In the United States, our discussion on economics has circled around a single dominating philosophy called Austerity. The Republicans have demanded that we immediately reduce our spending, and attack our deficit. They have argued that the deficit is weighing down our economy and that the only way to dig ourselves out of the economic whole we are in, is to reduce spending immediately. Their demands for cuts have become so ravenous that Eric Cantor, the House Minority Whip, recently suggested that we withhold emergency funds for recent hurricane victims until we cut those funds from other lines of the federal budget. The philosophy actually makes sense, on an intuitive level. Our country is in debt. Its natural that we would want to get out of debt. The notion that cutting back and reducing debt is the path to success is so intuitive, that it has become the dominant economic strategy throughout Europe and in the UK, in particular. But recent observers have noted that Austerity hasn't worked very well for the UK. In fact, many are starting to question the conventional wisdom entirely.
Reuters reported that Bill Gross, the manager of PIMCO, the world's largest bond holder, recently stated that the UK is risking another recession as a result of their austerity measures.
He recommended a "mid-course correction" that he says could lift the UK economy. "The economy in the UK is WORSE OFF than it was when the plan was developed, so there should be at a minimum fine-tuning and perhaps re-routing of the plan". He then suggested that a similar readjustment needs to take place in the United States. The new International Monitary Fund Chief, Christine Lagarde has suggested that the world's economy is entering a "dangerous phase"She says that weak balance sheets and poor growth are "feeding negatively on one another". She went on stating that "This vicious cycle is gaining momentum, and frankly, it has been exacerbated by policy indecision and political dysfunction" (I wonder who she is talking about......U.S.). She capped it all off with, "Exactly three years after the collapse of Lehman Brothers, the economic skies look troubled and turbulent as global activity slows and downside risks increase". As the U.S. plots its course ahead, it is useful to look at the results or lack thereof, that other nations are experiencing. Few nations have testified to the gospel of austerity, as sincerely as the UK. The current Chancellor of the Exchequer, George Osborne has sworn an eternal oath to decapitating the british debt and in this battle, austerity has been his primary weapon. But the british economy has not thrived and as a result, a growing chorus of voices is insisting on a new direction, away from what have been perceived to be failing policies.
The Wall Street Journal recently reported that unemployment in the UK, has risen at it's fastest pace in the last two years. The government had been banking on private sector jobs and the absorption capacity of the private market. The government, filled with blind faith, slashed 111,000 workers in the second quarter and plans on dropping 310,000 workers from the public sector. This strategy is similar to the course demanded by the Right in America. The british ideals are perfectly representative of the U.S. efforts. They believed, as we do that sincere efforts at curbing debt would result in growing confidence in the fiscal accountability of our respective nations and would also result in confidence in the private sector. But in the UK, for every two jobs cut in the public sector, LESS THEN one job was created in the private sector. These facts have led to a raucous debate about the effectiveness of UK austerity measures and perhaps should lead the U.S. to question whether or not we are on the right path.
Is the Right Wing of America, leading us down a path of tried and failed policies, based on a blind faith in a private sector ideal that does not exist-and never has existed? Even the Deputy Prime Minister of the UK, is starting to turn. He has announced a round of infrastructure spending. The economic situations of the UK and the U.S. are like mirror images, or more accurately, the UK has seemed like a window into our future. Our own President has proposed a new round of infrastructure spending and the GOP is unsurprisingly, opposed! Will we head down the same road as the UK, of austerity and a decline in public sector employment, only to see the same results? Will we find ourselves frantically scrambling for new strategies, a few months from now?Or will we experience a totally different result? Will we be the one place in the world, where Austerity is actually working?
I Don't know----what do you think, Spectrum Family?
No comments:
Post a Comment