British Austerity Bombs
I predicted this more than a year ago. You need a growth mechanism
not just strict austerity. The U.S. proved that.
4/25/2012 @ 2:09PM |455 views
British Economic Austerity Bombs As England Double Dips Into Recession
David Cameron is a British politician, Leader of the Conservative Party (Photo credit: Wikipedia)
Over the past year, I’ve watched with wonder as American conservatives have grown increasingly comfortable with their narrative deriding our European friends as an oppressed people living in a socialist hellhole.
To hear GOP leaders tell the story, Europe’s only true remaining value is to serve as a warning to good Americans everywhere that a life of croissant, kippers, long summer vacations and government run healthcare will surely turn us all into communists. They warn that continuing to allow our socialist president to take us down the European path will lead to us to become the American collectivist society.
There is, however, one thing about Europe that the GOP has found very much to their liking – European style economic austerity.
Since the moment English Prime Minister David Cameron instituted his government austerity program in the belief that taking huge sums of money out of the British economy would get England back on more solid financial footing, American conservative leaders have been fawning all over their Conservative Party counterparts—if not the actual nation that the British Conservatives lead.
Today, the report card is in and the results are clear—the GOP has been backing the wrong horse…again.
Austerity drives Greece, Ireland, Portugal, Spain and now Britain into recession. Next?
How austerity policies and stimulus policies affect the GDP
The financial experts had expected the U.K. to eke out a teensy bit of economic growth in 2012. But the Office for National Statistics reported Wednesday that the British economy contracted for the second consecutive quarter, registering a 0.2 percent decline in annualized Gross Domestic Product for the first quarter of the year on top of the 0.3 percent GDP decline in the fourth quarter of 2011. The killers came from the biggest drop in construction in three years and in industrial production.
They call what's happening a "technical recession" as a result of the back-to-back two-quarter loss, just as they call what's happening in Spain a "technical recession." Technically, it's weasel wording. Britain, Spain, Portugal, Greece and Ireland are all now in recession. The Netherlands and France have not yet succumbed, but weak economic data have roiled their governments, contributing to the collapse of the Dutch parliamentary coalition and French President Nicolas Sarkozy's loss in the first round of voting over the weekend.
Behind it all is European austerity policy, the very stuff Republicans in the United States have been promoting for the past three-plus years. If they'd won the election in 2008 and imposed their proposals, you could add the U.S. to those nations who are now seeing so much economic damage. Indeed, it is unlikely the U.S. would have emerged from recession as it "technically" did in mid-2009. The policies the GOP objected to, particularly the economic stimulus package put forth and barely passed by Congress shortly after Barack Obama took the oath as president, have made a big difference even though they were not nearly as vigorous as truly needed to deal with the depth of the Great Recession. The GDP chart above shows the difference.
Now, as Joe Stiglitz makes clear in an excellent interview in The European, GDP is not the best measurement of people's well-being since it keeps going up while workers keep getting bit in the behind. (There's a discussion in bobswern's diary.) But there is still a big difference in what's happened in the United States and Europe over the past few years.
As my colleague Laurence Lewis wrote this past weekend, "Austerity is a disaster." Just as its tentacles have spread across Europe, the backlash against it is spreading as well. Whether (and how fast) potential replacement governments in France and the Netherlands and perhaps Britain itself can reverse the slide is anybody's guess. But it's increasingly clear that the people in those countries, and in Spain where youth unemployment is a stunning 50 percent, are fed up with the imposition of austerity on everyone but the people who brought on the financial crises in the first place.