Austerity vs. Growth

The media has been parroting the line that Europe needs less austerity and more “growth”.  Austerity, however, simply means that governments must move towards living within their means, and not endlessly driving up the nation´s deficit.  For the last few decades governments have been busy expanding government spending, while building patronage networks to buy votes.  Cushy government jobs, juicy contracts, and social spending all help special interests and the nation live above its means…until the debt burden becomes unsustainable.  That moment has now arrived, and current spending is unsustainable and affordable.  The bill has finally come due for the party, and the open bar must close.  The PIGS are being forced slowly to move towards living within their means.  Of course politicians and various vested interests never want the party to end, and fight it tooth and nail.

One of the ways to fight austerity and budget sustainability is to pretend that deficit spending is so good for the economy that it is either austerity or growth.  Lately there has been a chorus coming from the media about more “growth” and less austerity.  The reality is that deficit spending does little more than temporarily juice the economy.  Productivity is rarely increased, and once the spending stops (as it must inevitably) so does the party.  In fact deficit spending can actually hurt productivity, because like oil revenue, it can drive up costs, and make an economy less competitive.

I wish that they media would stop mindlessly parroting the line of austerity vs. “growth”.   It is typical of today´s media which is rarely- if ever-is critical of government assertions, and tends to have very superficial reporting.  The line ought to be austerity vs. financial implosion.


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