Austerity: Who’s Being Held to Account?

Many individuals and organisations are still struggling from the effects of the global crisis and the fallout from uncontrolled government borrowing across most Western countries. Where for some this just equates to cutting back on expenditure but for others it equates to losing their homes and visiting food banks for basic provisions.

It’s worth remembering that John Maynard Keynes said way back in 1937 that “the boom, not the slump, is the right time for austerity at the Treasury.” Contemporary Keynesian economists argue that budget deficits are appropriate when an economy is in recession, to reduce unemployment and help spur GDP growth. And where economist Paul Krugman explained that if everyone is trying to reduce their spending, the economy can be trapped in what economists call the paradox of thrift, worsening the recession as GDP falls. If the private sector is unable or unwilling to consume at a level that increases GDP and employment is sufficient, he argued the government should be spending more.

Strategies that involve short-term stimulus with longer-term austerity are not mutually exclusive. Steps can be taken in the present that will reduce future spending, such as ‘bending the curve’ on pensions by reducing cost of living adjustments or raising the retirement age for younger members of the population, while at the same time creating short-term spending or tax cut programs to stimulate the economy to create jobs.

IMF managing director Christine Lagarde wrote in August 2011 that “for the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans. At the same time we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects. So fiscal adjustment must resolve the conundrum of being neither too fast nor too slow; what is needed is a dual focus on medium-term consolidation and short-term support for growth. That may sound contradictory, but the two are mutually reinforcing. Decisions on future consolidation, tackling the issues that will bring sustained fiscal improvement, create space in the near term for policies that support growth.

While economists, academics and politicians can discuss with gusto different theories and practices that may or may not work in the real world; and our current politicians can, when backed into a corner, blame everything on their predecessors  - what we should want to know, especially when more and more families are suffering and large and small businesses are closing their doors on a regular basis – is why isn’t anyone from government and the financial sector being held accountable for the need for austerity measures in the first place?

Further during these times of austerity why are essential service organisations, for example, in the energy and transport sectors being allowed to increase prices in percentage terms that are way above the CPI or average salary increases the majority of employees are getting. Adding further suffering and financial problems for millions of people

In democratic nations this equates to monopolistic exploitation, especially of the elderly and resembles a mafia racket – where if you want to stay warm then you pay up or freeze.  Where are our trusty politicians in this instance, as this time they can’t blame past governments. Why aren’t they ensuring everyone steps up to the plate to support their country gets out of the recession and that their citizens aren’t taken advantage of especially in times of austerity.  

It’s worth remembering that in October 2012, the International Monetary Fund announced that its forecasts for countries which implemented austerity programs have been consistently overoptimistic, suggesting that tax hikes and spending cuts have been doing more damage than expected, and countries which implemented fiscal stimulus, such as Germany and Austria, have done better than expected.

Without meaning to sound melodramatic, most revolutions through history have started because of economic factors, including the government facing financial difficulties and bankruptcy; citizens facing hunger and unemployment;  and those in power being out of touch and seemingly indifferent to the hardships of segments of their population; and where citizens aspire for social, political and economic equality.

The citizens of most Western countries are entitled to know how their country got into such a financial mess in the first place and ask why the people responsible haven’t been held to account?