Tuesday, 30 November 2010

In black and white, Part 2

Barack Obama says: "Economists on both the left and right agree that the last thing a government should do in the middle of a recession is to cut back on spending. You see, when this recession began, many families sat around their kitchen table and tried to figure out where they could cut back. That is a completely responsible and understandable reaction. But if every family in America cuts back, then no one is spending any money, which means there are more layoffs, and the economy gets even worse. That's why the government has to step in and temporarily boost spending in order to stimulate demand." You keep stimulating until we are back on our feet – and then you pay back the debt in the good times.

But the Irish government has continued to cleave to Tory solutions. After the crash, its government rejected the case for a stimulus package, and insisted its "number one priority" was to "cut the deficit and get the public finances back in order". It sawed deep into spending on teachers, pupils, the disabled, and childcare. Out of total annual spending of €60bn, they are en route to ditching €15bn. The government is paying off its debt as its first, second and third priority, just as Cameron demands.

So what happened? The economy has collapsed. As the economist Rob Brown writes in the latest issue of the New Statesman, the country is now embarked on "an astonishing 15 per cent shrinkage in the Irish economy overall – the sharpest contraction experienced by any advanced industrial nation in peacetime". Unemployment has soared to 12.5 per cent: it would be even higher if so many young people hadn't left the country. Only 14 per cent of Irish citizens are happy with the government's performance.

By contrast, the countries that have most strongly defied Cameronomics are pulling out of the recession first and fastest. China has ramped up state spending to 88 percent of GDP growth, paid for by increased government debt. This is Brown to the power of a hundred. If Cameron was right, this would be economic suicide, and they would be plummeting down. In fact, the recession there is now over. That's why even right-wing leaders that initially shared Cameron's instincts, like Angela Merkel, are reversing course.


No comments:

Post a Comment