Guardian UK: Spooked into austerity, we dig our own economic grave

[marmar]

Spooked into austerity, we dig our own economic grave
Fear of the markets has blinded leaders to the alternatives. Economies can grow out of debt or plunge deeper into crisis

Jayati Ghosh
guardian.co.uk, Tuesday 13 September 2011


The stupidity of the current macroeconomic stance in the UK is surprising in itself; but when combined with similar voices in Europe and the US, it is downright astonishing. Three years after the collapse of Lehman Brothers, the global economy is not going through a recovery from financial crisis, but simply entering act two after a brief intermission. On current form this play is a farce that will end in tragedy.

Policy discussion on both sides of the Atlantic is dominated by extreme fiscal hawks, who wrongly see public spending as the problem rather than at least part of the solution. The emphasis on fiscal rectitude is accompanied by the inability to rein in finance. All this condemns economies to financial instability, depressed and even contracting GDP and worsening conditions for ordinary citizens.

Consider: the UK government's focus is still on cutting the budget deficit, though the economy is not just tottering but into the downswing already. The Vickers report on controlling the financial sector is well-intentioned but so modest as to tend to irrelevance. It misses essential points about the financial system, and the lengthy grace period it awards to banks (more than seven years before they have to ringfence their operations) risks being completely overtaken by the likely future volatility in banking.

Part of the problem is that the bulk of the mainstream economics profession has forgotten basic Keynesian macroeconomics, and so is unable to offer even the most obvious advice. But the other aspect of the problem is deeper, reflecting the class configurations that create and intensify the mess. The choice between increasingly futile and counterproductive monetary easing and dithering about policies oriented to more austerity to satisfy bond markets is ultimately a political one, reflecting the continued power of finance. .............(more)

The complete piece is at: http://www.guardian.co.uk/commentisfree/2011/sep/13/spooked-austerity-economic-grave

[Starry Messenger]

1. recommend.

[provis99]

2. it is deliberate destruction of societies.

Is there a term for that? Societicide or something? Started with Reagan and Thatcher, and confirmed with this latest bunch of rotten conservative politicians and economic quacks. They want to do to the world what Kissinger and Nixon did to Allende's Chile: make the economy howl, and put in fascistic puppets like Pinochet.

It's happening before our very eyes, and I don't have a clue what to do about it; voting seems pointless, since Democrats and Republicans have the same budget cutting, tax cutting ideas. Maybe the Arab Spring needs to be duplicated around the world, not just in the Arab countries.

[chill_wind]

3. K & R. Full of powerful analogies

to our own state of affairs, and so many familiar assertions, near word-for-word by our own (progressive) economists here.

[Kaleko]

4. K & R