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?