MerylStreep
Here’s another good piece.
morningporridge.com/blog/blains-morning-porridge/the-uk-out-the-unfunded-spending-fire-and-into-the-austerity-frying-pan/
Thanks for that link, MerylStreep. A good article.
This is, I think, a key paragraph:
Blyth goes on to show how Austerity doesn’t work, it increases inequality, and that it can’t work in a competitive global economy where prices and currencies are volatile. He asks: Is everybody supposed to run current account surpluses? If so, with whom—Martians? And if everybody does indeed try to run a savings surplus, what else can be the outcome but a permanent global depression?
This long, but worth a read, article provides a detailed explanation of that statement:
fromtone.com/why-running-a-budget-surplus-is-a-bad-idea/
The author starts with this analogy:
To understand how something like savings can be so different at the level of an entire economy compared to a single household consider this imaginary scenario. You want to save up some money and so you decide to reduce your spending for several months and stuff the money under your mattress. As your stash of saved money gets bigger you get wealthier. That may make a lot of sense at an individual level but consider what happens if everybody were to do this at once. Everybody simultaneously decides to stop spending a big chunk of their income and instead saves it by stuffing it under their mattress. Suddenly because people everywhere are spending less and saving more the sales of goods across the entire economy drops. As a result businesses start to contract or go bust. This means workers are sacked, causing their spending to drop, causing more businesses to go bust. The economy starts to get smaller. As you can see at the level of the entire economy increasing savings can actually cause a lot of problems. Too much savings can reduce economic activity and reduce wealth.
Then extrapolates it to 'what if countries all did the same?'
So why cannot everybody be like Germany and run a trade surplus and run a budget surplus? The problems is that not everyone can run a trade surplus at the same time because every trade surplus has to be matched by a matching deficit somewhere in the global economy. And deficit countries are not just importing another countries exports but they are also importing unemployment as their domestic demand is used to buy goods from abroad instead of keeping its own workers employed.
While this is covering the topic of countries running budget surpluses it applies to a great extent to countries 'balancing the books^ (which is the story that the government will be feeding us, we have to 'balance the books'). Balancing the books will just cause stagnation in the economy because it will inhibit both the public and private investment needed to 'grow' the economy.
It would also seem to me that the more that cutting spending slows growth, and leads to failed businesses and unemployment, the worse our GDP will be and the bigger the deficit figure, as a percentage of GDP, will become. Which is not the stated aim of 'austerity! Austerity falsely promises quite the opposite...
