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European Gut Instinct: Austerity Is Wrong Response

Protests in Barcelona (Photo by Andreu Dalmau/EPA)

Titus Maccius Plautus, Roman poet-philosopher, 254 to 184 B.C.E., first wrote the phrase “You must spend money to make money.” Even though few of us know the source, most of us know the concept. Some of us even understand that the concept applies to nations as well as to individuals.

The member states of the European Union have become increasingly conservative over the course of the recession, and there is a continent-wide policy to dealing with the nationals debts of member nations and the recession’s unemployment and depressed economies by following what we Americans recognize as “The Republican Agenda” – drastically cut government spending, cut social programs, cut taxes on the “job creators.” The objective is to reduce a nation’s debt, by increasing the money being paid into a nation’s coffers while reducing the amount of money being spent by the nation. But these policies have a opposite and cascading effect, to wit: when social programs are cut, the poor have less money to spend, the less they buy, the fewer employees retailer need, the less goods need to be manufactured or processed for sale, the more unemployment rises, the less money is paid as taxes, the lower the nation’s revenues…..Some of us poor, dumb slobs out here understand that the best way to recover from a recession and pay down a nation’s debt is by increasing employment, increasing tax revenue, etc. etc, etc.

A lot of poor, dumb slobs in Europe also understand it. France, the United Kingdom and Greece have seen riots over the austerity plans of their governments. Now, it’s Spain’s turn and Spain has only had their conservative government for four months.

The Spanish are using general strikes and street protests to show the government what they think of the new austerity budget.

The conservatives talk a good game. They will create jobs, they will lower taxes, they will lower the national debt that is an unfair burden on our grandchildren, they will “reform” social programs so that laziness and dependency are discouraged. It’s a very good presentation. Its reality is quite different. It only took the Spanish four months to figure it out.

The debt-to-GDP ratios in Europe have everyone panicked, though they seem to be panicked over the wrong countries. The United Kingdom’s debt is 400% of GDP, France’s 182%, Greece’s 174%, Spain’s 154% and Germany’s 142%. The United States’ external debt is 99% of GDP. Those aren’t even the worst debts in Europe. Luxembourg’s is 3443% and Ireland’s is 1165%. Eighteen European nations have a higher debt-to-GDP ratio than America. The austerity budgets are not improving the economies in Europe, but actually deepening their recession.

But, heaven forbid a good conservative should listen to a liberal. President Obama tried to warn them back in 2009 that austerity was the wrong way to go, that trickle-down economics caused the recession and could not end it, that what Europe needed was Keynesian economics. They didn’t listen to him and they are, so far, not listening to their own people.

Europe suffered through an exceptionally bitter winter this year, with hundreds of deaths reported and record cold temperatures. It is getting to the point, however, where the surest sign of spring in Europe is not rivers flowing, flowers blooming and trees leafing, but riots.



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