, far outperforming expectations, crushed both the Tories and their moribund coalition partners, the Liberal Democrats.  Labour took more than 800 Tory and Liberal Democrat seats, when they had been expected to take somewhere between 5 and 7 hundred.

Using the local election results, analysts concluded a national election would produce a healthy Labour majority.  Austerity, high income tax breaks and low income tax increases were constant themes in the campaign.

Shortly after the Tory rout, Francois Hollande finished first in both the first and second round of the French presidential election becoming the first Socialist president in over two decades.

Hollande’s campaign was explicitly anti-austerity focusing on rising unemployment and growing disenchantment with the right’s economic policies.

The same weekend, anti austerity forces decimated the pro-austerity side in the Greek elections, and in an unreported harbinger of things to come the anti-austerity SPD beat out Angela Merkel’s pro-austerity party in a state election in Germany.

This weekend, along with massive Spanish protests, we see the crushing defeat of Angela Merkel’s party in North Rhine-Westphalia, Germany’s largest state.  The campaign was seen as a referendum on Merkel’s policy of austerity.

Tomorrow Hollande and Merkel meet for the first time since the French election.  Hollande will begin a discussion about a measured end to the European wide austerity program in favour of a pro-growth strategy.

What does this all mean?  First the traditional right wing solutions are not working.  They are making the economy worse for everyone but the wealthiest.  They are removing demand when it needs to be stimulated and they are making people poorer now and into the future.

Secondly, the same seems to be true here in Canada.  Demand is lacklustre. According to the Parliamentary Budget Office “restraint and reductions in government spending on programs in Canada will act as a drag on economic growth and job creation, pushing the economy further away from its potential (gross domestic product) and delaying the economic recovery,”.

Still the Harper government carries on, deliberately harming recovery.  So the goal can’t be economic recovery.  But then, what is the goal?

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6 Responses to Austerity fails

  1. wendy says:

    Your post reminded me of an article about Iceland
    And how Iceland’s citizen’s refused to take the expensive blame for financiers’ mistakes. Hope you find it interesting

  2. Dennis says:

    Maybe the goal is to eliminate the middle class. This would help to pit one against his/her neighbours in order to earn enough to put food on the table, but it sure helps the wealthy to pay less for goods and services. On a larger scale, motor car companies are being lured to right to work states to build assembly plants where workers will earn aproximately half of what members od the UAW get in Ontario and Michigan. The big boys are engineerring the mad rush to the bottom where the money will truly trickle down.
    At Long Beach, BC it “surf’s up”. If we as a middle class let the big boys continue doing what they have been doing for the past 40 years, some point in our future will be “Cerfs, UP”

  3. Burgess says:

    The goal of the Harper Government is to how to transfer wealth from the public sector to the private sector. To heck with the public purse as long as ‘friends’ of the Cons take the $$$$ and not the taxpaying peons.

  4. Don F. says:

    I think we have arrived at the stage where the ugliness is upon us and true motives are no longer hidden. Recovery is simply something we would want but the last thing on the minds of government.
    Whether austerity has worked elsewhere is of no concern for them. The fact is that austerity speeds the process they are seeking.
    We seem to be literally caught in a web.
    Don F.

  5. Norm Farrell says:

    David Cameron’s Conservatives might be in even deeper trouble if Labour had a more charismatic leader. However, Polly Toynbee says that charismatic leadership is not essential. She also asks if Chancellor of the Exchequer George Osborne is on the right track, “how come he has so badly under-shot on growth and over-shot on unemployment, missing all his own forecasts? How come the OBR keeps having to revise forecasts downwards?

    “This is a repeat of the 1930’s – only worse. Martin Wolf of the FT points out this is the worst slump since the 19th century. Why? Because Osborne has learned nothing from economic history: invest in the down-turn and pull back in the upturn. Brown didn’t do the latter enough – but the effect of that is very small compared with the great economic mismanagement of Osborne now.”

    Osborne, by the way, was reputed to have claimed as expense £47 for two copies of a DVD of his own speech on “value for taxpayers’ money.” That seems so typical of aristrocrats whose own sense of entitlement remains unmoderated even as they hack away at safety nets that protect society’s least privileged. Osborne is one of those wealthy sorts who believes that eliminating all labour laws would allow for desirable cuts in wages and working conditions.

  6. kootcoot says:

    Unfortunately there are indications that Hollande is likely to cave into the banksters and fraudsters and Angela…….I hope I’m wrong, vive the French Revolution, off with their heads!

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