Monday, December 16, 2013
On the Assertion that Austerity Invariably Leads to a Bad Economy
It is false, demonstrably. Harding cut spending by 50% in 1921 and the unemployment rate dropped from 12% to 2% in less than two years. Truman cut spending by 45% in 1946 and the following several years were amongst the best in U.S. history. The Canadian government (the liberal party, no less) cut spending in real dollars (none of this Washington D.C baseline budgeting bullshit) by 20% in 1993 and the ensuing growth rates over the next few years were in the 5-6% range. The Swedes in 1994 eventually reduced government spending as a percentage of GDP from 66% to 51% and that economy greatly benefited. And Estonia in 2009 was one of the few European countries that actually did institute significant austerity measures and now their economy is growing at a 7.6% rate (4-5 times the growth of the Eurozone which only instituted phony austerity). Yes, folks, it absolutely does appear as if the private sector does things better.
All of the examples that I provided were implemented during periods of economic downturn and which according to Keynesian idiocy should have INVARIABLY lead to a worsening of the situation AND THEY DID NOT. Yet another cigar exploding in their smug faces.
ReplyDeleteWhen the people get to control their own resources instead of the rulers controlling them supposedly in their interests, the economy does tend to take off...
ReplyDeleteI see Ireland is coming out of its EU bailout. The conundrum
ReplyDeletethere and some other places seems
that independent of most economic
sectors, finance and banking can
wreck it.
Virtually every Keynesian of the day (1944), from Paul Samuelson to Gunnar Myrdal, warned that a cut in government spending the size of which would occur at the end of the war, coupled with the millions of service men returning from Europe and the Pacific, would cause yet another yet great depression (and so they advocated even more spending). THEY WERE WRONG in that Truman and the Republicans ultimately decided against it and instead radically cut government spending.......And the spending cuts by Harding had absolutely NOTHING to do with the end of WW1 and everything to do with the depression of 1920-21 AND THEY WORKED!
ReplyDeleteAnd the Keynesian assertion is that government spending OF ANY KIND (remember Paul Krugman's ludicrous argument pertaining to the fake alien invasion), INCLUDING WAR SPENDING, invariably has a stimulating effect on the private sector - this despite the fact that it has never worked EVER; Hoover - nope, FDR - nope, WW2 - nope, Japan and Canada in the '90s - nope, GWB - nope, Obama - nope, etc., etc..
ReplyDeleteThe Depression of 1920-21 was actually worse early on than the great depression in the the unemployment rate shot up to 12% rather rapidly. Thankfully, Harding did not listen to his commerce secretary, a fellow by the name of Mr. Herbert Hoover, and didn't follow the path of idiotic interventionism.
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