News today that councils are having to sell off libraries, playgrounds and public buildings to pay for austerity-induced cuts and redundancies should come as no surprise to those well versed in the self-defeating nature of such policies.
As early as 2016 the International Monetary Fund were sounding the alarm about the ineffectiveness of the neoliberal doctrine that has dominated economics for the past three decades. In an article seized on by the shadow chancellor, John McDonnell, the IMF economists said rising inequality was bad for growth and that governments should use controls to cope with destabilising capital flows.
They concluded that while the benefits in terms of increased growth were fairly difficult to establish, the costs in terms of increased inequality are prominent. Inequality hurts the level and sustainability of growth, it was agreed, which effectively diminishes the sole reason for pursuing a neoliberal agenda in the first place.
And you don’t have to look far to find other examples of how self-defeatist austerity really is.
A video released last year by the Labour Party entitled “The Cycle of Austerity” gives a good view on the knock on effect between sectors in a cycle that ultimately reduces economic growth and prosperity.
And research released today puts the proof in the pudding. It found a huge 45 per cent of Brits say they often have months with absolutely no disposable income whatsoever, which equals less money for business and stalled economic growth.
But if you don’t believe the politicians, take a leaf out of any decent economics textbook and it will tell you, other things being equal, cutting government spending causes the economy’s overall output to fall, tax revenues to decrease, and spending on benefits to increase. Almost invariably, the end result is slower growth (or a recession) and high budget deficits.
As I noted yesterday, you only have to look to Portugal to see alternative political choices in action. By reversing cuts to wages, pensions, social security and offering incentives to businesses they have shown that you don’t have to tighten your belt to survive during times of economic turbulence. Rather, if you create a virtuous cycle that puts the economy back on a path to growth then people will show a renewed willingness to spend which will benefit everyone.
Austerity is the most self-defeating political choice in a generation. It’s high time we put the stoppers on it.
