What Hath Austerity Wrought?

The politics of austerity is evolving and will continue to do so if the euro zone’s second biggest economy, France, elects a new government. Further evidence is on display in the Netherlands, where Mark Rutte recently tendered his resignation as support for his government’s newly proposed austerity budget collapsed.

Below is a chart from Business Insider showing the growth of real gross domestic product from 2003. Concentrating on the United Kingdom, I’ve added a line showing the clear shift away from stimulative fiscal policy to austere fiscal policy. Another thing this line clearly demarcates is the exact time of the 2010 parliamentary elections and the formation of a new Conservative government, headed by David Cameron, that swept into office on a campaign of reigning in government expenditures.

Note the cutoff in positive growth, the flattening of the line. Not surprising, really. You don’t magically increase aggregate demand in an environment in which private actors are overwhelmingly deleveraging by cutting the only type of spending your economy has going for it–government spending.

Now compare this recession to the Great Depression.

To put it plainly, the UK isn’t doing well. And neither are any other countries that have adopted policies of austerity in the aftermath of 2008, save perhaps Germany for dissimilar reasons.


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