Myth 1: Austerity will give ‘jobs and growth’

Myth 1: Austerity will give ‘jobs and growth’

Copyright Belle Mellor

Austerity is not the answer to our economic problems. It is not the answer to the crazy financial system and the recession the private banks caused when they took so many risks. The banks took crazy risks but they receive a lot of public money. And the public must suffer from the austerity policies of the government.

Conservative politicians say that times are difficult so we must make difficult decisions. They say austerity is difficult but we must suffer it to help the economy. They say businesses will like this and with tax breaks this will help them to invest more and create jobs. But it is not true. And we have not seen the results that we want. Economist Paul Krugman writes that since 2010 every country that introduced austerity has seen its economy suffer.

The reason is clear. In a weak economy with more job insecurity and worse social welfare, people will want to keep their money and not spend it. The super-rich also do not want to invest their money productively. They prefer to build their portfolios and the result is very high house prices. If the government really wants to bring back confidence, then it needs to spend, not cut. It needs to create jobs in the public sector, and offer the security of a more social state. If there are deficits, it’s not the big problem we expect, because interest rates are so low and the money borrowed can be used productively.

Even the IMF has said that austerity has a negative effect on growth. For example, look at Greece and Spain. They have strong austerity policies which their people disagree with. Over 50 per cent of young people cannot find a job. This is a clear example that austerity has a negative effect.

US leaders are now openly disagreeing with austerity. Earlier in 2015 economists like Bloomberg said we must increase public spending and give more jobs to help the economy.

In Britain the Conservatives say again and again that their austerity policies are doing well. But Cambridge economist Ha-Joon Chang has a different idea. He writes that the government says national income is higher. But real incomes have fallen by 10 per cent since 2008. The richest people increased their share of wealth. As for job creation – he finds that the number of underemployed workers, who must work fewer hours because there are not enough jobs, has increased 400%. Self-employment, too, has increased because there are no other jobs. The Institute for Fiscal Studies believes that by 2020, 800,000 more British children – one in four - will be living in poverty.

Joseph Stiglitz is a Nobel-prize winning economist. It is no surprise that he thinks the austerity plans in 2012 were 100% negative. But there is another problem – austerity policies have little to do with good government, they are completely ideological. Transnational Institute is an alternative policy group. It said at the start of 2013: ‘Business and political leaders are not learning from the crisis. They are using the crisis to increase neoliberalism and to take away workers’ rights and a large part of the welfare state to make sure businesses have the power.’ They are using austerity to increase privatization,

Austerity has resulted in more inequality, as governments have stopped social spending to reduce poverty and tried to help the rich and not small businesses. Big companies give more and more of their profits to top managers and shareholders. The share of the profits to the workers is less and less. And the political message is: these are difficult decisions in difficult times to reward hard workers and stop those who do not want to work. It’s not true but a large number of voters like it. These voters see it as unfair but necessary, but there is nothing to show them that it works.

NOW READ THE ORIGINAL: http://newint.org/features/2015/12/01/austerity-jobs-growth/

(This article has been simplified so the words, text structure and quotes may have been changed).